Exeo Entertainment, Inc. - Quarter Report: 2014 February (Form 10-Q)

exeo_10q-15943.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2014


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

For the transition period from to

Commission File Number: 333-190690

EXEO ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

Nevada	45-2224704
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

4478 Wagon Trail Ave., Las Vegas, NV 89118

(Address of principal executive offices and Zip Code)

(702) 361-3188

(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 (Exchange Act) 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 has submitted electronically and posted on its corporate Website, 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 x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	o	Accelerated Filer	o

Non-accelerated Filer	o (Do not check if a smaller reporting company)	Smaller reporting company	x

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of the date of filing of this report, there were outstanding 23,433,100 shares of the issuer’s common stock, par value $0.0001 per share.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION		3

Item 1	Financial Statements	3

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3	Quantitative and Qualitative Disclosures About Market Risk	8

Item 4	Controls and Procedures	8

PART II – OTHER INFORMATION		9

Item 1	Legal Proceedings	9

Item 1A	Risk Factors	9

Item 2	Unregistered Sale of Equity Securities and Use of Proceeds	9

Item 3	Defaults Upon Senior Securities	9

Item 4	Mine Safety Disclosures	9

Item 5(a)	Other Information	10

Item 6	Exhibits	10

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Item Regulation S-X, Rule 10-01(c) Interim Financial Statements, and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three months ended February 28, 2014 are not necessarily indicative of the results that can be expected for the year ending November 30, 2014.

EXEO ENTERTAINMENT, INC.

(A DEVELOPMENT STAGE COMPANY)

TABLE OF CONTENTS

FEBRUARY 28, 2014

(UNAUDITED)


Balance Sheets as of February 28, 2014 and November 30, 2013	F - 1

Statements of Operations for the three months ended February 28, 2014 and 2013, and the period from May 12, 2011 (inception) to February 28, 2014	F - 2

Statements of Cash Flows for the three months ended February 28, 2014 and 2013, and the period from May 12, 2011 (inception) to February 28, 2014	F - 3

Notes to Financial Statements	F - 4 – F – 13

EXEO ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(unaudited)	February 28,			November 30,
	2014			2013

ASSETS

Current Assets
Cash and cash equivalents	$	316,980		$	358,299
Prepaid expenses		50,365			44,146
Total current assets		367,345			402,445

Property and equipment, net		100,184			105,563

TOTAL ASSETS	$	467,529		$	508,008

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
Current liabilities
Accounts payable and accrued expenses	$	47,310		$	47,480
Due to related parties		85,556			-
Notes payable		9,698			9,698
Total current liabilities		142,564			57,178

Long-term liabilities
Notes payable		16,734			19,186
Total long-term liabilities		16,734			19,186

Total Liabilities		159,298			76,364

Stockholders' Equity
Convertible Preferred Stock Series A - 15%, $0.0001 par value, 1,000,000 shares
authorized, no shares issued
Convertible Preferred Stock Series B - 15%, $0.0001 par value, 1,000,000 shares
authorized, no shares issued
Common stock - $0.0001 par value, 100,000,000 shares authorized; 23,433,100
and 23,433,100 shares issued and outstanding, respectively		2,344			2,344
Additional paid-in capital		2,121,834			2,076,147
Stock Payable		470,000			-
Deficit accumulated during the development stage		(2,285,947	)		(1,646,847	)
Total stockholders' equity		308,231			431,644

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	467,529		$	508,008

The accompanying notes are an integral part of these financial statements.

F-1

EXEO ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(unaudited)

	Three month period ending February 28, 2014			Three month period ending Febuary 28, 2013			From May 12, 2011 (Inception) to February 28, 2014

REVENUES	$	-		$	-		$	-

OPERATING EXPENSES
Advertising		280			561			1,698
Automobile and truck		1,386			497			9,324
Bank service charges		290			510			1,818
Compensation - non-directors		5,952			37,376			214,354
Compensation - officers / directors		30,000			25,000			309,107
Stock-based compensation to officers and employee		50,001			50,001			369,296
Computer and internet		202			401			2,338
Consulting fees		30,000			-			90,000
Depreciation		6,810			5,789			38,444
Filing fees		1,388			350			2,830
Investor Relations and News		410,000			-			410,000
Legal and professional		30,085			2,745			121,532
Meals and entertainment		-			95			1,230
Office rent		21,018			35,030			225,378
Office expense		1,707			2,352			26,903
Organizational cost		-			-			875
Promotions / trade show exhibit		-			-			38,677
Promotions / internet listings and sponsorships		1,556			-			1,556
Research and product development		19,268			57,138			340,781
Royalties		24,063			-			36,093
Travel		705			99			9,799
Utilities		4,252			4,741			49,665
TOTAL OPERATING EXPENSES		638,963			222,685			2,301,698

LOSS FROM OPERATIONS		(638,963	)		(222,685	)		(2,301,698	)

OTHER INCOME
Foregiveness of Debt		-			-			21,018
TOTAL OTHER INCOME		-			-			21,018

OTHER EXPENSE
Interest expense		(137	)		2,167			(5,267	)
TOTAL OTHER EXPENSES		(137	)		2,167			(5,267	)

LOSS BEFORE PROVISION FOR INCOME TAXES		(639,100	)		(220,518	)		(2,285,947	)

PROVISION FOR INCOME TAXES		0			0			0

NET LOSS	$	(639,100	)	$	(220,518	)	$	(2,285,947	)

NET LOSS PER SHARE: BASIC	$	(0.03	)	$	(0.01	)


WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC		23,433,100			22,632,860

The accompanying notes are an integral part of these financial statements.

