CMG HOLDINGS GROUP, INC. - Quarter Report: 2009 March (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
|
|
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THE
SECURITIES EXCHANGE ACT OF 1934
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For
the quarter ended March 31, 2009
Commission
file number 000-51770
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CMG
HOLDINGS, INC.
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|
(Exact
name of registrant as specified in its
charter)
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Nevada
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87-0733770
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|
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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5601 Biscayne
Boulevard
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||
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Miami, Florida,
USA
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33137
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(Address
of principal executive offices)
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(Zip
Code)
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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.
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Large
accelerated filer
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Accelerated
filer
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Non-accelerated
filer
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Smaller
reporting company x
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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 May
20, 2009, there were 42,400,000 common stock of the registrant issued
and outstanding.
1
CMG
HOLDINGS, INC.
FORM
10-Q
2
CMG
HOLDINGS, INC.
UNAUDITED FINANCIAL
STATEMENTS
FOR
THE QUARTER ENDED MARCH 31, 2009 AND 2008
CONTENTS
______________________________________________________________________________________
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Consolidated
Balance Sheets as of March 31, 2009 and December 31, 2008
(Unaudited)
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4
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Consolidated
Statements of Operations for the three months ended March 31, 2009 and
2008 (Unaudited)
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5
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Consolidated
Statements of Cash Flows for the three months ended March 31, 2009 and
2008 (Unaudited)
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6
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Notes
to Consolidated Financial Statements (Unaudited)
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7
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3
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CMG
HOLDINGS, INC
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||||||||
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CONSOLIDATED
BALANCE SHEETS
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||||||||
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(unaudited)
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||||||||
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March
31, 2009
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December
31, 2008
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|||||||
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ASSETS
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||||||||
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CURRENT
ASSETS:
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||||||||
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Cash
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$
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6,999
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$
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13,934
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||||
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Accounts Receivable
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1,050
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1,050
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||||||
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Note Receivable
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150,000
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--
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||||||
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Total Current Assets
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158,049
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14,984
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||||||
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Deposits
related to acquisitions
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300,000
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300,000
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||||||
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TOTAL
ASSETS
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$
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458,049
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$
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314,984
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||||
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LIABILITIES
AND STOCKHOLDERS' DEFICIT
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||||||||
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CURRENT
LIABILITIES:
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||||||||
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Client Payable
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$
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108,036
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$
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8,000
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||||
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Accounts Payable
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82,818
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29,320
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||||||
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Salary Payable
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488,896
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390,434
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||||||
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Consulting Payable
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24,925
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24,925
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||||||
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Line of Credit
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128,981
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108,231
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||||||
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Advance from Related Party
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25,000
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--
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||||||
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Total
current liabilities
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858,656
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560,910
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||||||
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STOCKHOLDERS’
DEFICIT
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||||||||
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Preferred stock:
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||||||||
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5,000,000
shares authorized par value $0.001 per share; none issued and
outstanding
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||||||||
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Common Stock:
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||||||||
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150,000,000
shares authorized par value $0.001 per share; 42,400,000 and 42,400,000
issued, and 31,726,518 and 31,726,518
shares outstanding respectively
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31,727
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31,727
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||||||
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Additional paid-in-capital
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4,449,863
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4,449,863
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||||||
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Shares
held in reserve, 10,673,482 and 10,673,482 shares held,
respectively.
