UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| [X] | ||
| ANNUAL REPORT | ||
| OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2021
12-31
| [] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from _____________ to _____________
Commission file number 000-51770
CMG HOLDINGS GROUP, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 87-0733770 | |
 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 2130 North Lincoln Park West 8N | ||
| Chicago, IL | 60614 | |
| (Address of principal executive offices) | (Zip Code) |
| (773)770-3440 | ||
| Registrant's telephone number including area code | ||
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act: Common Stock, no par value
Indicate by check mark if the registrant is a well known seasonalwell-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o [ ] No
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 o
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 o [X] No x *
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation STS-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso [X] No x
Indicate by check mark if disclosure of delinquent filers in responsepursuant to Item 405 of Regulation SKS-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10 K10-K or any amendment to this Form 10K. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer or a nonsmall. See definition of “large accelerated filer, or smallaccelerated filer and smaller reporting company. See the definition of "large accelerated filer," "accelerated filer" and "small reporting company"company” in Rule 12b 212b-2 of the Exchange Act.
The Aggregate market value of the Registrant’sCompany’s common shares issued and outstanding as of February 28, 2022, was $3,421,642. The Aggregate market value of the voting and non votingnon-voting common stockequity held by non affiliatesnon-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of the registrantsuch common equity, as of the endlast business day of the second quarterregistrant’s most recently completed fiscal year 2021, was $3,684,845.
| Large accelerated filer | [ ] | Accelerated filer | [ ] |
| Non-accelerated filer | [ ] | Smaller reporting company | [X] |
| (Do not check if a smaller reporting company) | Emerging growth company | [] | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the last fiscal year was approximately: $2,895,000 at $0.01 price per share, based on the closing price on the OTCQB. Exchange Act. [ ]
As of November 1, 2016,February 28, 2022, there were 289,500,000 shares of common stock of the registrant issued andCommon Stock, no par value, outstanding.
Documents Incorporated by Reference: Reference.None
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CMGO HOLDINGS GROUP, INC. FORM 10-K TABLE OF CONTENTS | |||||
Item # | Description | Page Numbers | |||
PART I | |||||
| ITEM 1 | BUSINESS | ||||
| 3 | |||||
| ITEM 1A | RISK FACTORS | ||||
| 6 | |||||
| ITEM 1B | UNRESOLVED STAFF COMMENTS | ||||
| 6 | |||||
| ITEM 2 | PROPERTIES | ||||
| 6 | |||||
| ITEM 3 | LEGAL PROCEEDINGS | ||||
| 8 | |||||
| ITEM 4 | MINE SAFETY DISCLOSURES | ||||
| 8 | |||||
| PART II | |||||
| ITEM 5 | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES | ||||
| 7 | |||||
| ITEM 6 | SELECTED FINANCIAL DATA | ||||
| 8 | |||||
| ITEM 7 | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ||||
| 9 | |||||
| ITEM 7A | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | ||||
| ITEM 8 | FINANCIAL STATEMENTS AND SUPPLEMENTARYDATA | ||||
| F-1 | |||||
| ITEM 9 | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | ||||
| 12 | |||||
| ITEM 9A | CONTROLS AND PROCEDURES | ||||
| 12 | |||||
| ITEM 9B | OTHER INFORMATION | ||||
| 13 | |||||
| PART III | |||||
| 14 | |||||
| ITEM 10 | DIRECTORS, EXECUTIVE OFFICERS, CORPORATE GOVERNANCE | ||||
| 14 | |||||
| ITEM 11 | EXECUTIVE COMPENSATION | ||||
| 16 | |||||
| ITEM 12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | ||||
| 17 | |||||
| ITEM 13 | CERTAIN RELATIONSHIPSAND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | ||||
| 18 | |||||
| ITEM 14 | PRINCIPAL ACCOUNTANT FEES AND SERVICES | |||
| 18 | ||||
| PART IV | ||||
| 19 |
| ITEM 15 | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | 20 | ||
| SIGNATURES | 21 | |||
| EXHIBIT 31 | SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER | |||
| EXHIBIT 32 | SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER |
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FORWARD LOOKING STATEMENTS
This annual report on Form 10K10K contains forward looking statements which include, but are not limited to, statements concerning expectations as to our revenues, expenses, and net income, our growth strategies and plans, the timely development and market acceptance of our products and technologies, the competitive nature of and anticipated growth in our markets, our ability to achieve cost reductions, the status of evolving technologies and their growth potential, the adoption of future industry standards, expectations as to our financing and liquidity requirements and arrangements, the need for additional capital, and other matters that are not historical facts. These forward looking statements are based on our current expectations, estimates, and projections about our industry, management’s beliefs, and certain assumptions made by it. Words such as “anticipates”, “appears”, “expects”, “intends”, “plans”, “believes, “seeks”, “estimates”, “may”, “will” and variations of these words or similar expressions are intended to identify forward looking statements. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances, including any underlying assumptions, are forwardforward looking statements. These statements, which are included in accordance with the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, are not guarantees of future performance and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results could differ materially and adversely from those results expressed in any forward looking statements, as a result of various factors. Readers are cautioned not to place undue reliance on forward looking statements, which are based only upon information available as of the date of this report. We undertake no obligation to revise or update publicly any forward looking statements for any reason. Unless the context indicates otherwise, the terms “Company”, “Corporate”, “CMGO”, “our”, and “we” refer to CMG Holdings Group, Inc. and its subsidiaries.
ITEM 1: DESCRIPTION OF BUSINESS
Some of the statements contained in this registration statement on Form 10 of CMG Holdings Group, Inc. (hereinafter the “Company”, “we” or the “Company”) discuss future expectations, contain projections of our plan of operation or financial condition or state other forward- looking information. In this registration statement, forward-looking statements are generally identified by the words such as “anticipate”, “plan”, “believe”, “expect”, “estimate”, and the like. Forward-looking statements involve future risks and uncertainties, there are factors that could cause actual results or plans to differ materially from those expressed or implied. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and is derived using numerous assumptions. A reader, whether investing in the Company’s securities or not, should not place undue reliance on these forward-looking statements, which apply only as of the date of this Registration Statement. Important factors that may cause actual results to differ from projections include, for example:
| ● | the success or failure of Management’s efforts to implement the Company’s plan of operation; |
| ● | the ability of the Company to fund its operating expenses; |
| ● | the ability of the Company to compete with other companies that have a similar plan of operation; |
| ● | the effect of changing economic conditions impacting our plan of operation; |
| ● | the ability of the Company to meet the other risks as may be described in future filings with the SEC. |
General Background of the Company
CMG Holdings Group, Inc. (the “Company” or “CMG”) was incorporated in the State of Nevada on July 30, 2004 under the name of “Pebble Beach Enterprises, Inc.” From the date of incorporation until August 2004, it was a wholly ownedwholly-owned subsidiary of Fresh Veg Broker.com, Inc. (“Fresh Veg”), a Nevada corporation. In August 2004, the Company was spun off from Fresh Veg. Until May 27, 2008, the Company was a real estate investment company with three areas of operation: a) real estate acquisition and resale;resale; b) real estate development and resale;resale; and c) real estate consulting and joint ventures. On February 20, 2008, a majority of the shares of the Company were sold by the shareholders who were actively involved in the Company’s prior real estate business (the “Change in Control”). Also, on February 20, 2008, the Company changed its name to “CMG Holdings, Inc.” Since the Change in Control, the Company started to engage in the business of providing marketing, entertainment and management services.
In October 2011, the Company changed its name from “CMG Holdings, Inc.” to its current name “CMG Holdings Group, Inc.” to better reflect the business of the Company.
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The Company is a marketing communications company focused on the operation of organizations in the alternative advertising, digital media, experiential and interactive marketing, and entertainment. Our Company was formed by a core group of executives who have held senior level positions with several of the largest companies in the entertainment and marketing management industry. Our Company delivers customized marketing solutions at optimize profitability by concentrating our resources in those segments of the marketing communications and entertainment industry. Our Company operates in the sectors of experiential marketing, event marketing, commercial rights, and talent management.
Experiential marketing includes production and promotion, event designs, sponsorship evaluation, negotiation and activation, talent buying, show production, stage and set designs, data analysis and management. We also offer branding and design services, including graphic, industrial and package designs across traditional and new media, public relations, social media, media development and relations and interactive marketing platforms to provide our clients with a customary private digital media networks to design and develop individual broadcasting digital media channels for our clients to sell, promote and enhance their digital media video contents through mobile, online and social mediums.
Below is the business description of XA, The Experiential Agency, Inc., our wholly ownedwholly-owned subsidiary.
XA The Experiential Agency, Inc. (“XA”)
Market Strategy
Through our wholly ownedwholly-owned subsidiary, XA, an integrated experiential marketing services company, we develop, manage and execute sales promotion programs at both national and local levels, utilizing both online and offline marketing programs. Our programs assist our clients effectively and promote their platforms and services directly to retailers and consumers, and are intended to assist our clients to achieve maximum impact and return on their marketing investment. Our activities reinforce brand awareness, provide incentives to retailers to motivate consumers to purchase their products, and are designed to meet the needs of our clients by focusing on the communities who want to engage brands as part of their lifestyles.
Through our wholly owned subsidiary, XA, an integrated experiential marketing services company, we develop, manage and execute sales promotion programs at both national and local levels, utilizing both online and offline marketing programs. Our programs assist our clients effectively and promote their platforms and services directly to retailers and consumers, and are intended to assist our clients to achieve maximum impact and return on their marketing investment. Our activities reinforce brand awareness, provide incentives to retailers to motivate consumers to purchase their products, and are designed to meet the needs of our clients by focusing on the communities who want to engage brands as part of their lifestyles.