F-2

EXEO ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
	Three month period ending February 28, 2014			Three month period ending February 28, 2013			From May 12, 2011 (Inception) to February 28, 2014

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period	$	(639,100	)	$	(220,518	)	$	(2,285,947	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		6,810			5,789			38,444
Stock-based compensation		450,001			50,001			769,296
Organization costs paid with stock		-			-			875
Foregiveness of Debt		-			-			(21,018	)
Imputed interest		-			-			2,271
Changes in assets and liabilities
Decrease (Increase) in pre-paid expenses		(6,219	)		7,006			(50,365	)
Decrease (Increase) in accounts payable and accrued expenses		386			34,018			68,884
Increase in accrued interest due to related parties		-			-			2,528
Net Cash Used in Operating Activities		(188,122	)		(123,704	)		(1,475,032	)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment		(1,430	)		(8,750	)		(94,993	)
Cash Flows Used in Investing Activities		(1,430	)		(8,750	)		(94,993	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of issuance costs		65,685			165,290			1,821,735
Proceeds from related party debt		85,000			-			106,476
Proceeds from notes payable		-			-			12,018
Payments on notes payable		-			(7,954	)		(22,850	)
Payments on related party debt		-			(638	)		(16,982	)
Payments on notes payable - auto loan (principal)		(2,452	)		(2,589	)		(13,392	)
Cash Flows Provided by Financing Activities		148,233			154,109			1,887,005

Net increase in cash and cash equivalents		(41,319	)		21,654			316,980

Cash and cash equivalents, beginning of the period		358,299			130,676			-

Cash and cash equivalents, end of the period	$	316,980		$	152,329		$	316,980

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	-		$	-		$	-
Cash paid for taxes	$	-		$	-		$	-

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Vehicle purchased with financing	$	-		$	39,824		$	39,824
Vehicle purchased using a related party trade-in vehicle	$	-		$	3,810		$	3,810
Assumption of related party debt	$	-		$	-		$	10,832

The accompanying notes are an integral part of these financial statements.

F-3

EXEO ENTERTAINMENT, INC.

(A Development Stage Company)

Notes to Financial Statements

February 28, 2014

Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Exeo Entertainment, Inc. (the “Company”) is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied to the preparation of the financial statements. The Company will adopt accounting policies and procedures based upon the nature of future transactions.

Nature of Business

The Company was incorporated in Nevada on May 12, 2011, and is in the development stage. The Company is based in Las Vegas, Nevada, and designs, develops, licenses, manufactures, and distributes its products. The Company plans to market the Zaaz™ Keyboard, to be used with Samsung’s Smart TV® as well as other smart devices, the Extreme Gamer™, and other new peripheral products for the video gaming industry, including the Psyko Krypton™ surround sound gaming headphones.

Development Stage Company

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to development-stage companies. A development-stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from.

Basis of Presentation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.

Accounting Basis

The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a November 30 fiscal year end. Prior to that, the Company adopted a calendar year end for 2011.

Cash and Cash Equivalents

The Company considers cash on hand, cash in banks, certificates of deposit, time deposits, and U.S. government and other short-term securities with maturities of three months or less when purchased as cash and cash equivalents.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts payable, notes payable, and accrued expenses. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

F-4

EXEO ENTERTAINMENT, INC.

(A Development Stage Company)

Notes to Financial Statements

February 28, 2014

Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property and Equipment

Property and equipment are stated at the lower of cost or fair value. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets, as follows:

Description	Estimated Life
Furniture & Equipment	5 years
Vehicles	5 years

The estimated useful lives are based on the nature of the assets as well as current operating strategy and legal considerations such as contractual life. Future events, such as property expansions, property developments, new competition, or new regulations, could result in a change in the manner in which the Company uses certain assets requiring a change in the estimated useful lives of such assets.

Maintenance and repairs that neither materially add to the value of the asset nor appreciably prolong its life are charged to expense as incurred. Gains or losses on disposition of property and equipment are included in the statements of operations. There were no dispositions during the periods presented.

Impairment of Long-Lived Assets

The Company evaluates its property and equipment and other long-lived assets for impairment in accordance with related accounting standards. The Company has impaired no fixed assets during the periods presented. For assets to be held and used (including projects under development), fixed assets are reviewed for impairment whenever indicators of impairment exist. If an indicator of impairment exists, the Company first groups its assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (the “asset group”). Secondly, the Company estimates the undiscounted future cash flows that are directly associated with and expected to arise from the completion, use and eventual disposition of such asset group. The Company estimates the undiscounted cash flows over the remaining useful life of the primary asset within the asset group. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs.

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Management Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-5

EXEO ENTERTAINMENT, INC.

(A Development Stage Company)

Notes to Financial Statements

February 28, 2014

Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured. From inception, the Company recognized no revenue.

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.

Stock-Based Compensation

Pursuant to ASC Topic 718, the Company recorded the fair value of the stock options on a monthly basis over the vesting period as stock-based compensation expense. The fair value of the options is calculated using the Black-Scholes method as of the date of grant. In fiscal year 2012, the Company adopted an incentive stock option plan for its employees. In fiscal year 2012 the Company granted stock options to three officers of the Company. These are described in Note G- Stock Options and Warrants.

Concentrations of Risk

The Company’s bank accounts are deposited in insured institutions. The funds are insured up to $250,000. At February 28, 2014, the Company’s bank deposits did exceed the insured amounts.

Accounting for Research and Development Costs

The Company records an expense in the current period for all research and development costs, which include Hardware Development Costs. The Company does not capitalize such amounts. Pursuant to ASC Topic 730 Research and Development, once we determine that our Extreme Gamer video game console is technologically feasible and a working model is put into use, the Company will capitalize Software Development costs associated with its products. Once this occurs we will determine a useful life of our software and apply a reasonable economic life of five years or less. At this time, our software development costs only relate to the Extreme Gamer and Zaaz keyboard hardware. The software development costs cannot be separated from the associated hardware development. We do not develop stand-alone software for sale to the retail consumers; rather we develop software in order to operate the designed hardware. The software is designed to be encoded within chips inside the hardware. Thus, it has been determined that the current software development costs, which are intertwined within the hardware development, are to be expensed rather than capitalized pursuant to ASC Topic 730.

This conclusion is also based upon our decision to devote further research and development costs in the support of our product interface to the video game players: Sony PS3® (and other products such as Nintendo Wii® and Microsoft Xbox 360®).

F-6

EXEO ENTERTAINMENT, INC.

(A Development Stage Company)

Notes to Financial Statements

February 28, 2014

Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Liquidity and Going Concern

The Company has incurred an accumulated deficit of $2,285,947 since inception and receives no revenue from the sales of products. The Company incurred significant initial research and product development costs, including expenditures associated with hardware engineering and the design and development of its hardware components and prototypes associated with the Zaaz™ keyboard, the Extreme Gamer, and the Psyko Krypton™ surround sound gaming headphones. The Company also incurred costs associated with its acquisition of property, plant and equipment for its 10,000 square foot office and warehouse.

