UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: SEPTEMBER 30, 2009
|_| 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
BETA MUSIC GROUP, INC.
----------------------
(Exact name of small business issuer as specified in its charter)
Florida 26-0582871
------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7359 Ballantrae Ct
Boca Raton, Florida 33496
-------------------------
(Address of principal executive offices)
818-539-6507
------------
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the 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. |X| Yes |_| No
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Date File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files.) |_| Yes |_| No
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 file" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting company |X|
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). |X| Yes |_| No
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 3, 2009 the Company had authorized 100,000,000 shares of $.01 par
value common stock of which 16,555,315 shares of common stock were issued and
outstanding.
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BETA MUSIC GROUP, INC AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
September 30, December 31,
2009 2008
------------- ------------
(unaudited) (audited)
ASSETS
Current Assets:
Cash ......................................... $ 1,729 $ 8
Accounts receivable .......................... 49 -
Prepaid expenses ............................. 12,039 18,992
--------- ---------
Total Assets ................................... $ 13,817 $ 19,000
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ............................. $ 953 $ 16,456
Accounts payable-related parties ............. 16,131 5,363
Due to related entity ........................ 2,250 -
Accrued wages related party .................. 42,863 18,415
Accrued liabilities .......................... - 8,000
--------- ---------
Total Current Liabilities .................. 62,197 48,234
--------- ---------
Total Liabilities ............................ 62,197 48,234
Stockholders' Equity
Common stock, $.01 par value 100,000,000
authorized 16,555,315 and 6,800,210 issued
and outstanding, respectively ............... 165,553 68,002
Deficit Accumulated in the Development Stage . (213,933) (97,236)
--------- ---------
Total Stockholders' Equity ................... (48,380) (29,234)
--------- ---------
Total Liabilities and Stockholders' Equity ..... $ 13,817 $ 19,000
========= =========
See Accompanying Notes to the Unaudited Consolidated Financial Statements
2
BETA MUSIC GROUP, INC AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED STATEMENTS OF OPERATIONS
From
July 5, 2006
(Date of
Three Months Ended Nine Months Ended Inception) to
September 30, September 30, September 30, September 30, September 30,
2009 2008 2009 2008 2009
------------ ------------ ------------ ------------ -------------
Revenue ....................... $ 49 $ - $ 49 $ - $ 2,809
Cost of sales ................. 2,199 - 2,199 - 4,450
------------ ------------ ------------ ------------ ------------
Gross profit .................. (2,150) - (2,150) - (1,641)
General administrative expenses 38,853 7,971 114,547 27,630 212,292
------------ ------------ ------------ ------------ ------------
Income (loss) before provision
for income tax ............... (41,003) (7,971) (116,697) (27,630) (213,933)
------------ ------------ ------------ ------------ ------------
Income tax expense ............ - - - - -
------------ ------------ ------------ ------------ ------------
Net Loss ...................... $ (41,003) $ (7,971) $ (116,697) $ (27,630) $ (213,933)
============ ============ ============ ============ ============
Basic and Diluted Loss per
Common Share ................. $ (0.00) $ (0.00) $ (0.01) $ (0.01) $ (0.06)
============ ============ ============ ============ ============
Basic and Diluted Weighted
Average Common Shares
Outstanding .................. 10,467,883 3,899,084 7,825,612 2,225,072 3,626,424
============ ============ ============ ============ ============
See Accompanying Notes to the Unaudited Consolidated Financial Statements
3
BETA MUSIC GROUP, INC AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
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 at $.01 per share ...... 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 at $.01 per share ... 383,000 3,830 - - 3,830
Shares issued for conversion of
accounts payable-related party and
accrued wages-related parties on
September 4, 2008 at $.01 at
$.01 per share ...................... 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 at $.01 per share .. 645,500 6,455 - - 6,455
Shares issued for prepaid expenses on
October 22, 2008 at $.01 per share .. 1,230,942 12,309 - - 12,309
