UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
| THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarter year ended September 30, 2008March 31, 2009
Commission file number 000-51770
CMG HOLDINGS, 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.) |
5601 Biscayne Boulevard | ||
Miami, Florida, USA | 33137 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number including area code (305) 751-1667
---------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or small reporting company. See the definition of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No x
As of November 14, 2008,May 20, 2009, there were 42,400,000 common stock of the registrant issued and 28,314,241 outstanding.
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CMG HOLDINGS, INC.
FORM 10-Q
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CMG HOLDINGS, INC.
UNAUDITED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30,MARCH 31, 2009 AND 2008 AND 2007
CONTENTS
______________________________________________________________________________________
| Consolidated Balance Sheets as of |
| Consolidated Statements of Operations for the three months ended March 31, 2009 and |
| Consolidated Statements of Cash Flows for the |
| Notes to Consolidated Financial Statements (Unaudited) |
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| CMG HOLDINGS, INC | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (unaudited) | ||||||||
| March 31, 2009 | December 31, 2008 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 6,999 | $ | 13,934 | ||||
| Accounts Receivable | 1,050 | 1,050 | ||||||
| Note Receivable | 150,000 | -- | ||||||
| Total Current Assets | 158,049 | 14,984 | ||||||
| Deposits related to acquisitions | 300,000 | 300,000 | ||||||
| TOTAL ASSETS | $ | 458,049 | $ | 314,984 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Client Payable | $ | 108,036 | $ | 8,000 | ||||
| Accounts Payable | 82,818 | 29,320 | ||||||
| Salary Payable | 488,896 | 390,434 | ||||||
| Consulting Payable | 24,925 | 24,925 | ||||||
| Line of Credit | 128,981 | 108,231 | ||||||
| Advance from Related Party | 25,000 | -- | ||||||
| Total current liabilities | 858,656 | 560,910 | ||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock: | ||||||||
| 5,000,000 shares authorized par value $0.001 per share; none issued and outstanding | ||||||||
| Common Stock: | ||||||||
| 150,000,000 shares authorized par value $0.001 per share; 42,400,000 and 42,400,000 issued, and 31,726,518 and 31,726,518 shares outstanding respectively | 31,727 | 31,727 | ||||||
| Additional paid-in-capital | 4,449,863 | 4,449,863 | ||||||
| Shares held in reserve, 10,673,482 and 10,673,482 shares held, respectively. | 10,673 | 1 | 10,673 | |||||
| Accumulated deficit | (4,892,870) | ) | (4,738,189 | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | (400,607) | (245,926) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 458,049 | $ | 314,984 | ||||
See accompanying notes to consolidated financial statements
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| CMG HOLDINGS, INC | ||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (unaudited) | ||||||||
| Three months ended | ||||||||
| March 31, | ||||||||
| 2009 | 2008 | |||||||
| Net revenues | $ | 212,394 | $ | 399,167 | ||||
| Operating expenses | 365,689 | 1,734,495 | ||||||
| Loss from operations | (153,295 | ) | (1,335,328 | ) | ||||
Other income (expense): | ||||||||
| Interest expense | (1,386 | ) | (22,380) | |||||
| Interest income | -- | 12,341 | ||||||
| Net Loss | $ | (154,681 | ) | $ | (1,345,367 | ) | ||
| Basic and diluted loss per common share | $ | (0.00 | ) | $ | (0.13 | ) | ||
| Basic and diluted weighted average common | ||||||||
| shares outstanding | 31,726,518 | 10,000,000 | ||||||
| CMG HOLDINGS, INC | ||||||||
| (FORMERLY PEBBLE BEACH ENTERPRISES, INC) | ||||||||