These factors create substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on the Company generating cash from the sale of its common stock or obtaining debt financing and attaining future profitable operations. Management’s plan includes selling its equity securities and obtaining debt financing to fund its capital requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.

Recent Accounting Pronouncements

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

Note B: PROPERTY AND EQUIPMENT

The Company owned property and equipment, recorded at cost, which consisted of the following at February 28, 2014 and November 30, 2013:

	February 28, 2014			November 30, 2013
Furniture and fixtures	$	21,045		$	21,045
Office & computer equipment		31,061			29,631
Vehicles		86,471			86,471
Subtotal		138,577			137,147
Less: Accumulated depreciation		(38,393	)		(31,584	)
Property and equipment, net	$	100,184		$	105,563

Depreciation expense was $6,810 and $5,789 for the three months ended February 28, 2014 and 2013, respectively.

Note C: HARDWARE DEVELOPMENT COSTS

The Company incurred $19,268 and $57,138 for research and development costs for the three months ended February 28, 2014 and 2013, respectively. As to the three months ended February 28, 2013, these costs relate to hardware engineering, design and development of the Zaaz Keyboard, and the Extreme Gamer. As to the three months ended February 28, 2014, these costs pertain to the Psyko Krypton™ surround sound gaming headphones, Zaaz Keyboard and the Extreme Gamer.

F-7

EXEO ENTERTAINMENT, INC.

(A Development Stage Company)

Notes to Financial Statements

February 28, 2014

Note D: PREPAID EXPENSES

At February 28, 2014, the balance of prepaid expenses was $50,365. At November 30, 2013 the balance of $44,146 consisted of royalty fees owed to Psyko Audio Labs as to the Psyko Audio Headphones. At February 28, 2014, the balance was reduced to $35,365 as the Company applied $8,781 from prepaid expenses to royalty fees during the three months ended February 28, 2014. The Company also recorded prepaid expenses of $15,000, which are associated with an upfront commitment of exhibitor expenses to participate in the Electronic Entertainment Expo to be held in June, 2014.

Note E: PATENT AND TRADEMARKS

In June 2013, the Company executed a license agreement with Psyko Audio Labs Canada to manufacture and distribute the Carbon and Krypton line of patented headphones. US Patent # 8,000,486 (for the Psyko Krypton™ surround sound gaming headphones).

The Company entered into a license agreement with Digital Extreme Technologies, Inc., a Delaware corporation, (also referred to as DXT) for use of certain intellectual property associated with the products being designed and developed by the Company. The specific terms of the license agreement are addressed under the related party transactions note I. The Black Widow keyboard is now known as the Zaaz keyboard. DXT worked to design and develop the Extreme Gamer as well as the Black Widow keyboard. The Company continues to work, under a license agreement, with DXT to advance the use of technologies designed by DXT.

DXT applied to the U.S. PTO for a patent of its Multi Video Game Changer. The agency assigned an application number of 12/543,296 to its application, which was published on February 25, 2010. The proposed 10 disk Video Game Changer is designed to interface directly with Sony PS3®, Nintendo Wii®, and Microsoft Xbox 360®. The Company anticipates incorporating Blu-Ray® compatible optics technology under a license agreement. This would allow users to insert Blu-Ray® discs into the Video Game Changer, and once connected to the video game console, to play movies on television. Sony PS3® is now capable of playing Blu-Ray® discs, but only with a capacity for a single disk. This technology would provide for the loading of up to 10 DVD’s, CD’s or Blu-Ray® discs into a single console that communicates with a video game console via USB. Furthermore, users would be able to plug in any external hard disc drive (“HDD”) directly into the console via an internal ATPI port, allowing movies, music and pictures to be played directly from the HDD.

Note F: COMMON STOCK

The Company has 100,000,000 shares at $0.0001 par value common stock authorized and 23,433,100 and 23,433,100 shares issued and outstanding at February 28, 2014 and November 30, 2013, respectively. During the three months ended February 28, 2013, the Company granted 350,000 stock warrants to investors. Details associated with stock warrants are described in Note G.

On December 24, 2012, the Company filed an amendment to its Articles of Incorporation to change the par value of its common stock from $0.001 to $0.0001 and to add to the authorized capital of the Company 1,000,000 Series A Preferred Stock at par value $0.0001. As of February 28, 2014, there have been no issuances of Series A Convertible Preferred Stock.

F-8

EXEO ENTERTAINMENT, INC.

(A Development Stage Company)

Notes to Financial Statements

February 28, 2014

Note F: COMMON STOCK (CONTINUED)

Common Stock Payable for Investor Relations

On February 3, 2014, the Company entered into an agreement with RedChip Companies, Inc., which is based in Maitland, Florida. The agreement provides for certain investor relations services including the preparation of a research profile, an investment thesis, and media content for distribution via the internet and in print. The Company agreed to reach out to investment firms and sophisticated individuals who are already registered with RedChip, and who opted in to receive media created on behalf of the Company. RedChip also agreed to respond to inquiries from investors, and to introduce the Company via press releases to RedChip’s existing business network. The term of the agreement is one year. Cash consideration to be paid to RedChip is $10,000 per month. As of February 28, 2014, the Company paid RedChip $10,000.

In addition to the cash compensation described above, the Company agreed to pay stock-based consideration. A common stock certificate for 400,000 common shares bearing a restrictive legend shall be delivered by the Company to RedChip in April, 2014. Although the Company agreed to deliver the stock certificate in February, 2014, the parties agreed to an extension to allow the Company additional time in order to process and deliver the stock certificate. The Company did not agree to register such shares with the U.S. Securities and Exchange Commission. The Company recorded $400,000 as an investor relations expense, and as stock payable since the certificate had not yet been issued. The $1.00 price per share was determined based upon the most recent sales of restricted common shares. These sales transactions occurred in the third quarter of fiscal year 2013. During that quarter, the Company sold 294,219 common shares at $1.00 per to 19 purchasers in a Regulation D, section 506 offering to accredited investors.