Net Loss ............................. - - - (75,614) (75,614)
---------- ---------- ------- ---------- ------------
Balance December 31, 2008 (Audited) .. 6,800,210 68,002 - (97,236) (29,234)
Shares issued for conversion of
accounts payable-related party and
accrued wages-related parties on
Janaury 7, 2009 at $.01 per share ... 1,969,500 19,695 - - 19,695
Shares issued at $.01 per share for
services and prepaid expenses on
January 7, 2009 ..................... 550,000 5,500 - - 5,500
Shares issued at $.01 per share for
conversion of accounts payable-
related party and accrued wages-
related parties on February 4, 2009 . 870,000 8,700 - - 8,700
Shares issued for accrued liabilities
and consulting expenses on
August 3, 2009 at $.01 .............. 100,000 1,000 - - 1,000
Shares issued at $.01 per share for
conversion of accounts payable-
related party and accrued wages-
related parties on August 3, 2009 ... 4,790,605 47,906 - - 47,906
Shares at $.01 per share issued for
accrued rent-related party .......... 750,000 7,500 - - 7,500
Shares issued at $.01 per share for
conversion of accounts payable-
related party and accrued wages-
related parties on September 1, 2009 725,000 7,250 - - 7,250
Net Loss ............................. - - - (116,697) (116,697)
---------- ---------- ------- ---------- ------------
Balance September 30, 2009 (Unaudited) 16,555,315 $ 165,553 $ - $ (213,933) $ (48,380)
========== ========== ======= ========== ============
See Accompanying Notes to the Unaudited Consolidated Financial Statements
4
BETA MUSIC GROUP, INC AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED STATEMENTS OF CASH FLOWS
From
July 5, 2006
(Date of
Nine Months Ended Inception) to
September 30, September 30, September 30,
2009 2008 2009
------------- ------------- -------------
OPERATING ACTIVITIES:
Net loss .......................................... $ (116,697) $ (27,630) $ (213,933)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Stock issued for services and accrued liabilities 6,500 - 35,863
Stock issued for accounts payable-related party . 36,300 49,138 36,300
Changes in Assets and Liabilities:
Accounts receivable ........................... (49) - (49)
Prepaid expenses .............................. 6,953 - (3,949)
Accounts payable .............................. (15,503) 1,250 953
Accounts payable-related party ................ - (21,587) -
Accrued wages-related parties ................. 30,848 - 42,863
Due to related entity ......................... 2,250 - 2,250
Accrued liabilities ........................... - - -
------------ ------------ ------------
Net Cash Used by Operating Activities ......... (49,398) 1,171 (99,702)
------------ ------------ ------------
INVESTING ACTIVITIES:
Investment in common stock of subsidiary ........ - (281) (281)
------------ ------------ ------------
Net Cash Provided by Investing Activities ..... - (281) (281)
------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from loans-related party ............... 52,119 - 102,612
Repayment of loans-related party ................ (1,000) - (1,000)
Proceeds from issuance of common stock .......... - - 100
------------ ------------ ------------
Net Cash Provided by Financing Activities ..... 51,119 - 101,712
------------ ------------ ------------
Net Increase (Decrease) in Cash ............... 1,721 890 1,729
------------ ------------ ------------
Cash at Beginning of Period ....................... 8 79 -
------------ ------------ ------------
Cash at End of Period ............................. $ 1,729 $ 969 $ 1,729
============ ============ ============
Supplemental Disclosures:
Cash paid for income taxes ...................... $ - $ - $ -
============ ============ ============
Cash paid for interest .......................... $ - $ - $ -
============ ============ ============
Non Cash Transactions:
Shares issued for conversion of loans
payable-related party ...................... $ 41,351 $ 49,138 $ 82,344
============ ============ ============
Shares issued for prepaid expenses ............ $ - $ - $ 12,309
============ ============ ============
Shares issued for rent expense ................ $ 12,000 $ - $ 21,000
============ ============ ============
Shares issued for accrued liabilities ......... $ 5,000 $ - $ 22,650
============ ============ ============
See Accompanying Notes to the Unaudited Consolidated Financial Statements
5
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. (Formerly known as The Next Pop Star, 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 23, 2008, the Company filed an
Article of Amendment to its Articles of Incorporation changing its name again to
Beta Music Group, Inc. The principal business purpose of the Company originally
was to produce 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. The Company 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.