Sources of Revenue
Our revenues are generated through the execution of marketing and communications programs derived primarily across the sectors of event management, talent management and commercial rights as well as various media, planning and other management programs. The majority of our contracts with our clients are negotiated individually and the terms of engagement with our clients and basis in which we earn fees and commissions will vary significantly. Contracts with our client are multifaceted arrangements that may include incentive compensation provisions and may include vendor credits. Our largest clients are corporations where they may arrange for our services to be provided locally or nationally. Similar to larger marketing communications companies operating in our sector, our revenues are primarily derived from planning and executing marketing and communications programs in various operating sectors. Most of our client contracts are individually negotiated where terms of engagements and consideration in which we earn revenues vary among planning, creation, implementation and executions of marketing and communications programs specific to the sectors of talent management, event management, and commercial rights. Several of our clients have complex contract arrangements;arrangements; therefore, we provide services to our clients from our own offices as well as onsite where the events are held. In arranging for such services, we may enter into national or local agreements and estimates are involved in determining both amount and timing of revenue recognition under these arrangements.
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Our fees are calculated to reflect our expertise based on monthly rates as well as mark upmarkup percentages and the relative overhead expenses to execute services provided to our clients. Clients may seek to include incentive compensation components for successful execution as part of the total compensation. Commissions earned are based on services provided and are usually calculated on a percentage over the total revenues generated for our clients. Our revenues can also be generated when clients pay gross rates before we pay reduced rates—the difference is commissions earned which is either retained in total or shared with the client depending on the nature of the services agreement. Our generated revenues are dependent upon the marketing and communications requirements of our corporate clients and dependent on the terms of the client contract. The revenues for services performed can be recognized as proportional performance, monthly basis or execution of the completed contracts. For revenues recognized on a completed contract basis, the contract terms are customary in the industry. Our client contracts generally provide terms for termination by either party on 90 day90-day notice.
Competition
In the highly competitive and fragmented marketing and communications industry, our Company competes for business with midmid- size marketing firms such as Mktg, Inc. as well as large global holding companies such as International Management Group, Interpublic Group of Companies, Inc., MDC Partners, Inc. and Omnicom. These global companies generally have greater resources than those available to us, and such resources may enable them to aggressively compete with our Company’s marketing communications businesses. We also face competition from numerous independent agencies that operate in multiple markets. Our competitive advantage is to provide clients with marketing strategies that are focused on increasing clients’ revenues and profits.
Industry Trend
Historically, event management and talent management have been primary service provided by global companies in the marketing communications industry. However, as clients aim to establish individual and enhanced relationships with their customers to more accurately measure the effectiveness of their marketing expenditures, specialized and digital communications services are consuming a growing portion of marketing dollars. This increases the demand for a broader range of marketing communications services. The mass market audience is giving way to life style segments, social events/networks, and online/mobile communities, with each segment requiring a different message and/or different, often non traditional,nontraditional, channels of communication. Global marketers now seek innovative strategies, concepts and programs for new opportunities for small to mid sizedmid-sized communications companies.
Clients
The Company serves clients across the marketing communication industry. Marketing agreements and talent representation for our clients means that the Company handles marketing communications and multiple brands, product lines of the client in every geographical location. We have contracts with many of our clients and the terms of the contracts are customary in the industry. These contracts provide for termination by either party on relatively short notice. “Management’s Discussion and Analysis — Executive Overview” for a further discussion of our arrangements with our clients.
Employees
As of December 31, 2015,2019, the Company and its subsidiary had 83 employees. The personal service character of the marketing communications sector, the quality of personnel and executive management are crucially important to the Company’s continuing success.
Environmental Laws
The company believes it complies with all regulations concerning the discharge of materials into the environment, and such regulations have not had a material effect on the capital expenditures or operations of the company.
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ITEM 1A: RISK FACTORS
Not applicable to this item is not required of a smaller reporting company.
ITEM 1B: UNRESOLVED STAFF COMMENTS
None
ITEM 2: DESCRIPTION OF PROPERTY
None
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4: MINE SAFETY DISCLOSURES
None.
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PART II
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED TO STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock has beenis currently quoted on the Over the Counter Markets (OTC) since October 2007 and currently lists at OTCQB which is the middle tier of the OTC Market. OTCQB companies report to the SEC or a U.S. banking regulator, making it easier for investors to identify companies that are current in their reporting obligations. There are no financial qualities standards to be in this middle tier and OTCQB securities such as ours may also be quoted on the FINRA BB. The OTCQB allows investors to easily identify reporting companies traded in the OTC market regardless of where they are quoted. For additional information regarding“Pink Sheets” under the Over the Counter Markets (OTC), please refer to the following http://www.otcmarkets.com/home.
| HIGH | LOW | |||||||
| FISCAL YEAR ENDED DECEMBER 31, 2015 | ||||||||
| First Quarter | 0.01 | 0.01 | ||||||
| Second Quarter | 0.01 | 0.01 | ||||||
| Third Quarter | 0.02 | 0.01 | ||||||
| Fourth Quarter | 0.03 | 0.01 | ||||||
| FISCAL YEAR ENDED DECEMBER 31, 2014 | ||||||||
| First Quarter | 0.01 | 0.01 | ||||||
| Second Quarter | 0.01 | 0.01 | ||||||
| Third Quarter | 0.02 | 0.01 | ||||||
| Fourth Quarter | 0.03 | 0.01 | ||||||
| FISCAL YEAR ENDED DECEMBER 31, 2021 | HIGH | LOW | ||||||
| First Quarter | 0.0090 | 0.0081 | ||||||
| Second Quarter | 0.0149 | 0.0136 | ||||||
| Third Quarter | 0.0115 | 0.0106 | ||||||
| Fourth Quarter | 0.0083 | 0.0078 | ||||||
FISCAL YEAR ENDED DECEMBER 31, 2020 First Quarter | 0.0045 | 0.0038 | ||||||
| Second Quarter | 0.0050 | 0.0045 | ||||||
| Third Quarter | 0.0151 | 0.0130 | ||||||
| Fourth Quarter | 0.0063 | 0.0058 | ||||||
As of Shares of Common Stock
Dividends
Holders of common stock are entitled to dividends when, as, and if declared by the Board of Directors, out of funds legally available therefore. We have never declared cash dividends on its common stock and our Board of Directors does not anticipate paying cash dividends in the foreseeable future as it intends to retain future earnings to finance the growth of our businesses. There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends.
Securities Authorized for Issuance Under Equity Compensation Plans
No equity compensation plan or agreements under which our common stock is authorized for issuance has been adopted during the fiscal years ended December 31, 2021 and 2020.
Transfer Agent
The Company’s transfer agent and registrar of the common stock is Action Stock Transfer Corporation 2469 E Fort Union Blvd, Ste 214, Salt Lake City, UT 84121.
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Warrants
As of the date of this Report, the Company had warrants to purchase a total of 40,000,000 shares of the Company’s Common Stock. Among such outstanding warrants the terms of which are set forth as the following:
There were Warrants to purchase a total of 40,000,000 shares of the Company’s Common Stock. Warrants are exercisable within 5 years from issuance at the exercise price of $0.0155.
Penny Stock Considerations
Because our shares trade at less than $5.00 per share, they are “penny stocks” as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker dealers who engage in certain transactions involving a penny stock. Under the penny stock regulations, a broker dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser’s written consent to the transaction prior to the sale, unless the broker dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker dealer is required to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker dealer or the transaction is otherwise exempt;exempt; disclose commissions payable to the broker dealer and our registered representatives and current bid and offer quotations for the securities;securities; Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks;stocks; and make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account. Because of these regulations, brokerbroker dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded. In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities. Our shares in all probability will be subject to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.
Unregistered Sales Of Equity Securities and Issuance of Equity Securities And Use Of Proceeds
None
ITEM 6: SELECTED FINANCIAL DATA
As a smaller reporting company, as defined in Rule 12b212b2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information required by this item.
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ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with the financial statements for the year ended December 31, 2014 included with this Form 10K.10K. The following discussion and analysis provides certain information, which the Company’s management believes is relevant to an assessment and understanding of the Company’s results of operations and financial condition for the year ended December 31, 2014. The statements contained in this section that are not historical facts are forward looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties. Such forward looking statements may be identified by, among other things, 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. From time to time, we or our representatives have made or may make forward looking statements, orally or in writing. Such forward looking statements may be included in our various filings with the SEC, or press releases or oral statements made by or with the approval of our authorized executive officers.
These forward looking statements, such as statements regarding anticipated future revenues, capital expenditures and other statements regarding matters that are not historical facts, involve predictions. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward looking statements. We do not undertake any obligation to publicly release any revisions to these forward looking statements or to reflect the occurrence of unanticipated events. Many important factors affect our ability to achieve our objectives, including, among other things, technological and other developments within a given field, intense and evolving competition, the lack of an “established trading market” for our shares, and our ability to obtain additional financing, as well as other risks detailed from time to time in our public disclosure filings with the SEC.
Executive Summary
References in this Current Report on Form 10K10K to “CMG Holdings Group”, “CMG”, the “Company,” “we,” “us” and “our” for periods prior to the closing of the Reorganization refer to the Registrant, and for periods subsequent to the closing of the Reorganization refer to the Registrant and its subsidiaries. The Company reports its financial results in accordance with generally accepted accounting principles (“GAAP”) of the United States of America (“US GAAP”). The Company’s objective is to create shareholder value by building market leading strategies that deliver innovative, value added marketing communications and strategic consulting to our clients. The company manages the business by monitoring several financial and non financial performance indicators. The key indicators that we review focus on the areas of revenues and operating expenses. Revenue growth is analyzed by reviewing the components and mix of the growth, including: growth by major geographic location and growth from acquisitions.