Equity Issuance Costs

We incurred equity issuance costs of $4,315 and $9,710 during the three months ended February 28, 2014 and 2013, respectively. Rather than expense these costs, such items are charged against the Company’s equity. These costs include mailing, copying, courier, and other miscellaneous costs associated with the duplication and delivery of our offering circular to investors and paying for the return delivery of signed stock subscription agreements.

Note G: STOCK OPTIONS AND WARRANTS

Stock-Based Compensation to Employees

Pursuant to the employee incentive stock option plan, on July 15, 2012, the Company granted 2,000,000 shares to each of its two officers and directors. The option agreement provides the employee has no more than five years from the date of the grant to exercise the options at an exercise price of $0.25 per share. The employee may only exercise such options based upon the contracted vesting schedule, which provides that the options vest on a pro-rata basis over 60 months of future services to be rendered by such employee. In addition, on August 15, 2012, the Company granted 100,000 incentive stock options to another officer of the Company. This employee received the right to exercise the options on the date of grant at an exercise price of $0.25 per share. As the officer was fully vested in his right to such exercise at the time of the grant, the Company recorded the entire fair value of his stock options at the date of grant.

F-9

EXEO ENTERTAINMENT, INC.

(A Development Stage Company)

Notes to Financial Statements

February 28, 2014

Note G: STOCK OPTIONS AND WARRANTS (CONTINUED)

The fair value of the options is calculated using the Black-Scholes method as of the date of grant. The factors used to calculate fair value of the stock options include the following: 1) Risk free interest rate, 2) Volatility of returns of the underlying asset, 3) current stock price, 4) Term of the Option, and 5) The exercise price. The risk free interest rate used in this calculation equals 0.63% and 0.80% for the stock options granted on July 15, 2012 and August 15, 2012, respectively. The term of the option is 5 years from the date of the grant. The exercise price is $0.25 per share. The current stock price at the dates of grant, which is July 15, 2012 and August 15, 2012, is $0.25 based on the sale of common shares to investors for the eleven months prior to the date of grant. Several industry comparables to this Company were used in order to determine an approximation of the volatility. The approximate volatility based on these comparables is approximately 458%.

The following is a summary of the status of all of the Company’s stock options issued to the Company’s management as of February 28, 2014 and the changes from December 1, 2013 to February 28, 2014.

	# of Options	Weighted Average Exercise Price	Weighted Average Remaining Life
Outstanding November 30, 2013	4,100,000	$0.25	43.75 months
Granted	-	$ -	-
Exercised	-	$ -	-
Cancelled	100,000	$0.25	-
Outstanding at February 28, 2014	4,000,000	$0.25	40.50 months
Exercisable at February 28, 2014	1,000,000	$0.25	40.50 months

Stock Warrants Issued to Investors

There were no common stock warrants granted by the Company from inception through August 16, 2012. For each common share purchased by an investor, for no additional consideration, each investor acquired a warrant to purchase an additional two shares at the fixed price of $1.00 per share. During the period June 1, 2013 to August 31, 2013, in connection with a private placement, the Company raised $126,719 from the sale of securities to four new investors and 13 previous investors. 746,203 stock warrants to purchase common stock were granted in conjunction with the purchase by each investor of our common stock. The terms of the stock warrant include the right to exercise all or a portion of the warrants granted, shall be no more than 2 years from the date of grant of the warrant, and the exercise price is $1.00 per warrant. The warrant may not be transferred or assigned in whole or in part by the grantee. No common stock warrants were issued during the period September 1, 2013 to January 31, 2014.

The following is a summary of the status of all of the Company’s stock warrants as of February 28, 2014 and the changes from December 1, 2013 to February 28, 2014.

F-10

EXEO ENTERTAINMENT, INC.

(A Development Stage Company)

Notes to Financial Statements

February 28, 2014

Note G: STOCK OPTIONS AND WARRANTS (CONTINUED)

	# of Warrants	Weighted Average Exercise Price	Weighted Average Remaining Life
Outstanding at November 30, 2013	624,520	$1.00	10 months
Granted	1,875,480	$1.00	18 months
Exercised	-	$ -	-
Cancelled	-	$ -	-
Outstanding at November 30, 2013	2,500,000	$1.00	16 months
Exercisable at November 30, 2013	2,500,000	$1.00	16 months
Outstanding at February 28, 2014	2,500,000	$1.00	16 months
Exercisable at February 28, 2014	2,500,000	$1.00	16 months

Note H: PREFERRED STOCK

On December 24, 2012, the Company filed an amendment to its Articles of Incorporation to add to the authorized capital of the Company 1,000,000 Series A Preferred Stock at par value $0.0001. As of February 28, 2014, there have been no issuances of Series A Convertible Preferred Stock.

On January 13, 2014, the Company filed a Certificate of Designation to designate the rights, preferences, privileges, and restrictions associated with Series B Convertible Preferred Shares. The Company intends to offer up to $1,000,000 to investors in the Company’s Series B Stock at par value $0.0001. The Company did not file an Amendment to its Articles of Incorporation at such time, but the Amendment was received by the Nevada Secretary of State on March 24, 2014.

In the last week of February 2014, the Company received $70,000 in deposits from a group of six accredited investors, all pre-existing investors in the Company’s common stock, who wished to subscribe to 14,000 shares of Series B Preferred Stock and 35,000 common stock warrants. For each Series B Convertible Preferred share purchased by an investor, for no additional consideration, each investor shall acquire a warrant to purchase an additional 2 and ½ common shares.

Each of the six accredited investors executed a stock subscription agreement, and delivered funds in exchange for the delivery of Company’s Series B Convertible Preferred Shares at a price of $5.00 per share. As of February 28, 2014, no stock certificates had been issued. Therefore, the Company recorded $70,000, not as paid in capital, but rather as a stock subscription payable associated with the Company’s obligations to issue certificates under the stock subscription agreements.

Note I: RELATED PARTY TRANSACTIONS

Compensation of Officers

The Company entered into officer compensation agreements with two officer/directors whereby each receives $60,000 per annum as cash compensation. The Company pays each officer $5,000 per month. The amount paid to the two officers in total was $30,000 and $25,000 during the three months ended February 28, 2014 and 2013, respectively. In addition, each officer/director received additional compensation in the form of non-cash incentive stock options granted on July 15, 2012. Each person received 2,000,000 stock options. For further discussion of the terms of the grant of stock options, see Note G.