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
September 30, 2009, Famous is wholly owned by Beta Music Group, Inc.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principals for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for fair presentation have been included.
Management has evaluated subsequent events, and the impact on the reported
results and disclosures, through November 16, 2009, which is the date these
financial statements were filed with the Securities and Exchange Commission.
PRINCIPLES 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.
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.
6
BETA MUSIC GROUP, INC AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - GOING CONCERN
As reflected in the accompanying financial statements, the Company has net
losses of $41,003 and $116,697 for the three and nine months ended September 30,
2009, respectively, and net cash used in operations of $49,398 for the nine
months ended September 30, 2009; and a working capital deficit of $48,380, a
deficit accumulated during the development stage of $213,933 and a stockholders'
deficit of $48,380 at September 30, 2009. In addition, the Company is in the
development stage and has not yet generated any significant revenue. The ability
of the Company to continue as a going concern is dependent on Management's
plans, which include implementation of its business plan and continuing to raise
funds short-term loans from related parties and through debt or equity raises.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. These financial statements do not
include any adjustments relating to the recovery of the recorded assets or the
classification of the liabilities that might be necessary should the Company be
unable to continue as a going concern.
NOTE 3 - STOCKHOLDERS' EQUITY (DEFICIT)
At inception, July 5, 2006, the authorized capital of the Company consisted of
10,000 shares of common stock with a par value of $.01. 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 June
30, 2009, there are 10,189,710 shares outstanding.
On January 7, 2009, the Company issued 1,009,500 shares of common stock to the
Tucker Family Spendthrift Trust as repayment of $5,595 of advances made to the
Company and $4,500 for accrued rent and rent expense. The Company issued 960,000
shares of common stock to Officers and Directors of the Company for their
services. The Company also issued 550,000 shares of common stock for services.
On February 4, 2009, the Company issued 550,000 to the Tucker Family Spendthrift
Trust as repayment of $4,000 of advances made to the Company and $1,500 for rent
expense. Also on that date, the Company issued 320,000 shares to Officers and
Directors of the Company for their services.
On August 3, 2009, the Company issued 3,940,605 shares of common stock to the
Tucker Family Spendthrift Trust as repayment $31,906.05 of advances made to the
Company and $7,500 of accrued rent The Company issued 1,600,000 shares of common
stock to Officers and Directors for their services and also 100,000 shares to
vendors for accrued liabilities and consulting expenses.
On September 1, 2009, the Company issued 85,000 shares to the Tucker Family
Spendthrift Trust as repayment of $850 of advances made to the Company. Also on
that date, the Company issued 640,000 shares to Officers and Directors.
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.
7
BETA MUSIC GROUP, INC AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 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 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 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 March 31, 2008, the Company issued 2,160,087 shares of common stock as
repayment of $21,601 of amounts due to related parties.
NOTE 4 - RECENT ACCOUNTING PRONOUNCMENTS
In December 2007, the FASB issued FASB ASC 805-10 (Prior authoritative
literature: FASB Statement 141 (R), "Business Combinations," which replaces FASB
Statement No. 141). FASB ASC 805-10 is effective for the Company April 1, 2009
and establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any non controlling interest in the acquiree and the
goodwill acquired. The Statement also establishes disclosure requirements which
will enable users to evaluate the nature and financial effects of the business
combination. FASB ASC 805-10 will change how business combinations are accounted
for and will impact financial statements both on the acquisition date and in
subsequent periods. The adoption of FASB ASC 805-10 did not have an impact on
the Company's financial position and results of operations although it may have
a material impact on accounting for business combinations in the future which
cannot currently be determined.
In April 2009, the FASB issued FASB ASC 805-10-05 (Prior authoritative
literature: FSP 141(R)-1 "Accounting for Assets Acquired and Liabilities Assumed
in a Business Combination That Arises from Contingencies"). For business
combinations, the standard requires the acquirer to recognize at fair value an
asset acquired or liability assumed from a contingency if the acquisition date
fair value can be determined during the measurement period. FASB ASC 805-10-05
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008, with early adoption prohibited. The
Company adopted these provisions at the beginning of the fiscal year April 1,
2009. FASB ASC 805-10-05 will be applied prospectively for acquisitions in
fiscal 2010 or thereafter.