Financial analysis
Year ended December 31, 20152021 compared to the year ended December 31, 20142020 Liquidity and capital resources
As at December 31, 2015,2021 the Company had a cash balance of $230,138$595,430 and working capital deficit of $1,174,641$702,906 compared with a cash balance of $27,886$411,136 and a working capital deficit of $1,285,378$83,020 at December 31, 2014.2020. The decreaseincrease in working capitalcash was mainly due to the decreaseincrease in business for XA during the second half of 2014.
Cash Flows from Operating Activities
During the year ended December 31, 2015,2021, cash flows provided by operating activities was $681,364 compared with used in operating activities was $137,486 compared with use of $2,043,692$189,211 of cash flow during the year ended December 31, 2014.2020. The decreaseincrease in cash flow from operating activities is mainly due to the decrease in revenues and operating expenses during the year ended December 31, 2014.
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Cash Flows from Investing Activity
During the year ended December 31, 2015,2021, cash flows providedused by investing activities were $64,766,$0, compared to $1,260,990$29,010 for the year ended December31, 2014.
Cash Flows from Financing Activities
During the year ended December 31, 2015,2021, cash provided byused in financing activities was $0$497,070 as compared to $334,000$152,395 for the year ended December 31, 2014.
Revenues
The Company had revenues of $1,073,577$1,618,874 in our fiscal year ended December 31, 2015,2021, as compared to $7,811,423$140,758 in fiscal year ended December 31, 2014.2020. The decreaseincrease in revenues is mainly due to decrease of business revenues generated in event marketing operations of XA, The Experiential Agency, Inc.
Cost of Sales
The Company had cost of sales of revenues of $352,531$1,214,281 in the year ended December 31, 2015,2021, as compared to $6,493,002
$94,936 in the year ended December 31, 2014.2020. The decreaseincrease in cost of sales is mainly associated due to the decrease in event marketing operations of XA, The Experiential Agency, Inc.
Expenses
The Company had total operating expenses of $752,139$715,165 in the year ended December 31, 2015,2021, as compared to $2,908,815$637,763 in the year ended December 31, 2014.2020. The decreaseincrease in operating expense is mainly due to a decreaseincrease in General and Administrative Expenses during the year ended December 31, 2015 comparedpayments to the year ending December 31, 2014.
Income
The Company had a net lossincome of $977$782,212 in the year ended December 31, 20152021 as compared to net income of $1,268,183$42,974 in the year ended December 31, 2014.
Capital Resources
At December 31, 2015,2021, we had assets totaling $321,516,$1,792,275, compared to $122,978$610,309 at December 31, 2014.2020. Assets at December 31, 20152021 consisted primarily of cash of $230,138, $595,430, loan receivable of $1,190,648 and property and equipment, net of $28,478, goodwill of $54,500 and other current assets of $8,400.
Liabilities
Our liabilities at December 31, 20152021 totaled $1,413,179,$1,083,172, compare to $1,321,664$683,418 at December 31, 2014.2020. Liabilities at December 31, 20152021 consisted primarily of $145,408 in accrued liabilities, $676,670 in accounts payable, $2200,000$438,514 in deferred compensation, loan from outside party of $15,000, paycheck protection loan of $62,500, loan payable of $507,158 and $371,100 in other short term liabilities including convertible notes and derivative liabilities.
Critical Accounting Policies and Estimates
For all periods following closing under the Reorganization Agreement, the Company intends to prepare consolidated financial statements of the Company and its subsidiaries, which will be prepared in accordance with the generally accepted accounting principles in the United States. During the preparation of the financial statements the Company will be required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company will evaluate its estimates and judgments, including those related to sales, returns, pricing concessions, bad debts, inventories, investments, fixed assets, intangible assets, income taxes and other contingencies. The Company intends to base its estimates on historical experience and on various other assumptions that it believes are reasonable under current conditions. Actual results may differ from these estimates under different assumptions or conditions. In response to the SEC’s Release No. 338040,338040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policy,” the Registrant identified the most critical accounting principles upon which its financial status depends. The Registrant determined that those critical accounting principles are related to the use of estimates, revenue recognition, income tax and impairment of intangibles and other long lived assets. The Company presents these accounting policies in the relevant sections in this management’s discussion and analysis, including the Recently Issued Accounting Pronouncements discussed below.
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Revenue Recognition
The Company recognizes revenues generated from clients are subject to contracts requiring the Company to provide services within specified time periods generally ranging up to twelve months. As a result, we have projects in process at various stages of completion on any given date and stages may extend from one quarter to the next quarter and from one year to the next year. Revenue for our services is recognized when the following criteria are satisfied: evidence of an arrangement exists;exists; price is agreed upon at a fixed or determinable agreement level;level; services have been performed and collection is assured. Depending on terms of a client contract, fees for services performed can be recognized in three principal ways: individual project performances as is such in our event marketing division, monthly base retainers in our public relations, consulting or talent management division, and completed contracts were the Company work is based on success fee of the engagement and paid a percentage of the revenue generated by our clients. Depending on the terms of the client contract, revenue is derived from arrangements involving fees for services performed, commissions, performance or a combinations of each or all three. The revenues and commissions are generally earned on the date of the signing of the contract and then an invoice is distributed to the client with approvals. Our revenue is recorded as gross revenues less cost of goods sold or less pass through expenses charged to a client because there may be various pass through expenses, such as external production and marketing costs.
If the Company does not accurately manage our projects properly within the planned periods of time to satisfy our obligations under the contracts, then future profit margins may be significantly and negatively affected or losses on existing contracts may need to be recognized. Outside production costs consist primarily of costs to purchase media and program merchandise;merchandise; costs of production;production; merchandise warehousing and distribution;distribution; third party contract fulfillment costs;costs; and other costs directly related to marketing programs. Revenue recognition will not result in related billings throughout the duration of a contract due to timing differences between the contracted billing schedule and the time such revenue is recognized. In such instances, when revenue is recognized in an amount in excess of the contracted billing amount, we record such excess on our balance sheet as un billed contracts in progress. Alternatively, on a scheduled billing date, should the billing amount exceed the amount of revenue recognized, we record such excess on our balance sheet as deferred revenue. In addition, on contracts where reimbursable costs are incurred prior to the time revenue is recognized on such contracts, we record such costs as deferred contract costs on our balance sheet. Notwithstanding this, labor costs for permanent employees are expensed as incurred.
We use estimates of fair value to value derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, our policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads (including for our liabilities), relying first on observable data from active markets. Additional adjustments may be made for factors including liquidity, credit, bid/offer spreads, etc., depending on current market conditions. Transaction costs are not included in the determination of fair value. When possible, we seek to validate the model’s output to market transactions.
11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CMG HOLDINGS GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
| CONTENTS | |||
| Report of Independent Registered Public Accounting Firm | F-2 | ||
| Consolidated Balance Sheets | F-3 | ||
| Consolidated Statements of Operations | F-4 | ||
| Consolidated Statements of Stockholders’ Deficit | F-5 | ||
| Consolidated Statements of Cash Flows | F-6 | ||
| Notes to the Consolidated Financial Statements | F-7 | ||
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of CMG Holdings Group, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated financial statements, together with the reportbalance sheets of the independent registered public accounting firm thereon and the notes thereto, are presented beginning at page F1. The Company’s balance sheetsCMG Holdings Group, Inc. (the “Company”) as of December 31, 20142021 and 2020 and the related consolidated statements of operations, changes in stockholders’ deficitshareholders’ equity, and cash flows for the two years thenin the period ended have been audited by John Scrudato, CPA. John Scrudato, CPA is an independent registered publicDecember 31, 2021, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the two years in the period ended December 31, 2021 and 2020, in conformity with accounting firm. principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, been preparednor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
We determined that there are no critical audit matters.
