Docoh
Loading...

CMGO CMG

Filed: 16 Aug 21, 3:00pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X]QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended June 30, 2021 

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

 

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 o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x

 

 
 

 

 

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]

 

Emerging growth[]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

 

As of August 6, 2021, there were 438,672,016 shares of common stock of the registrant issued and outstanding.

  

 

 

 

1

 

 

 

 

 

CMG HOLDINGS GROUP, INC.

FORM 10-Q TABLE OF CONTENTS

 

 

Item #

 

 

Description

 Page Numbers
  

 

PART I FINANCIAL INFORMATION

  
     
ITEM 1 CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 3
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF  
ITEM 2 OPERATIONS 14
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FACTORS 15
ITEM 4 CONTROLS AND PROCEDURES 15

 

 

 

PART II OTHER INFORMATION

 

ITEM 1LEGAL PROCEEDINGS16
ITEM 1ARISK FACTORS17
ITEM 2UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS17
ITEM 3DEFAULTS UPON SENIOR SECURITIES17
ITEM 4MINE SAFETY DISCLOSURES17
ITEM 5OTHER INFORMATION17
ITEM 6EXHIBITS17

 

 

2

 

 

PART I FINANCIAL INFORMATION

 

ITEM 1- CONSOLIDATED FINANCIAL STATEMENTS

 

CMG HOLDINGS GROUP, INC.

UNAUDITED CONSOLIDATED FINANCIAL

 

STATEMENTS FOR THE QUARTER ENDED June 30, 2021 AND 2021

 

CONTENTS 
Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020 (Audited)  4
Consolidated Statements of Operations for three and six months ended June 30, 2021 and 2020 (Unaudited)  5
Consolidated Statements of Stockholders’ Deficit (Unaudited)  6
Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (Unaudited)  7
Notes to Consolidated Financial Statements (Unaudited)  8

 

 

 

3

 

 

CMG Holdings Group, Inc.
Consolidated Balance Sheet

 

         
   June 30,    December 31,   
   2021   2020 
   (Unaudited)   (Audited) 
ASSETS        
CURRENT ASSETS        
Cash $466,244  $411,136 
Accounts receivable  15,004   24,941 
Loan receivable Pristec  118,117   164,321 
Loan receivable NVT  275,448      
Prepaid legal fees  206,000      
         
Total current assets  1,080,813   600,398 
         
Property and equipment  8,054   9,911 
         
         
Total Assets $1,088,867  $610,309 
         
LIABILITIES AND STOCKHOLDERS' DEFICIT        
         
CURRENT LIABILITIES        
Accounts payable $0    $10,500 
Deferred compensation  470,376   483,376 
Paycheck protection loan payable  108,292   45,792 
Loan from outside party  15,000   35,000 
Loan payable          
Note payable  83,750   108,750 
         
Total current liabilities  677,418   683,418 
         
TOTAL LIABILITIES  677,418   683,418 
         
COMMITMENTS AND CONTINGENCIES        
         
STOCKHOLDERS' DEFICIT        
Common Stock 450,000,000 shares authorized; $0.001 par value,        
438,672,016 shares issued and outstanding        
Common Stock 450,000,000 shares authorized; $0.001 par value, 438,672,016 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively  438,672   438,672 
Additional paid in capital  14,630,689   14,630,689 
Treasury Stock          
Accumulated deficit  (14,657,912)  (15,142,470)
         
TOTAL STOCKHOLDERS DEFICIT  411,449   (73,109)
         
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $1,088,867  $610,309 
         
The accompanying notes are an integral part of these financial statements.

4

 

 

CMG Holdings Group, Inc.
Consolidated Statements of Operations
Unaudited

 

                 
  For the three months ended For the six months ended
  June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
         
Revenues $199,286  $9,609  $292,284  $9,609 
                 
Operating expenses                
Cost of revenues  233,979   8,644   277,378   8,644 
Interest expense       750        2,375 
General and administrative expenses  211,972   158,321   371,135   366,734 
Total operating expenses  445,951   167,715   648,513   377,753 
                 
Net income from operations  (246,665)  (158,106)  (356,229)  (368,144)
                 
Other income                
Settlement of Hudson Gray  188,468   146,352   372,643   294,352 
Settlement of loan payable  (12,500)  (6,250)  (25,000)  (18,750)
Interest income  17,172       22,024     
Gain on sale of stock.  414,859        471,120      
Total other income  607,999   140,102   840,787   275,602 
                 
Net income $361,333  $(18,004) $484,557  $(92,542)
                 
The accompanying notes are an integral part of these financial statements.