F-11

EXEO ENTERTAINMENT, INC.

(A Development Stage Company)

Notes to Financial Statements

February 28, 2014

Note I: RELATED PARTY TRANSACTIONS CONTINUED)

Notes Payable to Officer

During the three month period ended February 28, 2014, an officer loaned to the Company $85,000. The terms of the notes provide that the Company shall repay the principal of each note in full within six months of the date of each note. In addition, the Company is obligated to pay interest at a flat rate of 6.00% upon maturity of each note. At the sole discretion of the officer, the notes may be extended for an additional six month term.

Date of Each Note	Amount of Each Note	Maturity Date of Each Note
December 18, 2013	$10,000	June 15, 2014
December 30, 2013	$25,000	June 27, 2014
January 24, 2014	$50,000	July 22, 2014

Note J: COMMITMENTS AND CONTINGENCIES

License Agreement

On June 10, 2013 Exeo Entertainment, Inc. entered into a license agreement with Psyko Audio Labs, Canada whereby Exeo Entertainment. Inc. will manufacture and market the Psyko Krypton and Carbon line of gaming headphones. The company will owe a 5% royalty on all headphone sales to Psyko Audio Labs. Payments are due quarterly on January 15, April 15, July 15, and October 15. In fiscal year 2014, the Company will incur increasing minimum royalty expenses as follows: $24,063 (CDN $26,741), $33,088 (CDN $36,770), $42,102 (CDN $46,787), and $60,155 (CDN $66,849) in each of the four quarters, respectively. Prepaid expenses consist of royalty fees of $44,146 (CDN $49,058) paid to Psyko Audio Labs. These prepaid expenses shall be applied towards royalty expenses incurred in fiscal year 2014. At January 1, 2015, the Company is obligated to pay minimum monthly royalties of $89,986 (CDN $100,000) per quarter for the remaining term of the contract. The company carries the risk of currency exchange rate fluctuations as our royalty obligation under the license agreement is stated in Canadian dollars.

Operating Lease Obligation

On October 25, 2012, the Company signed a lease for its current office and warehouse. The Company became a co-tenant along with DXT. The new lease agreement expires September 30, 2014 and has an option for a three year renewal. The typical monthly rent expense is $7,006, which includes base rent of $5,496 and common area maintenance of $1,510. The Company is not obligated to pay a security deposit to the management company. A deposit to secure the current lease was made by DXT in 2009. DXT will receive the security deposit at the end of the lease.

As of February 28, 2014, the monthly minimum rental payment is $7,006. Rent expense was $21,018 and $35,030 for the three months ended February 28, 2014 and 2013, respectively.

As of February 28, 2014, minimum rent to be paid under this lease agreement is summarized as follows:

	Minimum rent payments
As of February 28, 2014	$	49,588
Total Lease Obligation	$	49,588

F-12

EXEO ENTERTAINMENT, INC.

(A Development Stage Company)

Notes to Financial Statements

February 28, 2014

Note J: COMMITMENTS AND CONTINGENCIES (CONTINUED)

Note Payable for Vehicle Financing Obligations

On September 27, 2012, the Company acquired a pre-owned company vehicle on credit. The total cost basis is $49,824. The Company paid $10,000 as a down payment. The amount financed by the seller is $39,824, and the Company makes monthly payments of $863. The Company is obligated to pay a total of $41,420 over the course of the loan. This note bears interest at the annual percentage rate of 1.9%, and the term is 48 months. The total finance charge associated with this note is $1,596.

Minimum financing payment to be paid under this finance agreement is summarized as follows:

Years ending November 30,	Total Payments		Principal		Interest
2014		10,355		9,883		472
2015		10,355		10,073		282
2016		9,492		9,401		91
Total Financing Obligation	$	30,202	$	29,357	$	845

Note K: SUBSEQUENT EVENTS

Series B Convertible Preferred Stock to be Issued

In the first week of March 2014, the Company received $27,500 in deposits from two accredited investors, both pre-existing investors in the Company’s common stock, who wished to subscribe to 5,500 shares of Series B Preferred Stock and 13,750 common stock warrants. Each person executed a stock subscription agreement and delivered funds in exchange for the delivery of Series B Convertible Preferred Shares at a price of $5.00 per share. As of March 28, 2014, no stock certificates had been issued. Therefore, the Company recorded $27,500, not as paid in capital, but rather as a stock subscription payable associated with the Company’s obligations to issue certificates under the stock subscription agreements. On March 24, 2014, the Nevada Secretary of State received the Amended Articles of Incorporation relative to this class of securities.

F-13

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Exeo Entertainment, Inc. designs, develops, licenses, manufacturers, and markets consumer electronics in the video gaming, music and smart TV sector. Our current business objectives are:

·	Complete product development and establish channels of distribution, and

·	Expand SKUs within the headphone market for both music and gaming

Activities to date

We incorporated in the state of Nevada on May 12, 2011. We are a development stage company. From our inception to date we have not generated any revenues and continue to operate at a loss. Our activities have centered on the design and engineering of peripherals in the video gaming, music, and smart TV sector.

We accomplished the following:

1)	In 2011, we executed an exclusive license agreement with Digital Extreme Technologies, Inc. to secure the rights to manufacture and distribute the Extreme Gamer®, Zaaz™ keyboard and the Reality Pro™ handheld gaming system.

2)	In 2012, the company completed its first round of financing for proceeds of $773,035 and used said proceeds to continue product development on the aforementioned licensed products.

3)	In 2013, we completed our second round of financing for proceeds of $937,740 and we executed a license agreement with Psyko Audio Labs Canada to manufacture and distribute the Carbon and Krypton line of patented headphones; Patent US # 8,000,486.

4)	In June 2013, we debuted the Extreme Gamer®, the Zaaz™ keyboard, and the Psyko™ Krypton headphones to the public at the 2013 Electronic Entertainment Expo (E3) held June 11-13.

5)	In July 2013, we executed a contract with Elite Product Management, Ltd. Hong Kong to handle the sourcing, procurement, QA, Logistics and manufacturing of the Psyko™ headphones, Zaaz™ keyboard, and the Extreme Gamer®.