/S BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company's auditor since 2020
Lakewood, CO
March 31, 2022
5041
F-2
| CMG Holdings Group, Inc. |
| Consolidated Balance Sheet |
| As of December 31, |
| ASSETS | 2021 | 2020 | ||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 595,430 | $ | 411,136 | ||||
| Accounts receivable | — | 24,941 | ||||||
| Loan receivable | 1,190,648 | 164,321 | ||||||
| Total current assets | 1,786,078 | 600,398 | ||||||
| Property and equipment | 6,197 | 9,911 | ||||||
| Total Assets | $ | 1,792,275 | $ | 610,309 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | — | $ | 10,500 | ||||
| Deferred compensation | 438,514 | 483,376 | ||||||
| Loan Payable | 500,000 | — | ||||||
| Loan from outside party | 15,000 | 35,000 | ||||||
| Paycheck Protection Loan | 62,500 | 45,792 | ||||||
| Note payable | 60,000 | 108,750 | ||||||
| Total current liabilities | 1,076,014 | 683,418 | ||||||
| TOTAL LIABILITIES | 1,076,014 | 683,418 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS' DEFICIT | ||||||||
| Common Stock shares authorized; par value, | ||||||||
| shares issued and outstanding | ||||||||
| Common Stock 450,000,000 shares authorized; $0.001 par value, 438,672,016 shares issued and outstanding as of December 31, 2021 and 2020 | 438,672 | 438,672 | ||||||
| Additional paid in capital | 14,630,689 | 14,630,689 | ||||||
| Accumulated deficit | (14,353,100 | ) | (15,142,470 | ) | ||||
| TOTAL STOCKHOLDERS DEFICIT | 716,261 | (73,109 | ) | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 1,792,275 | $ | 610,309 | ||||
| The accompanying notes are an integral part of these financial statements. | ||||||||
F-3
| CMG Holdings Group, Inc. |
| Consolidated Statements of Operations |
| For the year ended December 31, |
| 2021 | 2020 | |||||||
| Revenues | $ | 1,618,874 | $ | 140,758 | ||||
| Operating expenses | ||||||||
| Cost of revenues | 1,214,281 | 94,936 | ||||||
| Interest expense | — | 3,182 | ||||||
| General and administrative expenses | 708,007 | 634,581 | ||||||
| Total operating expenses | 1,922,288 | 732,699 | ||||||
| Net income from operations | (303,414 | ) | (591,941 | ) | ||||
| Other income (expense) | ||||||||
| Interest Income | 35,507 | 14,321 | ||||||
| Settlement of loan payable | (48,750 | ) | (41,250 | ) | ||||
| Settlement of Lawsuit Hudson Gray | 589,115 | 661,844 | ||||||
| Forgiveness of PPP loan | 45,792 | |||||||
| Gain on sale of securities | 471,120 | — | ||||||
| Total other income | 1,092,784 | 634,915 | ||||||
| Net income | $ | 789,370 | $ | 42,974 | ||||
| Weighted Average Number of Common Shares Outstanding - Basic and Diluted | 438,672,016 | 446,782,706 | ||||||
| Income (Loss) per Common Share - Basic and Diluted | $ | 0.0020 | $ | — | ||||
| The accompanying notes are an integral part of these financial statements. | ||||||||
F-4
| CMG Holdings Group, Inc. |
| Consolidated Statement of Stockholders Equity |
| Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||
| Number of | Number of | Additional Paid In | Treasury | Accumulated | Total Stockholders' | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Stock | Deficit | Equity | |||||||||||||||||||||||||
| Balance December 31, 2019 | 0 | $ | — | 449,506,008 | $ | 449,506 | $ | 14,687,865 | $ | (39,000 | ) | $ | (15,185,444 | ) | $ | (87,073 | ) | |||||||||||||||
| Purchase of treasury stock | — | — | — | — | — | (29,010 | ) | (29,010 | ) | |||||||||||||||||||||||
| Retirement of treasury stock | — | — | (10,833,992 | ) | (10,834 | ) | (57,176 | ) | 68,010 | — | — | |||||||||||||||||||||
| Net Income(Loss) for the year | — | — | — | — | — | — | 42,974 | 42,974 | ||||||||||||||||||||||||
| Balance December 31, 2020 | 0 | — | 438,672,016 | 438,672 | 14,630,689 | — | (15,142,470 | ) | (73,109 | ) | ||||||||||||||||||||||
| Net Income(Loss) for the year | — | — | — | — | — | — | 789,370 | 789,370 | ||||||||||||||||||||||||
| Balance December 31, 2021 | 0 | $ | — | 438,672,016 | $ | 438,672 | $ | 14,630,689 | $ | — | $ | (14,353,100 | ) | $ | 716,261 | |||||||||||||||||
| The accompanying notes are an integral part of these financial statements. | ||||||||||||||||||||||||||||||||
F-5
| CMG Holdings Group, Inc. |
| Consolidated Statement of Cash Flows |
| For the year ended December 31, |
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 789,370 | $ | 42,974 | ||||
| Adjustments to reconcile net income to cash used in operating activities | ||||||||
| Depreciation | 3,714 | 3,714 | ||||||
| Forgiveness of PPP loan | (45,792 | ) | ||||||
| Interest income | (35,507 | ) | (14,321 | ) | ||||
| Deferred compensation | (44,862 | ) | (173,150 | ) | ||||
| Accounts receivable | 24,941 | 15,572 | ||||||
| Accounts payable | (10,500 | ) | (64,000 | ) | ||||
| Net cash provided by operations | 681,364 | (189,211 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from loans payable | 562,500 | 45,792 | ||||||
| Payments of loans payable | (68,750 | ) | (115,687 | ) | ||||
| Payment of loan receivable | (990,820 | ) | (82,500 | ) | ||||
| Net cash provided by financing activities | (497,070 | ) | (152,395 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase treasury stock | — | (29,010 | ) | |||||
| Net cash provided by investing activities | — | (29,010 | ) | |||||
| Net increase in cash | 184,294 | (370,616 | ) | |||||
| Cash, beginning of year | 411,136 | 781,752 | ||||||
| Cash, end of year | $ | 595,430 | $ | 411,136 | ||||
| The accompanying notes are an integral part of these financial statements. | ||||||||
F-6
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated Financial Statements
1 Nature of Operations and Continuance of Business
Creative Management Group, Inc. was formed in Delaware on August 13, 2002 as a limited liability company named Creative Management Group, LLC. On August 7, 2007, this entity converted to a corporation. The Company is a sports, entertainment, marketing and management company providing event management implementation, sponsorships, licensing and broadcast, production and syndication.
On February 20, 2008, Creative Management Group, Inc. formed CMG Acquisitions, Inc., a Delaware company, for the purpose of acquiring companies and expansion strategies. On February 20, 2008, Creative Management Group, Inc. acquired 92.6% of Pebble Beach Enterprises, Inc. (a publicly traded company) and changed the name to CMG Holdings Group, Inc. (“the Company”). The purpose of the acquisition was to effect a reverse merger with Pebble Beach Enterprises, Inc. at a later date. On May 27, 2008, Pebble Beach entered into an Agreement and Plan of Reorganization with its controlling shareholder, Creative Management Group, Inc., a privately held Delaware corporation. Upon closing the eighty shareholders of Creative Management Group delivered all their equity interests in Creative Management Group to Pebble Beach in exchange for shares of common stock in Pebble Beach owned by Creative Management Group, as a result of which Creative Management Group became a wholly owned subsidiary of Pebble Beach. The shareholders of Creative Management Group received one share of Pebble Beach’s common stock previously owned by Creative Management Group for each issued and outstanding common share owned of Creative Management Group. As a result, the shares of Pebble Beach that were issued and previously owned by Creative Management Group, are now owned directly by its shareholders. The shares of Creative Management Group previously owned by its shareholders are now owned by Pebble Beach, thereby making Creative Management Group a wholly owned subsidiary of Pebble Beach. Pebble Beach did not issue any new shares as part of the Reorganization. The transaction was accounted for as a reverse merger and recapitalization whereby Creative Management Group is the accounting acquirer. Pebble Beach was renamed CMG Holdings Group, Inc.
On April 1, 2009, the Company, through a newly formed subsidiary CMGO Capital, Inc., a Nevada corporation, completed the acquisition of XA, The Experiential Agency, Inc. On March 31, 2010, the Company and AudioEye, Inc. (“AudioEye”) completed a Stock Purchase Agreement under which the Company acquired all the capital stock of AudioEye. On June 22, 2011 the Company entered into a Master Agreement subject to shareholder approval and closing conditions with AudioEye Acquisition Corp., a Nevada corporation where the shareholders of AudioEye Acquisition Corp. exchanged 100% of the stock in AudioEye Acquisition Corp for 80% of the capital stock of AudioEye. The Company retained 15% of AudioEye subject to transfer restrictions in accordance with the Master Agreement; in October 2012, the Company distributed to its shareholders, in a dividend, 5% of the capital stock of AudioEye in accordance with provisions of the Master Agreement.
On March 28, 2014, CMG Holdings Group, Inc. (the “Company” or “CMG”), completed its acquisition of 100% of the shares of Good Gaming, Inc. (“GGI”) by entering into a Share Exchange Agreement (the “SEA”) with BMB Financial, Inc. and Jackie Beckford, shareholders of GGI. The sole owner of BMB Financial, Inc. is also the sole owner of Infinite Alpha, Inc. which provides consulting services to CMG. Pursuant to the SEA, the Company received 100% of the shares of GGI in exchange for shares of the Company’s common stock, $33,000 in equipment and consultant compensation and a commitment to pay $200,000 in development costs.
On February 18, 2016, the Company sold the assets of Good Gaming, Inc. to HDS International Corp. and thereafter, HDS changed their name to Good Gaming, Inc, from CMG Holdings Group, Inc. (OTCQB: GMER) (“Good Gaming”). The Company received in exchange Class B Preferred Shares in Good Gaming which are convertible into shares of common stock at a rate of 200 common shares for each Class B Preferred Shares. Good Gaming, Inc. did a 1,000 to 1 reverse split, thus the Class B Preferred Shares were converted to Class B Preferred Shares. The Company has sold all of these Good Gaming shares to date in the market and currently own common shares in the form of preferred stock and common stock as of December 31, 2021, (807)274-1088.
F-7
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated Financial Statements
| 1 | Nature of Operations and Continuance of Business (continued) |
The Company’s operating subsidiaries are XA - The Experiential Agency, Inc. - which is a sports, entertainment, marketing and management company providing event management implementation, sponsorships, licensing and broadcast, production and syndication. Its President is Alexis Laken, the daughter of the Company’s president. The other subsidiary is Lincoln Acquisition Corp. which was formed for the purpose of liquidating shares in Good Gaming, Inc. and any other investment shares which might be held by CMG at any given time.