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10,673
|
1
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10,673
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|||||
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Accumulated deficit
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(4,892,870)
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)
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(4,738,189
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)
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||||
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TOTAL STOCKHOLDERS’ DEFICIT
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(400,607)
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(245,926)
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||||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
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$
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458,049
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$
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314,984
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||||
See
accompanying notes to consolidated financial statements
4
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CMG
HOLDINGS, INC
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||||||||
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CONSOLIDATED
STATEMENTS OF OPERATIONS
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||||||||
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(unaudited)
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||||||||
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Three
months ended
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||||||||
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March
31,
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||||||||
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2009
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2008
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|||||||
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Net
revenues
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$
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212,394
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$
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399,167
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||||
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Operating
expenses
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365,689
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1,734,495
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||||||
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Loss from
operations
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(153,295
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)
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(1,335,328
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)
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||||
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Other
income (expense):
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||||||||
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Interest
expense
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(1,386
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)
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(22,380)
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|||||
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Interest
income
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--
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12,341
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||||||
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Net Loss
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$
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(154,681
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)
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$
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(1,345,367
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)
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||
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Basic
and diluted loss per common share
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$
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(0.00
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)
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$
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(0.13
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)
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||
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Basic
and diluted weighted average common
|
||||||||
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shares
outstanding
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31,726,518
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10,000,000
|
||||||
See
accompanying notes to consolidated financial statements
5
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CMG
HOLDINGS, INC
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||||||||
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CONSOLIDATED
STATEMENTS OF CASH FLOWS
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||||||||
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(unaudited)
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||||||||
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Three
months ended
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||||||||
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March
31,
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||||||||
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2009
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2008
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|||||||
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CASH
FLOWS FROM OPERATING ACTIVITIES
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||||||||
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Net
Loss
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$
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(154,681
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)
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$
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(1,345,367
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)
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||
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Adjustments
to reconcile net loss
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||||||||
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to
net cash used in operating activities:
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||||||||
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Changes
in:
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||||||||
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Accounts
receivable
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--
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(440,000)
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||||||
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Prepaid expense
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--
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17,454
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||||||
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Accounts Payable
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53,498
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396,750
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||||||
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Client
Payable
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100,036
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371,772
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||||||
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Accrued
expense
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98,462
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1,050,000
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||||||
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Net
cash provided by operating activities
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97,315
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50,609
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||||||
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CASH FROM
INVESTING ACTIVITIES
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||||||||
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Cash
paid for acquisition of Pebble Beach Enterprises, Inc.
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--
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(600,000)
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||||||
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Cash
paid to acquire a bank loan
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(150,000
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)
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--
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|||||
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Net
cash used in investing activities:
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(150,000
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)
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(600,000)
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|||||
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FINANCING
ACTIVITIES
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||||||||
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Advance from a related party
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25,000
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--
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||||||
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Net borrowings on line of credit
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20,750
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685,830
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||||||
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Contributions
to capital
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--
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30,000
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||||||
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Borrowing on convertible notes
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--
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314,000
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||||||
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Net
cash provided by financing activities
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45,750
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1,029,830
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||||||
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Net
increase (decrease) in cash
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(6,935
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)
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480,439
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|||||
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Cash, beginning
of period
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13,934
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1,213,035
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||||||
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CASH
BALANCE AT END OF PERIOD
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$
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6,999
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$
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1,693,474
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||||
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Supplemental
cash flow information:
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||||||||
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Income tax paid
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$
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--
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$
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--
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||||
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Interest
paid
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1,386
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--
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||||||
See
accompanying notes to consolidated financial statements
6
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. 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 2008 annual
report on Form 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 2008, as reported in the
Form 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.
NOTE
2 – GOING CONCERN
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 unable 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
demand.
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 consulting
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 business and
therefore will be applying SFAS 141(R) “Business Combinations” when
accounting for the transaction.
7
The
information contained in this Management’s Discussion and Analysis of Financial
Condition and Results of Operation contains “forward looking statements.”
Actual results may materially differ from those projected in the forward
looking statements as a result of certain risks and 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 the 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 also 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 compensation expense in
2009.
LIQUIDITY AND CAPITAL
RESOURCES.
As of
March 31, 2009, the Company’s cash on hand was $6,999.
Cash
provided by operations for the three months period ended March 31, 2009 was
$97,315, as compared to cash provided by operations of $50,609 for the three
months ended March 31, 2008. This change is primarily due to less cash expense
incurred by the Company in the first three month of
2009.
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. and for the three month ended
March 31, 2009, the Company paid $150,000 to obtain a note receivable from a
financial institution.
Cash
provided by financing activities for the three month period ended March 31, 2009
was $45,750, as compared to $1,029,830 provided for 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.
8
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth information regarding the number of shares of common
stock beneficially owned on August 7, 2008, following consummation of the
Reorganization by Each person who is known by us to beneficially own 5% or more
of the Registrant’s common stock; Each of the Registrant’s directors and named
executive officers; and All of the Registrant’s directors and executive officers
as a group.