6)	In January 2014, the SEC granted the effectiveness of our S-1 registration statement.

7)	In February 2014, FINRA approved the ticker “EXEO”.

8)	In March 2014, we were approved by DTC (The Depository Trust and Clearing Company). DTC provides the electronic basis through which stock sales bought and sold through brokers are transferred from the seller’s brokerage account to the buyer’s account.

9)	We completed the molds for the Psyko™ PC model and are working on the molds for the Psyko™ console unit.

10) On February 1, 2014, we executed an agreement with RedChip Companies, Inc. to provide investor relations and news services

Although this task has not yet been accomplished, we are currently working on molds for the Zaaz™ keyboard.

Products and Services

Products under development include the Psyko™ 5.1 surround sound gaming headphones for both PCs and consoles, Krankz™ Bluetooth™ wireless headphones, Zaaz™ Smart TV keyboards, the Extreme Gamer® a multi-disc video game changer, and an android based portable gaming system. We have completed the engineering on the Psyko™ and Krankz™ headphones. We are finalizing development on the Zaaz™ keyboard and will soon begin tooling for manufacturing. The Extreme Gamer™ and portable gaming system are still in development and expected to be released in 2015.

Strategy and Marketing Plan

Once manufacturing is established we intend on utilizing existing consumer electronics distributers, such as Synnex Corp. (SNX) and Ingram Micro to distribute our products to big box retailers such as Best Buy, GameStop, and Fry’s Electronics. We do not have distribution agreements with these companies at this time.

ITEM 2.

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

Competition

Psyko ™ Headphones

While our Psyko™ headphone offering differs from the competition in the method of 5.1-surround sound delivery, we will face competition from manufacturers with established channels of distribution, mature capital structures, and significantly larger marketing budgets. Well established gaming headphone manufacturers include Turtle Beach; a private company, Tritton – a subsidiary of Mad Catz Interactive (MCZ), and Astro Gaming which is a subsidiary of Skullcandy (SKUL).

While other headphone manufacturers replicate 5.1 surround sound through Digital Signal Processing (DSP), the Psyko™ headphones use a patented method of sound delivery that doesn’t require the use of DSP. Management believes that the difference in audio quality is a major differentiating factor between our product offering and what is currently available on the market.

Krankz™ Headphones

We expect to face competition from lifestyle headphone companies such as Beats by Dr. Dre and Skull candy. These entities are well established and have a loyal customer following. We expect to carve out a niche within the market by initially marketing to the X games demographic through endorsements and sponsorships in Extreme sports such as motocross, supercross, snowboarding, surfing, skating, and similar such sports.

Zaaz™ Keyboard

The majority of the competition in the Bluetooth wireless keyboard arena is concentrated amongst a few well-known companies such as Logitech® (LOGI), Microsoft® (MSFT), Apple® (AAPL), and Samsung® (SSNLF). While management believes that only Samsung makes keyboards specifically designed to interact with smart TVs, and that their keyboards only work with certain Samsung® TVs, there can be no assurance that other companies do not currently manufacture, or plan to manufacture, such units in the future. Any such companies that manufacture keyboards capable of connecting to a smart TV would further increase competition.

The Company intends on differentiating the Zaaz™ keyboard through a set of features designed specifically for smart TV users. The Zaaz™ keyboard features a customized set of “one touch access keys” that allows users to access specific, user defined features of the consumers smart TV. Examples include one touch access to the following: Netflix®, Facebook®, Hulu®, and Amazon®. Additionally, the Zaaz™ keyboard will differentiate itself by including a full size track pad – built into the keyboard – to navigate, point, click, and select.

Extreme Gamer®

The Extreme Gamer® is a patent pending (patent application 12/543,296) multi-disc video game changer that connects to current generation video game consoles offered by Nintendo®, Microsoft®, and Sony®.

Management believes from attending the Consumer Electronics Show (CES) January 11-13, 2013, having a booth and its products on display at the Electronic Entertainment Expo (E3) June 11 – 13, 2013 (booth 4010), and from regularly reading Video Gaming news from sources such as IGN.com, EGNnow.com, 1up.com, and gamespot.com that no other company is currently manufacturing a multi-disc video game changer. If such a unit is being made management is unaware of its existence.

Management however acknowledges that while it cannot find any commercially available products that our patents may never be awarded and that we could face competition from any number of existing video game accessory manufacturers.

Sources and Availability of Suppliers and Supplies

Currently we have access to an adequate supply of products, from various manufacturers. These companies and their products are new, not well established, and are a subject to significant risk and uncertainty.

ITEM 2.

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

Dependence on One or a few Major Customers

We do not anticipate dependence on one or a few major customers into the foreseeable future.

Patents, Trademarks, Licenses, Franchise Restrictions and Contractual Obligations and Concessions

We executed a license agreement with Psyko Audio Labs Canada to manufacture and distribute the Carbon and Krypton line of patented headphones. US Patent # 8,000,486 (for the Psyko Krypton™ surround sound gaming headphones). With regard to intellectual property rights associated with Psyko ™ Headphones, we have a license to use this mark as well as the patented technology.

We entered into a license agreement with Digital Extreme Technologies, Inc., a Delaware corporation, (also referred to as DXT) for use of certain intellectual property associated with the products being designed and developed by us. The Black Widow keyboard is now known as the Zaaz keyboard. DXT worked to design and develop the Extreme Gamer as well as the Black Widow keyboard. We continue to work under a license agreement with DXT to advance the use of technologies designed by DXT.

In regard to intellectual property rights associated with Krankz™ Bluetooth® wireless headphones, we do not have a federally registered trademark in the word Krankz. Therefore, we do not have the same presumptive rights which might otherwise apply had we obtained a federally registered trademark. We believe we have intellectual property rights to this mark under common law. If we are unable to register this mark, we may use an alternative name for these headphones.

Subsidiaries

We do not have any subsidiaries.

Comparison of Three Month Results –for the quarters ended February 28, 2014 and 2013, respectively

Revenues and Gross Profit

Revenues and Gross Profit for the three months ended February 28, 2014 and 2013 are zero. The Company is a development stage company and has incurred significant costs in research and development activities. See discussion below for further information. At February 28, 2014, the Company had incurred an accumulated deficit of $2,285,947 since inception. In March, 2014, the Company recorded its first sale of the Krankz™ bluetooth® wireless headphones.