 

 

 

 

5

 

 

 

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      $     449,506,008  $449,506  $14,687,865  $(39,000) $(15,185,444) $(87,073)
                                 
Purchase Treasury Stock                      (18,251)      (18,251)
                                 
Retire treasury stock          (9,156,008)  (9,156)  (48,095)  57,251          
                                 
Net Income(Loss) for the year  —          —                    (92,542)  (92,542)
                                 
Balance June 30, 2020            440,350,000  $440,350  $14,639,770  $    $(15,277,986) $(197,866)
                                 
   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, 2020            438,672,016   438,672   14,630,689        (15,142,470)  (73,109)
                                 
Net Income(Loss) for the year  —          —                    484,557   484,557 
                                 
Balance June 30, 2021      $     438,672,016  $438,672  $14,630,689  $    $(14,657,912) $411,449
                                 
The accompanying notes are an integral part of these financial statements.

 

 

 

 

6

 

 

CMG Holdings Group, Inc.
Consolidated Statement of Cash Flows
Unaudited

 

   For the six   For the six 
   months ended   months ended 
   June 30, 2021   June 30, 2020 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income $484,557  $(92,542)
Adjustments to reconcile net income to cash used in operating activities        
Accounts receivable  9,937   39,515 
Prepaid legal fees  (206,000)     
Gain on sale of stock  (471,120)    
Depreciation  1,857   1,857 
Deferred compensation  (13,000)     
Interest income  (22,023)     
Accounts payable  (10,500)  (64,000)
         
Net cash provided by operations  (226,292)  (115,170)
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Loan receivable       (82,500)
Proceeds from repayment of notes receivable  60,000     
Proceeds from sale of stock  471,120     
Payment of notes receivable  (267,220)    
Payment of deferred compensation       (110,649)
Net cash provided by investing activities  263,900   (193,149)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Purchase of Treasury Stock       (18,251)
Proceeds from paycheck protection loan  62,500   45,485 
Payment of loans  (45,000)  (46,688)
Net cash provided by financing activities  17,500   (19,454)
         
Net increase in cash  55,108   (327,773)
Cash, beginning of year  411,136   781,752 
Cash, end of year $466,244  $453,979 
         
The accompanying notes are an integral part of these financial statements.

  

7

 

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 22,135,148 shares of Pebble Beach that were issued and previously owned by Creative Management Group, are now owned directly by its shareholders. The 22,135,148 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 5,000,000 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 100,000,000 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 100,000,000 Class B Preferred Shares were converted to 100,000 Class B Preferred Shares. The Company has sold a portion of these Good Gaming shares to date in the market and currently owns the equivalent of 14,076,200 common shares in the form of preferred stock and common stock.

 

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.

 

 

8

 

CMG HOLDINGS GROUP, INC.

Notes to the Consolidated Financial Statements  

 

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 are expressed in US dollars. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Lincoln Acquisitions 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 make 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 tax asset valuation allowances. 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 Company may differ materially and adversely 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 June 30, 2021 and December 31, 2020, the Company had no cash equivalents. The cash balance as of June 30, 2021 and December 31, 2020 was $466,244 and $411,136, respectively

 

d) Basic and Diluted Net Loss Per Share 

 

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,” requires an entity to maximize the use of observable inputs and 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:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

9

 

CMG HOLDINGS GROUP, INC.

Notes to the Consolidated Financial Statements  

 

 2.Summary of Significant Accounting Policies (Continued)
 e)Financial Instruments (Continued)

 

Level 2

 

Level 2 applies to assets 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. 

 

f) 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.

 

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 June 30, 2021 and December 31, 2020 were $15,004 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 100 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 six months ended June 30, 2021 the Company loaned an additional $267,220 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.

 

5 Accounts Payable

Accounts payable consist of expenses incurred during the year that had not yet been paid. The balance of accounts payable at June 30, 2021 is $0. The balance of accounts payable at December 31, 2020 were $10,500. These accounts payable consisted of trade accounts payable.

 

10

 

 

CMG HOLDINGS GROUP, INC.

Notes to the Consolidated Financial Statements 

 

 

6 Equity

 

 a.Common Stock

 

During the periods ended June 30, 2021 and December 31, 2020, the Company did not sell any shares of its $0.001 par value per share common stock.

 

 b.Common Stock Warrants

 

During the periods ended June 30, 2021 and December 31, 2020, 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

 

7 Notes Payable

 

Convertible Promissory Notes

 

 a.During the periods ended June 30, 2021 and December 31, 2020, the Company did not issue any new convertible promissory notes.

  

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.