8
BETA MUSIC GROUP, INC AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In May 2009, the FASB issued FASC Topic 855, Subsequent Events, formerly SFAS
165 ("FASC 855"), which requires entities to disclose the date through which
they have evaluated subsequent events and whether the date corresponds with the
release of their financial statements. FASC 855 is effective for interim and
annual periods ending after June 15, 2009. We adopted FASC 855 for reporting in
second quarter 2009. Adoption of FASC 855 did not have a material impact on our
Consolidated Financial Statements.
In June 2009, the FASB issued Accounting Standards Update ("ASU") 2009-01, Topic
105 - Generally Accepted Accounting Principles ("ASU 2009-01"), which superseded
all accounting standards in U.S. GAAP, aside from those issued by the SEC. ASU
2009-01 is effective for reporting periods ending after September 15, 2009. We
adopted ASU 2009-01 for reporting in the second quarter 2009. The codification
does not change or alter existing GAAP. Adoption of ASU 2009-01 did not have a
material impact on our Consolidated Financial Statements.
FASB ASC 820-10-65-4 (Prior authoritative literature: FASB Staff Position No.
FAS 157-4), "Determining Fair Value When the Volume and Level of Activity for
the Asset or Liability Have Significantly Decreased and Identifying Transactions
that Are Not Orderly," provides additional guidance for estimating fair value in
accordance with ASC 820 when the volume and level of activity for the asset or
liability have significantly decreased. FASB ASC 820-10-65-4 also provides
guidance for determining when a transaction is an orderly one. The Company
adopted FASB ASC 820-10-65-4 during the quarter ended June 30, 2009 and the
adoption did not have a significant impact on the Company's Consolidated
Financial Statements.
In August 2009, the FASB issued ASU 2009-05, Fair Value Measurement and
Disclosures: Measuring Liabilities at Fair Value ("ASU 2009-05"), which provides
clarification on measuring liabilities at fair value when a quoted price in an
active market is not available. ASU 2009-05 is effective for the first reporting
period beginning after issuance. We do not expect adoption of ASU 2009-05 to
have a material impact on our Consolidated Financial Statements.
NOTE 5 - SUBSEQUENT EVENTS
On October 2nd 2009, the Company formed a Florida wholly owned subsidiary, Delta
Entertainment Group, Inc. ("Delta').
During October and November 2009, the Tucker Family Spendthrift Trust has
advanced the Company and or its affiliates approximately $17,300.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD LOOKING STATEMENTS
The statements contained in this report 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.
Readers are also directed to other risks and uncertainties discussed in other
documents filed by the Company with the Securitis and Exchange Commission. The
Company undertakes no obligation to update or revise any forward-looking
information, whether as a result of new information, future developments or
otherwise.
OVERVIEW AND HISTORY
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.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
We did not generate significant revenues from continuing operations during the
three or nine months ended September 30, 2009 or 2008.
During the three months ended September 30, 2009 we incurred general and
administrative expenses totaling $38,853, as compared to $7,971 for the same
period in the prior year. During the nine months ended September 30, 2009 we
incurred general and administrative expenses totaling $144,547, as compared to
$27,630 for the same period of the prior year. The increase in the current year
was due primarily to an increase in compensation expense, rent expense and other
professional fees.
Liquidity and Capital Resources
We have nominal assets. At September 30, 2009 we had cash of $1,729 and prepaid
expenses of $12,039. At December 31, 2008 we had cash of $8 and prepaid expenses
of $18,992. The increase in our cash holdings was attributable to advances from
a related party.
10
Our operations to date have been funded by loans and capital contributions made
by our affiliates.
Our total current liabilities at September 30, 2009 were $62,197 as compared to
$48,234 at December 31, 2008. We have relied on related parties to provide
working capital to cover professional fees, rent and compensation. We have a
working capital deficit of $48,380. Unless we secure additional financing, of
which there can be no assurance, or begin to generate revenues in excess of
expenses, we may not be able to meet our obligations as they become due.