Costs and Expenses

Total cost and expenses were $638,963 and $222,685 for the three months ended February 28, 2014 and 2013, respectively. The increase in costs in the current quarter as compared to the three months period ended February 28, 2013 is $400,000 stock-based compensation paid to RedChip Companies, Inc. for investor relations services. On February 1, 2014, the Company agreed to deliver to RedChip 400,000 common shares of the Company’s equities.

Research and Development Costs

The Company incurred $19,268 and $57,138 for research and development costs during the three months ended February 28, 2014 and 2013, respectively. As to the 2013 year, these costs pertain to the, Zaaz Keyboard and the Extreme Gamer. As to the 2014 year, these costs relate to the Psyko Krypton™ surround sound gaming headphones, Zaaz Keyboard, Extreme Gamer, and multi-video game changer.

ITEM 2.

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

Liquidity and Capital Resources

Long-Term Debt / Note Payable and Other Commitments

Other than what is described in this Report, the Company had no material commitments for capital expenditures at February 28, 2014. In fiscal year 2013, the Company incurred a minimum royalty expense to Psyko Audio Labs, Canada of $12,130. In fiscal year 2014, the Company will incur increasing minimum royalty expenses as follows: $24,063 (CDN $26,741), $33,088 (CDN $36,770), $42,102 (CDN $46,787), and $60,155 (CDN $66,849) in each of the four quarters, respectively. Prepaid expenses consist of royalty fees of $44,146 (CDN $49,058) paid to Psyko Audio Labs. These prepaid expenses shall be applied towards royalty expenses incurred in fiscal year 2014. At January 1, 2015, the Company is obligated to pay minimum monthly royalties of $89,986 (CDN $100,000) per quarter for the remaining term of the contract. The company carries the risk of currency exchange rate fluctuations as our royalty obligation under the license agreement is stated in Canadian dollars.

The Company has an office and warehouse rental lease obligation through September 30, 2014, which equals $70,060 as of November 30, 2013. The monthly minimum rental payment is $7,006. Rent expense was $21,018 and $35,030 for the three month periods ended February 28, 2014 and 2013, respectively.

Cash Flow Information

On February 28, 2014, the Company had working capital of approximately $224,781. On November 30, 2013, the Company had working capital of approximately $345,267. The decrease in working capital at February 28, 2014 as compared to November 30, 2013 was primarily due to the increase in cash during the fiscal year ended November 30, 2013 associated with the following: i) sales of equity investments, ii) reduction in the use of working capital for purchases of vehicles and equipment, and iii) less expenditures for research and development expenses. The Company believes it has insufficient cash resources to meet its liquidity requirements for the next 12 months.

The Company had cash and cash equivalents of approximately $316,980 and $358,299 at February 28, 2014 and November 30, 2013, respectively. This represents a decrease in cash of $41,319.

Cash used in Operating Activities

The Company used approximately $188,678 of cash for operating activities in the three months ended February 28, 2014 as compared to using $123,704 of cash for operating activities in the three months ended February 28, 2013. This increase in cash used in operating activities, which is $64,974, is primarily attributed to the net loss generated in these periods.

Cash used for Investing Activities

Investing activities for the three months ended February 28, 2014 used approximately $1,430 of cash as compared to using $8,750 of cash in the three months ended February 28, 2013. This decrease in use is attributable to a reduction in the acquisition of vehicles and equipment.

Cash Provided by Financing Activities

Financing activities in the three months ended February 28, 2014 provided $148,789 of cash as compared to providing $154,109 of cash in the three months ended February 28, 2013. The difference of $5,320 is attributable to the decrease in equity investments. The Company did not incur any debt issuance costs in 2014.

The Company’s principal sources and uses of funds are investments from accredited investors. The Company would need to raise additional capital in order to meet its business plan. Management intends to secure additional funds using borrowing or the further sale of Regulation D, Section 506 securities to accredited investors in the future.

The Company anticipates that its future liquidity requirements will arise from the need to fund its growth, pay its current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated from operations and raising additional funds from private sources and/or debt financing.

ITEM 2.

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

Going Concern Consideration

For the period from inception to February 28, 2014, the Company recorded no revenue. There is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Forward-Looking Statements

Many statements made in this report are forward-looking statements that are not based on historical facts. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements made in this report relate only to events as of the date on which the statements are made.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company”, we are not required to provide the information required by this Item.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on the management evaluation, we concluded that our disclosure controls and procedures are not effective to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management is in the process of determining how to most effectively improve our disclosure controls and procedures.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control, as is defined in the Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls, including the possibility of human error and overriding of controls. Consequently, an effective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.

Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and the receipts and expenditures of company assets are made and in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

ITEM 4.

CONTROLS AND PROCEDURES - continued

Management has undertaken an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria established in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon this evaluation, management concluded that our internal control over financial reporting was not effective as of February 28, 2014. The Company has resourced outside consultants to assist in implementing the necessary financial controls over the financial reporting and the utilization of internal management and staff to effectuate these controls.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

The Company has no knowledge of existing or pending legal proceedings against the Company, nor is the Company involved as a plaintiff in any proceeding or pending litigation. There are no proceedings in which any of the Company’s directors, officers or any of their respective affiliates, or any beneficial stockholder, is an adverse party or has a material interest adverse to our interest. The Company’s address for service of process in Nevada is Business Filings, Incorporated located at 311 S. Division Street, Carson City, Nevada 89703.

ITEM 1A.

RISK FACTORS

As a “smaller reporting company”, we are not required to provide the information required by this Item.

ITEM 2.

UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

On January 13, 2014, the Company filed a Certificate of Designation to designate the rights, preferences, privileges, and restrictions associated with Series B Convertible Preferred Shares. During the last week of February 2014, the Company received $70,000 in deposits from a group of six accredited investors, all pre-existing investors in the Company’s common stock, who subscribed to 14,000 shares of Series B Preferred Stock and 35,000 common stock warrants. Each person executed a stock subscription agreement and delivered funds in exchange for the Company’s Series B Convertible Preferred Shares at a price of $5.00 per share. As of February 28, 2014, no stock certificates were issued as the Amended Articles of Incorporation had not yet been filed. An Amendment to the Articles of Incorporation was filed and recorded by the Nevada Secretary of State on March 24, 2014. At February 28, 2014, the Company recorded $70,000, not as paid in capital, but rather as stock subscription payable.