2 Summary of Significant Accounting
a) Basis of Presentation and Principle of Consolidation
These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuantare expressed in US dollars. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, XA THE EXPERIENTIAL AGENCY INC. All intercompany transactions have been eliminated. The Company's fiscal year-end is December 31.
b) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to Regulation SK as promulgatedmake estimates and assumptions that affect the reported amounts of assets and li abilities 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. The Company regularly evaluates estimates and assumptions related to the recoverability of its long-lived assets, stock-based compensation, and deferred income taxasset valuationallowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the SecuritiesCompany may differ materially and Exchange Commissionadversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
c) Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As of December 31, 2021 and 2020, the Company had no cash equivalents.
The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock
| • | options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. |
e) Financial Instruments
ASC 820, '" Fair Value Measurements”, requiresanentitytomaximizetheuse of observable inputsand minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
F-8
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated Financial Statements
| 2. | Summary of Significant Accounting Policies (Continued) |
Level 1
Level 1 applies to assets or liabilities for which there are included herein pursuantquoted prices in active markets for identical assets
or liabilities.
Level 2
Level 2 applies to Part II, Item 8assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identic al assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company's financial instruments consist principally of cash, accounts payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of our cash is determined based on "Level I" inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
t) Property and Equipment
Property and equipment are comprised of a vehicle and is amortized on a straight-line basis over an expected
useful life of three years. Maintenance and repairs are charged to expense as incurred. The land is not depreciated.
g) Impairment of long lived assets
The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives at each balance sheet date. The Company records an impairment or change in useful life whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed.
h) Reclassifications
Certain prior period amounts have been reclassified to conform to current presentation.
F-9
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
3 Accounts Receivable
Accounts receivable consist of invoices for events that occurred prior to period end that the payments were received in the following year. The balance of accounts receivable at December 31, 2021 and 2020,respectively were $0 and $24,941, respectively.
4 Loan Receivable
On November 15, 2019 the company entered into an agreement to a line of credit (LOC) with Pristec America Inc. (Pristec). The LOC was for $75,000. As of December 31, 2019, the Company had loaned to Pristec $67,500 at an interest rate of 12%, the loan matures in twelve (12) months. As of December 31, 2020 the Company loaned an additional $32,500 and extended the loan for another 12 months until 12/31/21. Pristec is a late stage technology company that has 108 worldwide patents for the cold cracking of crude oil and other oil products. The Company has been granted the right to convert this loan into shares of stock at price of $1,000. At the discretion of the Company, the Company has the option of entering into a revenue sharing at the same terms.
On June 24, 2020 The Company entered into an agreement with New Vacuum Technologies LLC(NVT) whereby the Company loaned NVT $50,000. During the year ended December 31, 2021 the Company loaned an additional $999,201 to NVT. NVT repaid $60,000 to the Company. The loan was originally due on December 24, 2020 at an interest rate of 10% per annum. The loan was extended on December 24, 2020 until December 24, 2021. The loan was verbally extended until December 24, 2022.
5 Accounts Payable
Accounts payable consist of expenses incurred during the year that had not yet been paid. The balance of accounts payable at December 31, 2021 is $-. The balance of accounts payable at December 31, 2020 were $10,500. These accounts payable consisted of trade accounts payable.
6 Equity
| a. | Common Stock |
During the years ended December 31, 2021 and December 31, 2020, the Company did not sell any shares of its par value per share common stock.
| b. | Common Stock Warrants |
During the years ended December 31, 2020 and December 31, 2019, the Company did not issue any warrants for its common shares. On December 15, 2017, the Company's Board of Directors lowered the strike price on the outstanding 40,000,000 Warrants previously issued to Glenn Laken to $0.0035 and extended the expiration date for an additional five (5) years.
F-10
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
7Notes Payable
Convertible Promissory Notes
On November 23, 2021, the Company borrowed $500,000 from GS Capital Partners LLC. The note is due and payable on November 23, 2022. The note has an interest rate of 6% per annum. The Holder of this Form 10K. The financial statementsNote is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price for each share of Common Stock at a price ("Conversion Price") of $0.0165 per share (the “Fixed Price”). Beginning on the 6th monthly anniversary of the Issuance Date of the Note, the Fixed Price shall be equal to $0.0092 per share. Provided, however that in the event, the Company’s Common Stock trades below $0.007 per share for more than seven (7) consecutive trading days, the Holder of this Note is entitled, at its option, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's Common Stock at a Conversion Price equal to the lower of the Fixed Price or 75% of the average of the two lowest VWAP’s of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the tenpriortrading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been prepared assumingdelivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will continuetake all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor). The conversion discount, look back period and other terms will be adjusted on a ratchet basis if the Company offers a more favorable conversion discount, prepayment rate, interest rate, (whether through a straight discount or in combination with an original issue discount), look back period or other more favorable term to another party for any financings while this Note is in effect, including but not limited to defaults, penalties and the remedy for such defaults or penalties.
8 Legal Proceedings
We are subject to certain claims and litigation in the ordinary course of business. It is the opinion of management that the outcome of such matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
F-11
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
9Income Taxes
The Company has a net operating loss carried forward of $14,398,892 available to offset taxable income in future years which commence expiring in 2030. The Company is subject to United States federal and state income taxes at an approximate rate of 21% (2021 and 2020). As at December 31, 2021 and 2020, the Company had no uncertain tax positions.
| 2021 | 2020 | |||||||
| Income tax recovery at Statutory rate | $ | 156,151 | $ | 4,825 | ||||
| Permanent differences and other | — | — | ||||||
| Valuation allowance change | (156,151 | ) | (4,825 | ) | ||||
| Provision for income taxes | $ | — | $ | — | ||||
The significant components of deferred income tax assets and liabilities at December 31, 2021 and 2020
are as a going concern.
| 2021 | 2020 | |||||||
| Net operating loss carried forward | $ | 14,398,892 | $ | 15,142,470 | ||||
| Valuation allowance | $ | (14,398,892 | ) | $ | (15,142,470 | ) | ||
| Net deferred income tax asset | $ | — | $ | — | ||||
F-12
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
10Segments
The Company splits its business activities during the year ended December 31, 2021 into three Reportable Segments. Each segment represents an entity of which are included in the consolidation. The table below represents the operations results for each segment or entity, for the year ended December 31, 2021.
| CMG Holding | ||||||||||||
| XA | Group | Total | ||||||||||
| Revenues | 1,509,633 | 109,241 | 1,618,874 | |||||||||
| Cost of Revenues | 1,156,281 | 58,000 | 1,214,281 | |||||||||
| Gross Profit | 353,352 | 51,241 | 404,593 | |||||||||
| Operating expenses | 310,968 | 397,039 | 708,007 | |||||||||
| Operating income (loss) | 42,384 | (345,798 | ) | (303,414 | ) | |||||||
| Other income (expenses) | 45,792 | 1,046,992 | 1,092,784 | |||||||||
| Net income (loss) | 88,176 | 701,194 | 789,370 | |||||||||
The Company splits its business activities during the year ended December 31, 2020 into three reportable segments. Each segment represents an entity of which are included in the consolidation. The table below represents the operations results for each segment or entity, for the year ended December 31, 2020.
| CMG Holding | ||||||||||||
| XA | Group | Total | ||||||||||
| Revenues | 73,758 | 67,000 | 140,758 | |||||||||
| Cost of revenues | 54,936 | 40,000 | 94,936 | |||||||||
| Gross profit | 18,822 | 27,000 | 45,822 | |||||||||
| Operating expenses | 317,207 | 320,556 | 637,763 | |||||||||
| Operating income (loss) | (298,385 | ) | (293,556 | ) | (591,941 | ) | ||||||
| Other income (expenses) | — | 634,915 | 634,915 | |||||||||
| Net income (loss) | (298,385 | ) | 341,359 | 42,974 | ||||||||
11 Gym Equipment
During the year ended December 31, 2020, the Company entered into an agreement to buy and sell gym equipment with Zautra Fitness. Zautra Fitness would buy the equipment and the Company would reimburse for the full cost. When the equipment is sold the Company will receive 100% of the cost and 60% of the gain. Zatura Fitness will keep 40% of the profit. In 2020 the Company received $43,057.60 in cash and recorded an accounts receivable of $23,942.40. The amount represents 67,000 which is $40,000 receipt for the cost of the equipment and $27,000 which represents 60% of the gain to Zautra for the sale of the equipment. For the period ended September 30, 2021 the Company received $109,241 in revenue for sales in excess of accounts receivable at December 31, 2020. The Company recorded $58,000 of cost of revenues.
F-13
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
12 Related Party Transactions
The Company borrowed $125,000 from a relative of the Company CEO. This amount is due on demand and has an interest rate of 0%. At December 31, 2021 the remaining balance of the loan was $15,000.
The Company issued the Company CEO a warrant to purchase 40,000,000 shares of the Company’s common stock at $0.0155. The warrant has an original term of 5 years. On December 15, 2017 the purchase price was changed to $.0035 and the term was extended 5 years. The warrants were vested 100% on April 7, 2014 when issued.
The board of directors approved a monthly salary for the Company CEO of $15,000 per month. Due to negative economic factors the company did not make any of these payments until January 15, 2019, when payments to the CEO began. The Company has recorded “Deferred Compensation” of $438,514 at December 31, 2021. The Company made payments of $44,862 and $173,149 in excess of the current $180,000 and $180,000 salary for periods ended December 31, 2021 and 2020, respectively.
The Company paid $150,000 and $150,000 for the periods ended December 31, 2021 and 2020, respectively, as compensation to the President of XA, who is the daughter of the Company CEO.
13 Subsequent Events
Per management review, no other material subsequent events have occurred.