| BALANCE SHEETS | ||||||||
| (unaudited) | ||||||||
| September 30, 2008 | December 31, 2007 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 103,766 | $ | $1,213,035 | ||||
| Accounts receivable | 304,167 | -- | ||||||
| Prepaid expense | -- | 17,454 | ||||||
| Deposits related to acquisitions | 300,000 | -- | ||||||
| Total Current Assets | 708,933 | 1,230,489 | ||||||
| Fixed assets | 1,159 | 1,159 | ||||||
| TOTAL ASSETS | $ | 709,092 | $ | 1,231,648 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Client Payable | $ | 417,492 | $ | 121,400 | ||||
| Line of credit | 75,695 | 132,763 | ||||||
| Accounts payable | -- | 139,226 | ||||||
| Consulting Payable | 243,750 | -- | ||||||
| Total current liabilities | 736,937 | 393,389 | ||||||
| LONG-TERM LIABILITIES: | ||||||||
| Convertible notes payable | -- | 1,178,000 | ||||||
| TOTAL LIABILITIES | 736,937 | 1,571,389 | ||||||
| STOCKHOLDERS EQUITY (DEFICIT) | ||||||||
| Preferred stock: | ||||||||
| 5,000,000 shares authorized par value $0.001 per share; none issued and outstanding | ||||||||
| Common Stock: | ||||||||
| 150,000,000 shares authorized par value $0.001 per share; 42,400,000 and 10,000,000 issued, and 28,314,241 and 10,000,000 shares outstanding respectively | 42,400 | 10,000 | ||||||
| Additional paid-in-capital | 3,262,503 | 680,686 | ||||||
| Accumulated deficit | (3,332,748 | ) | (1,030,427 | ) | ||||
| TOTAL STOCKHOLDERS EQUITY (DEFICIT) | 27,845 | (339,741 | ) | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) | $ | 709,092 | $ | 1,231,648 | ||||
See accompanying notes to consolidated financial statements.statements
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| CMG HOLDINGS, INC | ||||||||||||||||
| (FORMERLY PEBBLE BEACH ENTERPRISES, INC) | ||||||||||||||||
| STATEMENTS OF OPERATIONS | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Net revenues | $ | 303,547 | $ | 83,887 | $ | 702,714 | $ | 221,039 | ||||||||
| Operating expenses | 405,867 | 211,331 | 2,937,282 | 355,582 | ||||||||||||
| Loss from operations | (102,320 | ) | (127,444 | ) | (2,519,418 | ) | (134,543 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | (56 | ) | (9,978 | ) | (84,900 | ) | (9,978 | ) | ||||||||
| Interest income | 1,389 | 6,500 | 17,145 | 6,500 | ||||||||||||
| Net Loss | $ | (100,987 | ) | $ | (130,922 | ) | $ | (2,302,323 | ) | $ | (138,021 | ) | ||||
| Basic and diluted loss per common share | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.10 | ) | $ | (0.01 | ) | ||||
| Basic and diluted weighted average common | ||||||||||||||||
| shares outstanding | 28,115,690 | 10,000,000 | 22,430,854 | 10,000,000 | ||||||||||||
| CMG HOLDINGS, INC | CMG HOLDINGS, INC | CMG HOLDINGS, INC | ||||||||||||||
| (FORMERLY PEBBLE BEACH ENTERPRISES, INC) | ||||||||||||||||
| STATEMENTS OF CASH FLOWS | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
| Nine months ended | Three months ended | |||||||||||||||
| September 30, | March 31, | |||||||||||||||
| 2008 | 2007 | 2009 | 2008 | |||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||
| Net Loss | $ | (2,302,323 | ) | $ | (138,021 | ) | $ | (154,681 | ) | $ | (1,345,367 | ) | ||||
| Adjustments to reconcile net loss | ||||||||||||||||
| to net cash used in operating activities: | ||||||||||||||||
| Stock for services | 1,491,778 | -- | ||||||||||||||
| Stock for interest expense | 62,464 | -- | ||||||||||||||
| Changes in: | ||||||||||||||||
| Accounts receivable | (304,165 | ) | -- | -- | (440,000) | |||||||||||
| Prepaid expense | 17,454 | -- | -- | 17,454 | ||||||||||||
| Consulting payable | 243,750 | -- | ||||||||||||||
| Client payable | 266,772 | 36,204 | ||||||||||||||
| Accounts payable | (109,906 | ) | 186,732 | |||||||||||||
| Accounts Payable | 53,498 | 396,750 | ||||||||||||||
| Client Payable | 100,036 | 371,772 | ||||||||||||||