 

In October 2014, Ronald Burkhard, XAs former Executive Chairman and former member of the Company's Board of Directors filed a lawsuit in the Supreme Court of the State of New York, County of New York, alleging breach of his employment contract and seeking approximately $695,000 in damages. This lawsuit, where a judgement was entered against the Company for approximately $775,000, was settled with Burkhard for $105,000. In November and December of 2018 the Company paid Burkhard the amount due from this settlement.

 

 

9 Income Taxes

 

The Company has a net operating loss carried forward of $14,657,912 available to offset taxable income in future years which commence expiring in 2029. The Company is subject to United States federal and state income taxes at an approximate rate of 21% (2021 and 2020). As of June 30, 2021 and December 31, 2020, the Company had no uncertain tax positions.

 

  2021 2020
Income tax recovery at Statutory rate $(101,757) $15,653 
Permanent differences and other          
Valuation allowance charges  101,757   (15,653)
Provision for income taxes $    $   

 

The significant components of deferred income tax assets and liabilities at June 30, 2021 and December 31, 2020 are as follows: 

 

         
   June 30, 2021   December 31, 2020 
Net operating loss carried forward $14,657,912  $15,142,470 
Valuation allowance  (14,657,912)  (15,142,470)
Net deferred income tax asset $    $   

  

 

 

11

 

 

CMG HOLDINGS GROUP, INC.

Notes to the Consolidated Financial Statements 

 

 

10 Segments

 

The Company splits its business activities during the period ended June 30, 2021 into two 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 period ended June 30, 2021. 

 

    CMG  
    Holding  
  XA Group Total
Revenues  192,400   99,883   292,284 
             
Operating expenses  368,520   279,992   648,513 
             
Operating income (loss)  (176,120)  (180,109)  (356,229)
             
Other income (expense)       840,786   840,787 
             
Net income (loss)  (176,120)  660,677   484,557 

 

 The Company splits its business activities during the period ended June 30, 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 period ended June 30, 2020.

       CMG     
       Holding     
   XA   Group    Total 
Revenues  9,609        9,609 
             
Operating expenses  172,523   205,230   377,753 
             
Operating income (loss)  (162,914)  (205,230)  (368,144)
             
Other income (expense)       275,602   275,602 
             
Net income (loss)
  (162,914)  70,372   (92,542)

 

 

12

 

 

CMG HOLDINGS GROUP, INC.

Notes to the Consolidated Financial Statements 

 

 

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 June 30, 2021 the Company received $99,883 in revenue for sales in excess of accounts receivable at December 31, 2020. The Company recorded $58,000 of cost of revenues. 

 

 

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, 2020 the remaining balance of the loan was $35,000.

 

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 $470,376 at June 30, 2021. The Company made payments of $13,000 and $173,149 in excess of the current $90,000 and $180,000 salary for periods ended June 30, 2021 and December 31, 2020, respectively.

 

The Company paid $75,000 and $150,000 for the periods ended June 30, 2021 and December 31, 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.

 

The $206,000 of prepaid legal fees was returned unused during the third quarter.

 

13

 

  

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD LOOKING STATEMENTS

 

In addition to historical information, this Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, which includes, 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”, “believe,”, “expects”, “intends”, “plans”, “believes, “seeks”, “assume,” “estimates”, “may”, “will” and variations of these words or similar expressions are intended to identify forward-looking statements. All statements in this Quarterly Report regarding our future strategy, future operations, projected financial position, estimated future revenue, projected costs, future prospects, and results that might be obtained by pursuing management’s current plans and objectives are forward-looking statements. 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. You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this Quarterly Report was filed with the Securities and Exchange Commission (“SEC”). We expressly disclaim any obligation to revise or update publicly any forward-looking statements even if subsequent events cause our expectations to change regarding the matters discussed in those statements. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our stockholders. Unless the context indicates otherwise, the terms “Company”, “Corporate”, “CMGO”, “our”, and “we” refer to CMG Holdings Group, Inc. and its subsidiaries.

 

RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED June 30, 2021

 

Gross revenues increased from $9,609 for the six months ended June 30, 2020 to $292,284 for the six months ended June 30, 2021. The increase in revenues was mainly attributable to the beginning recovery from a worldwide pandemic that took place during the quarter.

 

Cost of revenue increased from $8,644 for the six months ended June 30, 2020 to $277,378 for the six months ended June 30, 2021. The increase in revenues was mainly attributable to the beginning recovery from a worldwide pandemic that took place during the quarter.

 

Operating expenses increased from $366734 for the six months ended June 30, 2020 to $371,135 for the six months ended June 30, 2021. The increase in operating expenses is due to the increase in salaries for its full-time employees.