F-14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the Company's previous fiscal years ended December 31, 2004 through 2013 and through April 10, 20143,2018, neither the Company nor anyone on the Company's behalf consulted with Anderson BradshawBF Borgewrs CPA PC regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements or (ii) any matter that was either the subject of a disagreement or a reportable event as defined in Item 304(a)(1)(v) of Regulation SK.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s Chief Executive Officer andd Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a15(e)13a15(e) and 15d15(e)15d15(e) under the Exchange Act) as of December 31, 2014.2020. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2014,2020, the Company’s disclosure controls and procedures were not effective due to the identification of a material weakness in our internal control over financial reporting which is identified below, which we view as an integral part of our disclosure controls and procedures. This conclusion by the Company’s Chief Executive Officer and Chief Financial Officer does not relate to reporting periods after December 31, 2015.
Management’s Report on Internal Control Over Financial Reporting
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2014 based on the framework stated by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 1992). Furthermore, due to our financial situation, the Company will be implementing further internal controls as the Company becomes operative so as to fully comply with the standards set by the Committee of Sponsoring Organizations of the Treadway Commission.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a15(f)13a15(f) and 15d15(f)15d15(f) of the Exchange Act. Our internal control system was 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. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on its evaluation as of December 31, 2014,2020, our management concluded that our internal controls over financial reporting were not effective as of December 31, 20142020 due to the identification of a material weakness. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. As soon as our finances allow, we will hire sufficient accounting staff and implement appropriate procedures for monitoring and review of work performed by our Chief Financial Officer.
12
In performing this assessment, management has identified the following material weaknesses as of December 31, 2014:
| · | There is a lack of segregation of duties necessary for a good system of internal control due to insufficient accounting staff due to the size of the Company |
| · | Lack of a formal review process that includes multiple levels of reviews |
| · | Employees and management lack the qualifications and training to fulfill their assigned accounting and reporting functions |
| · | Inadequate design of controls over significant accounts and processes |
| · | Inadequate documentation of the components of internal control in general |
| · | Failure in the operating effectiveness over controls related to valuing and recording equity based payments to employees and non employees |
| · | Failure in the operating effectiveness over controls related to valuing and recording debt instruments including those with conversion options and the related embedded derivative liabilities |
·Failure in the operating effectiveness over controls related to evaluating and recording related party transactions The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The
Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
No change in the Company’s internal control over financial reporting occurred during the year ended December 31, 2014,2020, that materially affected, or is reasonably likely to materially affect, the Company s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
13
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth the name and position of each of our current executive officers and directors. All directors hold office until the next annual meeting of stockholders or until their respective successors are elected, except in the case of death, resignation or removal:
| Name | Age | With Company Since | Director/Position | |||||
| Glenn Laken | April 7, 2014 | CEO, CFO and Chairman of the Board of Directors | ||||||
Glenn Laken
. Over the past 30 years, Mr. Laken has held multiple senior executive positions and created successful growth strategies in the financial services sector. His expansive professional experience includes working as an advisor to the 22 billion dollar Ameritech Pension fund, partnership in a Wall Street specialist firm, ownership of a Chicago clearing house with offices nationwide, and the purchase and restructuring of the Cigarette Racing Team Company. He has also enjoyed success in the area of mergers and acquisitions as an accomplished business leader.A Company shareholder since 2010, Mr. Laken organized a shareholder group that forced changes in Company management in 2012, after careful analysis revealed that the Company was failing to reach its potential due to mismanagement by the original management team. Since orchestrating this change, Mr. Laken has worked as Company consultant, introducing Jeffrey Devlin and David Kovacs to the Board, and bringing Ron Burkhardt on as a board member and executive chairman of XA, The Experiential Agency, Inc. (“XA”). He also introduced a new subsidiary partially owned by his wife, Good Gaming Inc., to the Companies portfolio and arranged the sale of Audio Eye, Inc. stock to fund the elimination of the Company’s toxic debt.
14
Board Committees
We do not have a standing nominating, compensation or audit committee. Rather, our full board of directors performs the functions of these committees. Also, we do not have an “audit committee financial expert” on our board of directors as that term is defined by Item 401(d)(5)(ii) of Regulation SK.SK. We do not believe it is necessary for our board of directors to appoint such committees because the volume of matters that come before our board of directors for consideration permits the directors to give sufficient time and attention to such matters to be involved in all decision making. Additionally, because our Common Stock is not listed for trading or quotation on a national securities exchange, we are not required to have such committees.
Director Independence
Our securities are not listed on a national securities exchange or in an inter dealer quotation system which has requirements that directors be independent. We believe that two of our three directors, Jeffrey Devlin and Ronald Burkhardt, would not be considered to be independent, as that term is defined in the listing standards of NASDAQ.
Meetings of the Board of Directors
During its fiscal year ended December 31, 2014,2021, the Board of Directors met three times through teleconferencing.one time. In addition, the Board of Directors had otherwise transacted business by unanimous written consents during the year 2013.
Board Leadership Structure and Role in Risk Oversight
Our Board recognizes that the leadership structure and combination or separation of the Chief Executive Officer and Chairman roles is driven by the needs of the Company at any point in time. Currently, Mr. Glenn Laken serves as Chairman of our Board as well as the CEO of the Company. We have no policy requiring the combination or separation of leadership roles and our governing documents do not mandate a particular structure. This has allowed, and will continue to allow, our Board the flexibility to establish the most appropriate structure for our company at any given time.
Code of Ethics
Our Board of Directors adopted a code of ethics, which was filed as Exhibit 14.1 to the annual report on Form 10KSB10KSB filed on February 20, 2008, and which is incorporated by reference herein. The Code of Ethics applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer.
The code of ethics address, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of violations of the code.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, executive officers and persons who own more than 10% of the Company’s Common Stock to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission. Directors, executive officers and greater than 10% stockholders are required by SEC rules to furnish the Company with copies of Section 16(a) forms they file.
15
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning cash and noncashnoncash compensation paid by the Company to its CEO and CFO and the CEO of XA during the fiscal years ended December 31, 20142021 and 2012.
| Name/ Position | Year | Salary | Bonus | Stock | Other | Total | ||||||||||||||||
| Glenn Laken (1) | 2014 | $ | 95,000 | $ | - | $ | - | $ | - | $ | 95,000 | |||||||||||
| CEO, CFO and Chairman | 2013 | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| Joseph Wagoner (2) | 2014 | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| 2013 | $ | 225,000 | $ | - | $ | - | $ | - | $ | 225,000 | ||||||||||||
| David Kovacs (2) | 2014 | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| Director | 2013 | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| Name/ Position | Year | Salary | Bonus | Stock | Other | Total | ||||||||||||||||||
| Glenn Laken (1) | 2021 | $ | 180,000 | $ | 0 | $ | 0 | $ | 0 | $ | 180,000 | |||||||||||||
| CEO, CFO and Chairman | 2020 | $ | 180,000 | $ | 0 | $ | 0 | $ | 0 | $ | 180,000 | |||||||||||||
| (1) | Mr. Laken was appointed as our CEO and Chairman of the Board of Directors on April 30, 2014. |
Employment Agreements
The Company has not entered into any employment contract with Glenn Laken, the CEO and Chairman of Board of Directors or David Kovacs, acting CFO and Vice Chairman of the Board of Directors. Mr. Laken was granted options to purchase forty million (40,000,000) shares of Common Stock at an exercise price of $0.0155 with a term of five years. The Company anticipates entering into an employment agreement with Mr. Laken by April 30, 2014.
Outstanding Equity Awards at Fiscal Year End
There were no un exercised options, stock that has not vested or equity incentive plan awards for any named executive officer outstanding as of December 31, 2015.
Securities Authorized for Issuance Under Equity Compensation Plan
There were no un exercised options, stock that has not vested or equity incentive plan awards for any named executive officer outstanding as of December 31, 2014.
Equity Compensation Plan Information
Currently, there is no equity compensation plan in place.
Director Compensation
Members of our Board of Directors do not normally receive cash compensation for their services as Directors, although some Directors are reimbursed for reasonable expenses incurred in attending Board or committee meetings. No directors received any compensation for their services during the fiscal year ended December 31, 2013.
16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common stock as of April 15, 2014,December 31, 2020, and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly and the shareholders listed possesses sole voting and investment power with respect to the shares shown.
| Name and Address of Beneficial Owner(1) | Title of Class | Amount | Percent of Class(2) | ||||||
| Directors and named Executive Officers | |||||||||
| Glenn Laken | Common Stock | 40,000,000 | (4) | 12.10 | % | ||||
| David J. Kovacs | Common Stock | 0 | 0 | % | |||||
| All Directors and executive officers as a group | Common Stock | 0 | 0 | % | |||||
| 5% Security Holders | |||||||||
| None. | |||||||||
| Name and Address of Beneficial Owner(1) | Title of Class | Amount | Percent of Class(2) | ||
Directors and named Executive Officers | |||||
| Glenn Laken | Common Stock | 14,290,850 | 3.26 | % | |
| 5% Security Holders | |||||
None.
| |||||
| (1) | Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table. Unless otherwise indicated, the address of the beneficial owner is c/o CMG Holdings Group, Inc. at 2130 Lincoln Park West 8N, Chicago, IL 60614. |
(2) | Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Beneficial ownership also includes shares of stock subject to options and warrants currently exercisable or exercisable within 60 days of the date of this table. In determining the percent of common stock owned by a person or entity as of the date of this Report, (a) the numerator is the number of shares of the class beneficially owned by such person or entity, including shares which may be acquired within 60 days on exercise of warrants or options and conversion of convertible securities, and (b) the denominator is the sum of (i) the total shares of common stock outstanding on as of the date of this Annual Report (290,716,364), and (ii) the total number of shares that the beneficial owner may acquire upon exercise of the derivative securities. Unless otherwise stated, each beneficial owner has sole power to vote and dispose of its shares. |
17
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was not a party to any transaction (where the amount involved exceeded the lesser of $120,000 or 1% of the average of our assets for the last two fiscal years) in which a director, executive officer, holder of more than five percent of our common stock, or any member of the immediate family of any such person have or will have a direct or indirect material interest and no such transactions are currently proposed.