The Company incurred equity issuance costs of $4,415 and $9,710 during the three month periods ended February 28, 2014 and 2013, respectively. Rather than expense these costs, such items are charged against the Company’s equity. These costs include mailing, copying, courier, and other miscellaneous costs associated with the duplication and delivery of our offering circular to investors and paying for the return delivery of signed stock subscription agreements.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable

ITEM 5(a).

OTHER INFORMATION

Market for the Company’s Common Stock

As of the date of filing of this Report, there is no active public market for the Company’s common stock. The Company’s common stock is listed on the over-the-counter market and quoted on the Over-The-Counter Bulletin Board (aka OTCBB) under the trading symbol “EXEO”. We are separately listed with another market known such as OTC Link LLC, which organizes securities into one of three separate market-places, i.e. OTC: Markets – QX, Pink and QB. The Company is listed in the market-place known as OTCQB.

Related Party Transactions

During the three month period ended February 28, 2014, an officer loaned to the Company $85,000 and advanced business expenses of $556. The terms of the notes provide that the Company shall repay the principal of each note in full within six months of the date of each note. In addition, the Company is obligated to pay interest at a flat rate of 6.00% upon maturity of each note. At the sole discretion of the officer, the notes may be extended for an additional six month term.

Date of Each Note	Amount of Each Note	Maturity Date of Each Note
December 18, 2013	$ 10,000	June 15, 2014
December 30, 2013	$ 25,000	June 27, 2014
January 24, 2014	$ 50,000	July 22, 2014

Material Contract

As previously disclosed within the Company’s Form 10-K filed on March 13, 2014, on February 3, 2014, the Company entered into an agreement with RedChip Companies, Inc., who is based in Maitland, Florida. The agreement provides for certain investor relations services including the preparation of a research profile, an investment thesis and media content for distribution in print and via the internet. The Company intends to reach out to investment firms and sophisticated individuals who are already registered with RedChip and who opted in to receive media created on behalf of the Company. RedChip also agrees to respond to inquiries from investors and to introduce the Company via press releases to RedChip’s existing business network. The term of the agreement is one year. Cash consideration to be paid to RedChip is $10,000 per month with each payment being due by the 3rd of each month for services to be performed during that month. As of February 28, 2014, the Company paid RedChip $10,000. In addition, the Company agreed to issue 400,000 common shares as stock-based compensation.

ITEM 6.

EXHIBITS

INDEX TO EXHIBITS

Exhibit		Description
3.1		Amendment to Articles of Incorporation as to Series B Convertible Preferred Stock filed and recorded with the Nevada Secretary of State on March 24, 2014
3.2		Certificate of Designation for Series A Convertible Preferred Stock filed and recorded with the Nevada Secretary of State on March 24, 2014
31.1		Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1		Press release issued on January 22, 2014
99.2		Press release issued on March 31, 2014

Reports on Form 8-K

On January 14, 2014, the Board of Directors of Exeo Entertainment, Inc. (the “Company” adopted a resolution pursuant to the Company’s Certificate of Incorporation, as amended, providing for the designations, preferences and relative, participating, optional and other rights, and the qualifications, limitations and restrictions, of the Series B Convertible Preferred Stock.

On January 18, 2014, the Company filed a Certificate of Designations for a Series B Convertible Preferred Stock. The authorized number of Series B Convertible Preferred Stock is 1,000,000 shares, par value 0.0001. The holders of shares of Series B Convertible Preferred Stock shall vote as a separate class on all matters adversely affecting the Series B Stock. The authorization or issuance of additional Common Stock, Series B Convertible Preferred Stock or other securities having liquidation, dividend, voting or other rights junior to or on a parity with, the Series B Convertible Preferred Stock shall not be deemed to adversely affect the Series B Convertible Preferred Stock. In each case the holders shall be entitled to one vote per share.

On January 23, 2014, the Company filed Form 8-K with the Commission to report a material modification of rights to security holders, as described above.

On April 1, 2014, the Company filed Form 8-K with the Commission to report a material modification of rights to security holders as described in Item 2 of this Report and Exhibits 3.1 and 3.2.

Subsequent Events

Series A Preferred Stock

The Company filed an Amendment to the Certificate of Designation to designate the rights, preferences, privileges, and restrictions associated with Series A Convertible Preferred Shares. See Exhibit 3.2. This class of Series A Preferred Stock was established in January, 2013. The Amendment to the Certificate of Designation was filed and recorded by the Nevada Secretary of State on March 24, 2014. Up to the date of the filing of this Report, the Company has sold no Series A Convertible Preferred Shares.

Series B Preferred Stock

A Certificate of Designation to designate the rights, preferences, privileges, and restrictions associated with Series Convertible Preferred Shares was filed and recorded with the Nevada Secretary of State on January 23, 2014. As to this class of securities, the Company also amended its Articles of Incorporation, which was filed and recorded by the Nevada Secretary of State on March 24, 2014. See Exhibit 3.1. In March, the Company received $27,500 in deposits from two accredited investors, both pre-existing investors in the Company’s common stock, who wished to subscribe to 5,500 shares of Series B Preferred Stock and 13,750 common stock warrants. Each person executed a stock subscription agreement and delivered funds in exchange for the delivery of Series B Convertible Preferred Shares at a price of $5.00 per share. The Company recorded $27,500, not as paid in capital, but rather as a stock subscription payable.

On April 1, 2014, the Company filed Form 8-K Current Report with the SEC to disclose the above amendments. In addition, the Company issued a press release to announce the same. See Exhibit 99.2.

SIGNATURES

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, thereunto duly authorized.

EXEO ENTERTAINMENT, INC. (Registrant)

Signature	Title	Date
Jeffrey A. Weiland
/s/ Jeffrey A. Weiland	President and Director	April 4, 2014

Robert S. Amaral
/s/ Robert S. Amaral	Chief Executive Officer,	April 4, 2014
	Treasurer and Director
	(Principal Executive and Financial Officer)