Security
Ownership of CMG Holdings, Inc. as of August 7, 2008:
|
Title
of Class
|
Name
|
Shares
|
Percent
(1)
|
||||||
|
Common
Stock
|
CMG
Acquisitions, Inc.
|
14,085,789 | 33.22 | % | |||||
|
Alan
Morell
|
10,107,000 | 23.84 | % | ||||||
|
James
J. Ennis
|
2,500,000 | 5.89 | % | ||||||
Security
Ownership of CMG Holdings Inc. directors and executive officers as of May 27,
2008:
|
Title
of Class
|
Name
|
Shares
|
Percent
(1)
|
||||||
|
Common
Stock
|
Alan
Morell
|
10,107,000 | (2 | ) | 23.84 | % | |||
|
James
J. Ennis
|
2,500,000 | (3 | ) | 5.89 | % | ||||
|
Michael
Vandetty
|
1,000,000 | 2.35 | % | ||||||
|
All
Directors and Executive Officers as a Group
|
13,607,000 | 32.09 | % | ||||||
|
(1)
|
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and includes voting and investment power with respect
to shares. Unless otherwise indicated, the persons named in the table have
sole voting and sole investment control with respect to all shares
beneficially owned, subject to community property laws where applicable.
The number and percentage of shares beneficially owned are based on
42,400,000 shares of common stock outstanding as of May 27, 2008, the
closing date of the Reorganization. The address for those individuals for
which an address is not otherwise indicated is: c/o CMG Holdings, Inc.,
5601 Biscayne Boulevard, Miami, Florida 33137,
USA.
|
|
(2)
|
Mr.
Morell owns 3,500,000 shares of Creative Management Group, Inc. directly,
and is the beneficial owner of an additional 6,607,000 shares owned by
Commercial Rights Intl Corp. for a total of 10,107,000
shares.
|
|
(3)
|
Mr.
Ennis owns 500,000 shares of Creative Management Group, Inc. directly, and
is the beneficial owner of an additional 2,000,000 shares owned by
Hastings Creek Group, Inc. for a total of 2,500,000
shares.
|
None.
9
ITEM 4 CONTROLS AND
PROCEDURES
(a)
Evaluation of disclosure controls and procedures.
Management has evaluated, with the participation of our Chief
Executive Officer and Chief Financial Officer, the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) as of the end of the period covered by this report and concluded
that our disclosure controls and procedures were not effective to ensure that
all material information required to be disclosed in this Quarterly Report on
Form 10-Q has been made known to them in a timely fashion. We are in the process
of improving our internal control over financial reporting in an effort to
remediate these deficiencies through improved supervision and training of our
accounting staff. These deficiencies have been disclosed to our Board of
Directors. We believe that this effort is sufficient to fully remedy these
deficiencies and we are continuing our efforts to improve and strengthen
our control processes and procedures.
Our Chief Executive Office, Chief Financial Officer and directors will continue
to work with our auditors and other outside advisors to ensure that our controls
and procedures are adequate and effective.
(b)
Changes in internal controls
There
have been no significant changes in our internal controls over financial
reporting that occurred during the fiscal quarter covered by this report that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
10
There is no past, pending or, to the Company’s
knowledge,
threatened litigation or administrative action which has or is expected by
the Company’s management to have a material effect upon our Company’s business,
financial condition or operations, including any litigation or action
involving our Company’s officers,
directors, or other key
personnel.
ITEM 1A – RISK FACTORS
Registrant
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
None
ITEM 3 – DEFAULT UPON SENIOR SECURITIES
None
None
None
11
Exhibit
No. Document
Description
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
of the Securities
Exchange Act,
as amended.
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
of the Securities Exchange Act, as
amended.
|
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted
Pursuant to Section 906 of the Sarbanes Oxley Act of
2002.
|
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted
Pursuant to Section 906 of the Sarbanes Oxley Act of
2002.
|
Reports
on Form 8-K:
None.
12
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, there unto duly
authorized.
|
CMG HOLDINGS, INC.
|
|||
|
(Registrant)
|
|||
|
Date:
May 20, 2009
|
By: /s/ ALAN
MORELL
|
||
|
Alan
Morell
|
|||
|
Chief
Executive Officer and
|
|||
|
Chairman of the Board
|
|||
|
Date:
May 20, 2009
|
By: /s/ JAMES J.
ENNIS
|
||
|
James J. Ennis
|
|||
|
Chief
Financial Officer and
|
|||
|
Director
|
|||
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
|
SIGNATURE
|
NAME
|
TITLE
|
DATE
|
|||
|
/s/Alan
Morell
|
Alan
Morell
|
CEO
& Chairman
|
May
20, 2009
|
|||
|
of
the Board
|
||||||
|
/s/James
I. Ennis
|
James
I. Ennis
|
CFO
& Director
|
May
20, 2009
|
|||
13