The Company’s Board conducts an appropriate review of and oversees all related party transactions on a continuing basis and reviews potential conflict of interest situations where appropriate. The Board has not adopted formal standards to apply when it reviews, approves or ratifies any related party transaction. However, the Board believes that the related party transactions are fair and reasonable to the Company and on terms comparable to those reasonably expected to be agreed to with independent third parties for the same goods and/or services at the time they are authorized by the Board.
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, 20152021 and 20142020 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services by our auditor 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)
| (iii) | services rendered in connection with tax compliance, tax advice and tax planning, and (iv) all other fees for services rendered. |
| FISCAL YEAR | FISCAL YEAR | |||||||
| FIRM | 2021 | 2020 | ||||||
| (i), (ii) Audit Related Fees: BF Borgers CPA PC* | $ | 13,000 | $ | 35,000 | ||||
(iii) Tax Fees | $ | — | ||||||
(iv) All Other Fees | $ | — | $ | — | ||||
| TOTAL FEES | $ | 13,000 | $ | 35,000 | ||||
*Borgers was paid $35,000 for the December 31, 2019 and tax planning, and (iv) all other fees2018 audits for services rendered.
| FIRM | FISCAL YEAR 2015 | FISCAL YEAR 2014 | ||||||
| (i), (ii) Audit Related Fees: | ||||||||
| Scrudato & Co., PA | $ | 20,000 | $ | 20,000 | ||||
| (iii) Tax Fees | $ | - | ||||||
| (iv) All Other Fees | $ | - | $ | - | ||||
| TOTAL FEES | $ | 20,000 | $ | 20,000 | ||||
The Company’s board of directors, acting as our audit committee pre-approved each engagement of our independent registered public accounting firm.
18
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| (a) | Financial Statements |
The following are filed as part of this report: Financial Statements
The financial statements of CMG Holdings Group, Inc. and Report of Independent Registered Public Accounting Firm are presented in the “F” pages of this Report.
19
| (b) | Exhibits |
The following exhibits are filed or “furnished” herewith:
| Incorporate by Reference | ||||||
Exhibit Number |
Exhibit Description |
Form | Filing Date/ Period End Date | |||
| Agreement and Plan of Reorganization dated May 27, 2008 between | ||||||
| 2.1 | CMG Holding, Inc. and Creative Management Group, Inc. | 8-K | May 5, 2008 | |||
| 3.1 | Certificate of Incorporation of Pebble Beach Enterprises, Inc. dated July 26, 2004 | 10-KSB | February 1, 2006 | |||
| Amendment to Certificate of Incorporation of CMG Holding, Inc., dated | ||||||
| 3.2 | February 20, 2008 | 8-K | February 1, 2006 | |||
| 3.3 | Bylaws of CMG Holdings, Inc. | 8-K | February 1, 2006 | |||
| Certificate of the Designations, Powers Preferences and Rights of the Series A | ||||||
| 3.4 | Convertible Preferred Stock dated March 31, 2011 | 8-K | April 6, 2011 | |||
| Certificate of the Designations, Powers Preferences and Rights of the Series B | ||||||
| 3.6 | Convertible Preferred Stock dated March 31, 2011 | 8-K | April 12, 2011 | |||
| Form of Convertible Promissory Notes issued to Continental Equities, LLC on | ||||||
| 4.1 | September 7, 2012 | 10-K | June 8, 2015 | |||
| Form of Convertible Promissory Notes issued to Asher Enterprises, Inc. on May | ||||||
| 4.2 | 20, 2013 | 10-K | June 8, 2015 | |||
| 10.1 | Stock Purchase Agreement AudioEye date March 31, 2010. | 10-K | April 15, 2010 | |||
| 10.2 | AudioEye Spinoff Master Agreement dated June 22, 2011 | 8-K | June 24, 2011 | |||
| 10.3 | Revised AudioEye Spinoff Master Agreement dated April 5, 2012 | 8-K | April 27, 2012 | |||
| Royalty Agreement, dated June 22, 2011, by and between the Company | ||||||
| 10.4 | and AudioEye | 10-K | June 8, 2015 | |||
| Services Agreement, dated June 22, 2011, by and between the Company | ||||||
| 10.5 | and AudioEye | 10-K | June 8, 2015 | |||
| Call Option Agreement, dated August 1, 2013, between the Company and | ||||||
| 10.6 | AudioEye | 10-K | June 8, 2015 | |||
| Call Option Agreement Second Extension, dated September 14, 2013, between the | ||||||
| 10.7 | Company and AudioEye | 10-K | June 8, 2015 | |||
| Call Option Agreement Third Extension, dated November 7, 2013, between the | ||||||
| 10.8 | Company and AudioEye | 10-K | June 8, 2015 | |||
| Call Option Agreement Second Extension, dated December 16, 2013, between the | ||||||
| 10.9 | Company and AudioEye | 10-K | June 8, 2015 | |||
| Modification to Separation Agreement and Release, dated June 26, 2013, | ||||||
| 10.10 | between the Company and Alan Morell | 10-K | June 8, 2015 | |||
| Settlement Agreement, dated August 3, 2013, among the Company, James | ||||||
| 10.11 | Ennis, Scott Baily, Martin Boyle, Hudson Capital Advisors and Michael Vandetty | 10-K | June 8, 2015 | |||
| Termination Agreement and Release, dated August 3, 2013, among the Company, | ||||||
| 10.12 | Continental Investments Group, Inc. and Connied, Inc. | 10-K | June 8, 2015 | |||
| Form Resignation and Compensation Agreement, dated February 5, 2014, | ||||||
| 10.13 | between the Company and Barry Kernan, Ian Thompson and Declan Keegan | 10-K | June 8, 2015 | |||
| Form Indemnification Agreement, dated February 5, 2014, between the | ||||||
| 10.14 | Company and Barry Kernan, Ian Thompson and Declan Keegan | 10-K | June 8, 2015 | |||
| February 20, | ||||||
| 14.1 | Code of Ethics | 10-KSB | 2008 | |||
| 21.1 | Subsidiaries of Registrant * | |||||
| CMG Holdings Group, Inc. Certification of Chief Executive Officer pursuant to | ||||||
| 31.1 | Section 302 * | |||||
| CMG Holdings Group, Inc. Certification of Chief Financial Officer pursuant to | ||||||
| 31.2 | Section 302 * | |||||
| 32.1 | CMG Holdings Group, Inc. Certification of CEO and CFO Officer pursuant to 18 | |||||
| U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes Oxley Act | ||||||
Interactive Data Files for CMG Holdings Group, Inc. 10K for the Year Ended December 31, 2020
101 INS** XBRL Instance Document
101 SCH** XBRL Taxonomy Extension Schema Document
101 CAL** XBRL Taxonomy Extension Calculation Linkbase Document
101 DEF** XBRL Taxonomy Extension Definition Linkbase Document
101 LAB** XBRL Taxonomy Extension Label Linkbase Document
101 PRE** XBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith
** Users of this data are advised pursuant to Rule 406T of Regulation SXSX that this interactive data file is deemed not filed or part of a registration statement or prospectus for the purpose of section 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
CMG HOLDINGS GROUP, INC. (Registrant) | ||
March 31, 2022 | By: /s/ Glenn Laken | |
| Glenn Laken, Chief Executive Officer and Chief Financial Officer | ||
Pursuant to the requirements of Section 13 or 15(d) of 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.