| Accrued expense | 98,462 | 1,050,000 | ||||||||||||||
| Net cash provided by (used in) operating activities | (634,176 | ) | 84,915 | |||||||||||||
| Net cash provided by operating activities | 97,315 | 50,609 | ||||||||||||||
| CASH FROM INVESTING ACTIVITIES | ||||||||||||||||
| Cash paid for acquisition of Pebble Beach Enterprises, Inc. | (600,000 | ) | -- | -- | (600,000) | |||||||||||
| Deposit related to acquisition | (300,000 | ) | -- | |||||||||||||
| Cash paid to acquire a bank loan | (150,000 | ) | -- | |||||||||||||
| Net cash used in operating activities: | (900,000 | ) | -- | |||||||||||||
| Net cash used in investing activities: | (150,000 | ) | (600,000) | |||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||||
| Distributions to members | -- | (61,875 | ) | |||||||||||||
| Advance from a related party | 25,000 | -- | ||||||||||||||
| Net borrowings on line of credit | 20,750 | 685,830 | ||||||||||||||
| Contributions to capital | 30,000 | -- | -- | 30,000 | ||||||||||||
| Stock for cash | 137,975 | -- | ||||||||||||||
| Net borrowings on line of credit | (57,069 | ) | -- | |||||||||||||
| Borrowing on convertible notes | 314,000 | 915,500 | -- | 314,000 | ||||||||||||
| Net cash provided by (used in) financing activities | 424,907 | 853,625 | ||||||||||||||
| Net cash provided by financing activities | 45,750 | 1,029,830 | ||||||||||||||
| Net increase (decrease) in cash | (1,109,269 | ) | 938,540 | (6,935 | ) | 480,439 | ||||||||||
| Cash, beginning of period | 1,213,035 | 9,630 | 13,934 | 1,213,035 | ||||||||||||
| CASH BALANCE AT END OF PERIOD | $ | 103,766 | $ | 948,170 | $ | 6,999 | $ | 1,693,474 | ||||||||
| Supplemental cash flow information: | ||||||||||||||||
| Income tax paid | $ | -- | $ | -- | $ | -- | $ | -- | ||||||||
| Interest paid | -- | -- | 1,386 | -- | ||||||||||||
| Non-Cash investing and financing: | ||||||||||||||||
| Stock issued for notes payable | 1,492,000 | -- | ||||||||||||||
See accompanying notes to consolidated financial statements.statements
CMG HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 -– DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The accompanying unaudited interim consolidated financial statements of CMG Holdings, Inc, formerly Pebble Beach Enterprises, Inc., have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in its 20072008 annual report on Form 8-K.10-K. In the opinion of management, these interim financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company and management’s discussion and analysis of financial condition and results of operations included in the Company’s Annual Report for the year ended December 31, 2008 as filed with the Securities and Exchange Commission on Form 10-K. Notes to the financial statements that would substantially duplicate the disclosure contained in the audited financial statements for fiscal year 2007,2008, as reported in the Form 8-K,10-K, have been omitted.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of CMG Holdings, Inc., Creative Management Group and CMG Acquisitions, Inc., CMGO Capital, Inc. and CMGO Events Marketing, Inc, after elimination of all significant inter-company accounts and transactions.
As shown in the accompanying financial statements, the Company has incurred net losses for the period ended March 31, 2009. In addition, the Company has an accumulated deficit and a working capital deficit as of March 31, 2009. These conditions raise substantial doubt as to our ability to continue as a going concern. In response to these conditions, the Company may raise additional capital through the sale of equity securities, through an offering of debt securities or through borrowings from financial institutions or individuals. The financial statements do not include any adjustments that might be necessary if we are amountsunable to continue as a going concern.