 

Net income increased from a loss of $92,542 for the six months ended June 30, 2020 to net income of $488,557 for the six months ended June 30, 2021. The decrease in net income to net loss was mainly attributable to the worldwide pandemic that took place during the quarter. At least two major jobs that were scheduled for the first quarter were canceled due to the pandemic.

LIQUIDITY AND CAPITAL RESOURCES:

 

As of June 30, 2021, the Company’s cash on hand was $466,244.

 

Cash used in operating activities for the six months ended June 30, 2021 was $226,292, as compared to cash used in operating activities of $115,170 for the six months ended June 30, 2020. The decrease in revenues was mainly attributable to the worldwide pandemic that took place during the quarter.

 

Cash provided by investing activities for the six months ended June 30, 2021 was $263,900 as compared cash used in investing activities of $193,149 for the six months ended June, 2020.

 

Cash used in financing activities for the six months ended June 30, 2021 was $17,500, as compared to $19,454 used for the six months ended June 30, 2020.

14

 

  

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 4 - CONTROLS AND PROCEDURES

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2020. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 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 June 30, 2020.

 

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 March 31, 2015 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 13a-15(f) and 15d-15(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 June 30, 2021, our management concluded that our internal controls over financial reporting were not effective as of June 30, 2021 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.

 

In performing this assessment, management has identified the following material weaknesses as of June 30, 2021:

 

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 recording revenue and expense transactions in the proper period

 

Failure in the operating effectiveness over controls related to evaluating and recording related party transactions

15

 

 

 

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. As of June 30, 2020 no changes have occurred.

 

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

 

No change in the Company’s internal control over financial reporting occurred during the period ended June 30, 2020, that materially affected, or is reasonably likely to materially affect, the Company s internal control over financial reporting.

 

PART II OTHER INFORMATION

 

IITEM 1 – 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.

 

 

In October 2014, Ronald Burkhard, XAs former Executive Chairman and former member of the Company's Board of Directors filed a lawsuit in the Supreme Court of the State of New York, County of New York, alleging breach of his employment contract and seeking approximately $695,000 in damages. This lawsuit, where a judgement was entered against the Company for approximately $775,000, was settled with Burkhard for $105,000. In November and December of 2018, the Company paid Burkhard the amount due from this settlement.

 

On September 25, 2019 the Company filed suit against Eaton & Van Winkle (EVW), Lawrence Allen Steckman (Steckman) and Paul Lieberman (Lieberman). In December 2019 the defendants settled for a payment of $450,000. On December 13, 2019 the Company received $378,500, which was the amount of proceeds net of attorney’s fee of $71,500.

 

In 2014 the Company filed a lawsuit against Hudson Gray et al. On January 14, 2019 the parties entered into arbitration. The parties reached agreement whereby the Company would be paid $2,750,000. The payments are scheduled as follows:

Due Amount
Paid
 Attorney's
Fees
Payment upon execution of the agreement $400,000  $214,548  $185,452 
On or before February 8, 2019 $100,000  $53,650  $46,350 
On or before June 30, 2019 $200,000  $148,000  $52,000 
On or before September 30, 2019 $200,000  $148,000  $52,000 
On or before December 31, 2019 $200,000  $146,496  $53,504 
On or before March 31, 2020 $200,000  $148,000  $52,000 
On or before June 30, 2020 $200,000  $146,352  $53,648 
On or before September 30, 2020 $250,000  $184,175  $65,825 
On or before December 31, 2020 $250,000  $183,312  $66,683 
On or before March 31, 2021 $250,000  $184,175  $65,825 
On or before June 30, 2021 $250,000  $188,468  $61,532 
On or before September 30, 2021 $250,000         
  $2,750,000  $1,745,181  $754,819 
             

16

 

 

ITEM 1A – RISK FACTORS

 

The Company is a smaller reporting company and is therefore not required to provide this information.

 

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

All unregistered sales of the Company’s securities have been disclosed on the Company’s current reports on Form 10 and form 8-K.

 

ITEM 3 – DEFAULT UPON SENIOR SECURITIES

 

None.

 

ITEM 4 – MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5 – OTHER INFORMATION

 

None

 

ITEM 6 – EXHIBITS

 

Exhibit Number Description of Exhibit Filing Reference
     
31.01 Certification of Principal Executive Officer Pursuant to Rule 13a-14. Filed herewith.
     
31.02 Certification of Principal Financial Officer Pursuant to Rule 13a-14. Filed herewith.
     
32.01 CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act. Filed herewith.
     
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  

 

 

* The XBRL-related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

 

17

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

 

 

 

CMG HOLDINGS GROUP, INC.

 

Dated: August 16, 2021

 

 

By: /s/ Glenn Laken

  Glenn Laken, Chief Executive Officer