CMG HOLDINGS GROUP, INC. (Registrant) | ||
March 31, 2022 | ||
By: /s/ Glenn Laken | ||
| CMG Holdings Group, Inc. | ||||||||
| Consolidated Balance Sheets | ||||||||
| December 31, | December 31, | |||||||
| 2015 | 2014 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 230,138 | $ | 27,886 | ||||
| Prepaid expenses and other current assets | 8,400 | 8,400 | ||||||
| Total Current Assets | 238,538 | 36,286 | ||||||
| Property and equipment, net | 28,478 | 32,192 | ||||||
| Goodwill | 54,500 | 54,500 | ||||||
| Other noncurrent assets | - | - | ||||||
| TOTAL ASSETS | $ | 321,516 | $ | 122,978 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 676,671 | $ | 676,671 | ||||
| Deferred compensation | 220,000 | 40,000 | ||||||
| Accrued liabilities | 145,408 | 129,422 | ||||||
| Loan from shareholders | 96,100 | - | ||||||
| Loan outside party | 125,000 | - | ||||||
| Note payable | 150,000 | - | ||||||
| Convertible notes - carrying value | - | 74,679 | ||||||
| Derivative liabilities | - | 400,892 | ||||||
| Total Current Liabilities | 1,413,179 | 1,321,664 | ||||||
| TOTAL LIABILITIES | 1,413,179 | 1,321,664 | ||||||
| Commitments and contingencies | ||||||||
| STOCKHOLDERS' DEFICIT | ||||||||
| Preferred stock: | ||||||||
| Series A Convertible Preferred Stock; 5,000,000 shares authorized; par value $0.001 per share; no shares issued and outstanding as of December 31, 2014 and December 31, 2013 | - | - | ||||||
| Series B Convertible Preferred Stock; 5,000,000 shares authorized; par value $0.001 per share; 0 and 0 shares issued and outstanding as of December 31, 2014 and December 31, 2013 | - | - | ||||||
| Common Stock: | ||||||||
| 450,000,000 shares authorized, par value $.001 per share; 449,329,190 and 289,329,190 shares issued and outstanding as of December 31, 2015 and December 31, 2014 | 449,329 | 289,329 | ||||||
| Additional paid in capital | 14,688,042 | 14,740,042 | ||||||
| Treasury Stock, 37,174 and 37,174 shares held, respectively, at cost of -0-, as of December 31, 2015 and December 31, 2014. | - | - | ||||||
| Accumulated deficit | (16,229,034 | ) | (16,228,057 | ) | ||||
| TOTAL STOCKHOLDERS' DEFICIT | (1,091,663 | ) | (1,198,686 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 321,516 | $ | 122,978 | ||||
| The accompanying notes are an inmtegral part of these finiancial statmenets | ||||||||
| CMG HOLDINGS GROUP, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| For the Year Ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Revenues | $ | 1,073,577 | $ | 7,811,423 | ||||
| Operating Expenses: | ||||||||
| Cost of revenues | 352,531 | 6,493,002 | ||||||
| General and administrative expenses | 752,139 | 2,908,815 | ||||||
| Total Operating Expenses | 1,104,670 | 9,401,817 | ||||||
| Operating Loss | (31,093 | ) | (1,590,394 | ) | ||||
| Other Income (Expense): | ||||||||
| Gain (loss) on derivative liability | - | (41,884 | ) | |||||
| Amortization of debt discount | 61,250 | - | ||||||
| Change in derivative liability | (15,607 | ) | ||||||
| Realized gain on marketable securities | - | 496,902 | ||||||
| Other income | - | 8,513 | ||||||
| Derivative interest | (15,527 | ) | (103,566 | ) | ||||
| Interest expense | - | (26,727 | ) | |||||
| Other expense | - | (11,027 | ) | |||||
| Total Other Income (Expense) | 30,116 | 322,211 | ||||||
| Income (loss) from continuing operations | (977 | ) | (1,268,183 | ) | ||||
| Net Income | $ | (977 | ) | $ | (1,268,183 | ) | ||
| Basic income (loss) per common share for continuing operations | $ | - | $ | - | ||||
| Basic income per common share for discontinued operations | $ | - | $ | - | ||||
| Total basic income per common share | $ | - | $ | - | ||||
| Diluted loss per share for continued operations | $ | - | $ | - | ||||
| Diluted income (loss) per common share for discontinued operations | $ | - | $ | - | ||||
| Total diluted income per common share | $ | - | $ | - | ||||
| Basic weighted average common shares outstanding | 449,329,190 | 289,674,514 | ||||||
| Diluted weighted average common shares outstanding | 449,329,190 | 290,668,814 | ||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||
| CMG Holdings Group, Inc. | ||||||||||||||||||||||||||
| CONSOLIDATED STATEMENT OF CHANGE IN STOCKHOLDERS’ DEFICIT | ||||||||||||||||||||||||||
| Preferred Stock | Treasury Stock | Common Stock | Additional | Accumulated | Total | |||||||||||||||||||||
| Paid | Shareholders' | |||||||||||||||||||||||||
| Shares | Par | Shares | Cost | Shares | Par | in Capital | Deficit | Deficit | ||||||||||||||||||
| Balance, December 31, 2013 | - | $ | - | 37,174 | $ | - | 283,657,190 | $ | 283,657 | $ | 14,529,751 | $ | (14,959,874) | $ | (146,466) | |||||||||||
| Shares issued for cash | 1,500,000 | 1,500 | 13,500 | 15,000 | ||||||||||||||||||||||
| Shares issued pursuant to acquisition of subsidiary | 5,000,000 | 5,000 | 82,500 | 87,500 | ||||||||||||||||||||||
| Shares issued pursuant to a consulting agreement | 522,000 | 522 | 8,091 | 8,613 | ||||||||||||||||||||||
| Shares issued to former directors | 6,000,000 | 6,000 | 106,200 | 112,200 | ||||||||||||||||||||||
| Shares canceled pursant to settlement agreement | (7,350,000) | (7,350) | (7,350) | |||||||||||||||||||||||
| Net income | (1,268,183) | (1,268,183) | ||||||||||||||||||||||||
| Balance, December 31, 2014 | - | - | 37,174 | - | 289,329,190 | 289,329 | 14,740,042 | (16,228,057) | (1,198,686) | |||||||||||||||||
| Shares issued on conversion of debt | 160,000,000 | 160,000 | (52,000) | 108,000 | ||||||||||||||||||||||
| Net income | (977) | (977) | ||||||||||||||||||||||||
| Balance, December 31, 2015 | - | - | 37,174 | - | 449,329,190 | $ | 449,329 | $ | 14,688,042 | $ | (16,229,034) | $ | (1,091,663) | |||||||||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||||||||||||||
| CMG Holdings Group, Inc. | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| For the Year Ended | ||||||||
| December 31, | ||||||||
| 2015 | 2014 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income from continuing operations | $ | (977 | ) | $ | (1,268,183 | ) | ||
| Adjustments to reconcile net income (loss) | ||||||||
| to net cash provided by (used in) operating activities: | ||||||||
| Amortization of debt discount | (61,250 | ) | 74,679 | |||||
| Depreciation | - | 4,950 | ||||||
| Shares issued for services | - | 8,613 | ||||||
| Shares for previous directors | - | 112,500 | ||||||
| Shares cancelled | - | 7,152 | ||||||
| (Gain) loss on derivatives | 15,607 | 41,884 | ||||||
| Realized gain on trading securities | - | (496,902 | ) | |||||
| Changes in: | ||||||||
| Accounts receivable | - | 287,094 | ||||||
| Prepaid expense and other current assets | - | - | ||||||
| Deferred income | - | (13,370 | ) | |||||
| Accrued liabilities | 4,106 | (464,288 | ) | |||||
| Accounts payable | - | 48,976 | ||||||
| Deferred compenastion | 180,000 | (446,875 | ) | |||||
| Accounts payable, related party | - | - | ||||||
| Other noncurrent assets | - | 60,078 | ||||||
| Net cash provided by (used in) operating activities | 137,486 | (2,043,692 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Proceeds from sale of trading securities | - | 1,260,990 | ||||||
| Proceeds from notes payable | 150,000 | |||||||
| Payments of convertible notes | (306,334 | ) | ||||||
| Proceeds from shareholder loans | 96,100 | |||||||
| Proceeds from loan from third party | 125,000 | |||||||
| - | - | |||||||
| Net cash provided by (used in) investing activities | 64,766 | 1,260,990 | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of debt | - | 319,000 | ||||||
| Proceeds from sales of common stock | - | 15,000 | ||||||
| Net cash (used in) provided by financing activities | - | 334,000 | ||||||
| Net increase in cash | 202,252 | (448,702 | ) | |||||
| Cash, beginning of period | 27,886 | 476,588 | ||||||
| Cash, end of period | $ | 230,138 | $ | 27,886 | ||||
| Supplemental cash flow information: | ||||||||
| Interest paid | $ | - | $ | 87,273 | ||||
| Non-cash investing and financing activity: | ||||||||
| Discount on shares issued with notes payable | $ | - | $ | 98,097 | ||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||
| December 31, 2014 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Marketable trading securities | $ | - | $ | - | $ | - | $ | - | ||||||||
| Derivative Liabilities | $ | - | $ | - | $ | 400,892 | $ | 400,892 | ||||||||
Outstanding and Exercisable | Weighted average Exercise Price | |||||||
| December 31, 2012 | 1,798,000 | $ | 0.28 | |||||
| Granted | 40,000,000 | 0.016 | ||||||
| Exercised | ||||||||
| Expired | (1,148,000 | ) | — | |||||
| December 31, 2013 | 40,650,000 | $ | 0.02 | |||||
| Granted | $ | |||||||
| Exercised | ||||||||
| Expired | ||||||||
| December 31, 2014 | 40,650,000 | $ | 0.02 | |||||
| Derivative Liabilities | ||||
| Balance at December 31, 2012 | $ | 145,970 | ||
| ASC 815-15 additions | 98.097 | |||
| Change in fair value | (210,180) | |||
| ASC 815-15 deletions | (22,270 | ) | ||
| Balance at December 31, 2013 | 11,121 | |||
| ASC 815-15 additions | 86,640 | |||
| Change in fair value | (1,818 | ) | ||
| ASC 815-15 deletions | (11,121 | ) | ||
| Balance at December 31, 2014 | 84,822 | |||
| ASC 815-15 additions | - | |||
| Change in fair value | (15,607 | ) | ||
| ASC 815-15 deletions | (69,215 | ) | ||
| Balance at December 31, 2015 | $ | - | ||
| XA | Good Gaming | CMG Holdings Group | Totals | |||||||||||||
| Revenue | $ | 1,073,577 | $ | — | $ | — | $ | 1,073,577 | ||||||||
| Operating expenses | 894,670 | 30,000 | 180,000 | 1,104,670 | ||||||||||||
| Operating Income (Loss) | 178,907 | (30,000 | ) | (180,000 | ) | (31,093 | ) | |||||||||
| Other Income (Expense) | 30,116 | 30,116 | ||||||||||||||
| Net Income (Loss) | $ | 178,907 | $ | (30,000 | ) | $ | (149,884 | ) | $ | (977 | ) | |||||