NOTE 3 – NOTES RECEIVABLE
On March 6, 2009, the Company, through a newly formed wholly owned subsidiary CMGO Capital, Inc., a Nevada corporation, completed a Note Purchase Agreement with Bank of America to purchase the senior secured debt obligations of The Experiential Agency, Inc. The purchase price of the Note Purchase Agreement with Bank of America to purchase the senior secured debt obligations of The Experiential Agency, Inc. was a total of $150,000. On April 1, 2009, the Company foreclosed on the note. See note 5 for details.
NOTE 4 – ADVANCE FROM RELATED PARTY
In March 2009, the Company received a total of $25,000 advances from one of its officer/directors. The funds were used by the Company for working capital purposes. The payable bears 0% interest, is unsecured and is due on sales, are unsecureddemand.
NOTE 5 – SUBSEQENT EVENTS
On April 1, 2009, the Company, through a newly formed wholly owned subsidiary CMGO Events Marketing, Inc., a Nevada corporation, completed the acquisition of the assets (including several exclusive domain names) of The Experiential Agency, Inc.
Experiential Agency, Inc. offers a full degree of solutions, services and are carried at their estimated collectible amounts. Credit is generally extended onconsulting expertise comprising of management, creation, and execution of entertainment event for corporate clients and individual clients general service areas of event marketing, interactive marketing, event production, public relations, talent representation, corporate consulting, digital media. Experiential Agency, Inc. earns consulting fees when it provides general consulting services and generates revenues for services for event marketing and communications assignments. The Experiential Agency, Inc. has offices in Chicago, IL and New York, NY and has 24 employees.
The Company has determined the assets acquired meet the definition of a short-term basis; thus accounts receivable do not bear interest although a finance chargebusiness and therefore will be applying SFAS 141(R) “Business Combinations” when accounting for the transaction.
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The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operation contains “forward looking statements.” Actual results may be applied to such receivables that are more than thirty days past due. Accounts receivable are periodically evaluated for collectability based on past credit history with clients. Provisions for losses on accounts receivable are determined on the basis of loss experience, known and inherent riskmaterially differ from those projected in the account balanceforward looking statements as a result of certain risks and current economic conditions.uncertainties set forth in this report. Although our management believes that the assumptions made and expectations reflected in the forward looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual future results will not be materially different from the expectations expressed in this Annual Report. The following discussion should be read in conjunction with the unaudited Consolidated Financial Statements and related Notes included in Item 1.
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2009
Net revenues decreased from $399,167 in the three months period ending March 31, 2008 to $212,394 for Stock-Based Compensation" established financial accountingthe three months period ending March 31, 2009. The decrease in revenues is mainly due to less income generated from the consulting business.
Operating expenses decreased from $1,734,495 for the three months ending March 31, 2008 to $365,689 for the same period in 2009. This was mainly due to the Company incurred less consulting expenses and reporting standardsalso the Company did not have any stock-based compensation expense in 2009 .
Net loss decreased from $1,345,367 for the three months ending March 31, 2008 to $154,681 for the same period in 2009. This was also due to the Company incurring less consulting expense and not having any stock-based employee compensation plans. It defines a fair value based methodexpense in 2009.
LIQUIDITY AND CAPITAL RESOURCES.
As of accounting for an employee stock option or similar equity instrument. CMG Holdings, Inc. accounts for compensation cost for stock option plans in accordance with SFAS No. 123R.March 31, 2009, the Company’s cash on hand was $6,999.
Cash used in investing activities for the three month period ended March 31, 2009 was $150,000, as compared to $600,000 for the three months ended March 31, 2008. For the three months ended March 31, 2008, the Company incurred $600,000 for the acquisition of Pebble Beach Enterprises, Inc. accountsand for share based paymentsthe three month ended March 31, 2009, the Company paid $150,000 to non-employees in accordance with EITF 96-18 “Accountingobtain a note receivable from a financial institution.
Cash provided by financing activities for Equity Instruments Issuedthe three month period ended March 31, 2009 was $45,750, as compared to Non-Employees$1,029,830 provided for Acquiring, or in Conjunction with Selling, Goods or Services”. the three months ended March 31, 2008. In 2008, the Company borrowed $685,830 from its line of credit and also obtained $314,000 from selling convertible notes.
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