Due to our operating losses and deficits, our independent auditors in our
financial statements have raised doubts about our ability to continue as a going
concern. Despite these historical losses, management believes that it will be
able to satisfy ongoing operating expenses. If revenues from operations are
insufficient to meet these obligations, management will seek to obtain third
party financing. There can be no assurance that any financing will be available,
or if available, will be offered on terms that will not adversely impact our
shareholders.
During the nine months ended September 30, 2009, we used cash in operating
activities of $49,398 as compared to cash provided of $1,171 for the nine months
ended September 30, 2008. During the 2009 period, we used cash to fund our net
loss of $116,697 offset by an increase in accrued wages-related party $30,848
and other changes in operating assets and liabilities.
During the nine months ended September 30, 2009, we received net cash from
financing activities of $52,119 as compared to nil for the nine months ended
September 30, 2008.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of our financial condition and results of operations
are based upon our condensed consolidated financial statements, which have been
prepared pursuant to the rules and regulations of the SEC. Certain information
related to our organization, significant accounting policies and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted. The preparation of the financial statements in accordance
with accounting principles generally accepted in the United States requires us
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. On an ongoing basis, we evaluate
our estimates related to (i) useful lives of depreciable lives of assets; (ii)
income tax valuation allowances; (iii) valuation assumptions for share-based
payments. We base our estimates on historic experience and various other factors
related to each circumstance. Actual results could differ from those estimates
based upon future events, which could include, among other risks, changes in the
business environment in which we operate.
There are several accounting policies that we believe are significant to the
presentation of our financial statements and require management's most
difficult, complex or subjective judgments about matters that are inherently
uncertain. We believe our most critical accounting policies include (i) use of
estimates, which is described more fully above and (ii) the carrying values of
goodwill and other long-lived assets. Our significant accounting policies and
critical accounting estimates are disclosed more fully in our Annual Report on
Form 10-K for the year ended December 31, 2008. We do not believe there have
been significant changes to our critical accounting policies and estimates
subsequent to December 31, 2008.
11
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2007, the FASB issued FASB ASC 805-10 (Prior authoritative
literature: FASB Statement 141 (R), "Business Combinations," which replaces FASB
Statement No. 141). FASB ASC 805-10 is effective for the Company April 1, 2009
and establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any non controlling interest in the acquiree and the
goodwill acquired. The Statement also establishes disclosure requirements which
will enable users to evaluate the nature and financial effects of the business
combination. FASB ASC 805-10 will change how business combinations are accounted
for and will impact financial statements both on the acquisition date and in
subsequent periods. The adoption of FASB ASC 805-10 did not have an impact on
the Company's financial position and results of operations although it may have
a material impact on accounting for business combinations in the future which
cannot currently be determined.
In April 2009, the FASB issued FASB ASC 805-10-05 (Prior authoritative
literature: FSP 141(R)-1 "Accounting for Assets Acquired and Liabilities Assumed
in a Business Combination That Arises from Contingencies"). For business
combinations, the standard requires the acquirer to recognize at fair value an
asset acquired or liability assumed from a contingency if the acquisition date
fair value can be determined during the measurement period. FASB ASC 805-10-05
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008, with early adoption prohibited. The
Company adopted these provisions at the beginning of the fiscal year April 1,
2009. FASB ASC 805-10-05 will be applied prospectively for acquisitions in
fiscal 2010 or thereafter.
In May 2009, the FASB issued FASC Topic 855, Subsequent Events, formerly SFAS
165 ("FASC 855"), which requires entities to disclose the date through which
they have evaluated subsequent events and whether the date corresponds with the
release of their financial statements. FASC 855 is effective for interim and
annual periods ending after June 15, 2009. We adopted FASC 855 for reporting in
second quarter 2009. Adoption of FASC 855 did not have a material impact on our
Consolidated Financial Statements.
In June 2009, the FASB issued Accounting Standards Update ("ASU") 2009-01, Topic
105 - Generally Accepted Accounting Principles ("ASU 2009-01"), which superseded
all accounting standards in U.S. GAAP, aside from those issued by the SEC. ASU
2009-01 is effective for reporting periods ending after September 15, 2009. We
adopted ASU 2009-01 for reporting in the second quarter 2009. The codification
does not change or alter existing GAAP. Adoption of ASU 2009-01 did not have a
material impact on our Consolidated Financial Statements.
FASB ASC 820-10-65-4 (Prior authoritative literature: FASB Staff Position No.
FAS 157-4), "Determining Fair Value When the Volume and Level of Activity for
the Asset or Liability Have Significantly Decreased and Identifying Transactions
that Are Not Orderly," provides additional guidance for estimating fair value in
accordance with ASC 820 when the volume and level of activity for the asset or
liability have significantly decreased. FASB ASC 820-10-65-4 also provides
guidance for determining when a transaction is an orderly one. The Company
adopted FASB ASC 820-10-65-4 during the quarter ended June 30, 2009 and the
adoption did not have a significant impact on the Company's Consolidated
Financial Statements.
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In August 2009, the FASB issued ASU 2009-05, Fair Value Measurement and
Disclosures: Measuring Liabilities at Fair Value ("ASU 2009-05"), which provides
clarification on measuring liabilities at fair value when a quoted price in an
active market is not available. ASU 2009-05 is effective for the first reporting
period beginning after issuance. We do not expect adoption of ASU 2009-05 to
have a material impact on our Consolidated Financial Statements.
OFF BALANCE SHEET ARRANGEMENTS
As of the date of this report, we do not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to investors. The term "off-balance sheet arrangement" generally
means any transaction, agreement or other contractual arrangement to which an
entity unconsolidated with us is a party, under which we have: (i) any
obligation arising under a guarantee contract, derivative instrument or variable
interest; or (ii) a retained or contingent interest in assets transferred to
such entity or similar arrangement that serves as credit, liquidity or market
risk support for such assets.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company we are not required to provide the information
required by this item.
ITEM 4. 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
Quarterly Report on Form 10-Q, 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
her evaluation of these disclosure controls and procedures, the Company's
chairman of the board, 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 her by others within
those entities, particularly during the period in which this Quarterly Report on
Form 10-Q was being prepared.
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CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in our internal controls over financial reporting during
the quarter ended September 30, 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. SALE OF UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On September 1, 2009, the Company issued 85,000 shares to the Tucker Family
Spendthrift Trust as repayment of $850 of advances made to the Company. Also on
that date, the Company issued 640,000 shares to Officers and Directors.
On August 3, 2009, the Company issued 3,940,605 shares of common stock to the
Tucker Family Spendthrift Trust as repayment $31,906.05 of advances made to the
Company and $7,500 of accrued rent The Company issued 1,600,000 shares of common
stock to Officers and Directors for their services and also 100,000 shares to
vendors for accrued liabilities and consulting expenses.
On February 4, 2009, the Company issued 550,000 to the Tucker Family Spendthrift
Trust as repayment of $4,000 of advances made to the Company and $1,500 for rent
expense. Also on that date, the Company issued 320,000 shares to Officers and
Directors of the Company for their services.
On January 7, 2009, the Company issued 1,009,500 shares of common stock to the
Tucker Family Spendthrift Trust as repayment of $5,595 of advances made to the
Company and $4,500 for accrued rent and rent expense. The Company issued 960,000
shares of common stock to Officers and Directors of the Company for their
services. The Company also issued 550,000 shares of common stock for 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.
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 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 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.
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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 March 31, 2008, the Company issued 2,160,087 shares of common stock as
repayment of $21,601 of amounts due to related parties.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS.
Set forth below is a list of exhibits to this quarterly report on Form 10Q.
Exhibit
Number Description
- ------- ----------------------------------------------------------------------
31 Certification of the Chief Executive and Financial Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of
1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32 Certification of the Chief Executive and Financial Officer pursuant to
Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of
1934, as amended, and 18 U.S.C. 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Beta Music Group, Inc.
Date: November 16, 2009 By /s/ Michelle Tucker
Michelle Tucker
Chief Executive Officer
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