Exeo Entertainment, Inc. - Annual Report: 2016 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the Fiscal Year Ended November 30, 2016

☐	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.
(Name of small business issuer 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)	(Zip code)

Issuer’s telephone number: (702) 361-3188

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered

Common Stock, $0.0001 par value per share	None; These securities are quoted on the OTC Bulletin Board (OTCBB) and OTC Markets (OTCQB)

Securities Registered Pursuant to Section 12(g) of the Act:

None
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer (Do not check if a smaller reporting company)	☐	Smaller reporting company	☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes ☐ No ☒

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of November 30, 2016, the last business day of the registrant's most recently completed fiscal year end, is undeterminable. The total number of common stock held by non-affiliates of the registrant as of this date was 7,507,943. The aggregate market value of such securities on November 30, 2016 was determined by the Company to be $2,097,400 based upon the analysis described in further detail in Item 5 of this report.

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the last practicable date, which is March 14, 2017: 25,156,317 Common Shares, 19,500 Series A, and 246,690 Series B Preferred Shares.

DOCUMENTS INCORPORATED BY REFERENCE

Incorporated by reference within this report are certain documents previously filed with the Commission within Form S-1, as amended, which was filed on August 16, 2013. Such document(s) are listed in Item 15 of this report.

EXEO ENTERTAINMENT, INC.

FORM 10-K

For the year ended November 30, 2016

TABLE OF CONTENTS

PART I	4
ITEM 1. DESCRIPTION OF BUSINESS	4
ITEM 1A. RISK FACTORS	7
ITEM 1B. UNRESOLVED STAFF COMMENTS	7
ITEM 2. DESRIPTION OF PROPERTY	7
ITEM 3. LEGAL PROCEEDINGS	7
ITEM 4. MINE SAFETY DISCLOSURES	7
PART II	8
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND MARKET INFORMATION FOR COMMON STOCK	8
ITEM 6. SELECTED FINANCIAL DATA	10
ITEM 7. MANAGEMENT’S DISCUSSION AND PLAN OF OPERATIONS	10
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS	12
ITEM 9A. CONTROLS AND PROCEDURES	12
ITEM 9B. OTHER INFORMATION	13
PART III	14
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	14
ITEM 11. EXECUTIVE COMPENSATION	14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	16
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES	17
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES	18
SIGNATURES	20

PART I

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

Exeo Entertainment, Inc. (the “Company” “we” or “us”) designs, develops, licenses, manufactures, 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 generated minimal 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)	We completed the molds for the Psyko™ PC model and are working on the molds for the Psyko™ console unit.
2)	During the six months ending May 31, 2015, we received inventory of the Krankz™ Bluetooth Wireless Headsets, and the Psyko®5.1 Surround Sound Gaming Headsets (with built-in microphone) with external amplifier for Personal Computers. We also approved the working prototypes of the similar type of Psyko® Krypton headphones for use with gaming consoles (such as Xbox®), and the Company is ready to go forward with the manufacturing.
3)	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 consoles, Krankz™ MAXX Bluetooth™ wireless headphones, Zaaz™ Smart TV keyboards, the Extreme Gamer® a multi-disc video game changer, and an android based portable gaming system. 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. We expect to release several new products in fiscal years 2015 and 2016.

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.

Competition

Psyko® Krypton™ Surround Sound 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 does not 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

The driver design provides a deep bass sound with clear midrange audio for a full-range for use up to 30’ distance. These headsets work with most mobile devices and have a retractable, foldable design with built-in microphone and noise cancelling feature. 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) on January 11-13, 2013, having a booth and its products on display at the Electronic Entertainment Expo (E3) on 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.

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.

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. There is no licensing fee paid to DXT during the years ended November 30, 2014 and 2015

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.

In regard to intellectual property rights associated with Krankz™ Bluetooth® wireless headphones, we do not have a federally registered trademark as to the word marks Krankz or Krankz Maxx. 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.

Reports to Security Holders

We will furnish shareholders with annual financial reports certified by our independent registered public accountants.

We are a reporting issuer with the Securities and Exchange Commission. We file periodic reports, which are required in accordance with Section 15(d) of the Securities Act of 1933, with the Securities and Exchange Commission to maintain the fully reporting status.

The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20002. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings will be available on the SEC Internet site, located at http://www.sec.gov.

ITEM 1A. RISK FACTORS

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

ITEM 1B. UNRESOLVED STAFF COMMENTS

The Company has no unresolved staff comments.

ITEM 2. DESRIPTION OF PROPERTY

We currently lease 10,068 sq. ft. of office and warehouse space at 4478 Wagon Trail Avenue, Las Vegas, Nevada 89118. The original lease contains an option for a three year renewal; which shall expire on September 30, 2016. The Company signed an additional one year lease at the same terms as the prior lease. Our monthly lease payment is $7,006. This location serves as our only facility for day-to-day operations. We believe our current premises are adequate for our current operations and we do anticipate that we will require additional premises in the next 9-12 months. We do not have any investments or interests in any real estate. Our Company does not invest in real estate mortgages, nor does it invest in securities of, or interests in, persons primarily engaged in real estate activities.

ITEM 3. LEGAL PROCEEDINGS

We know of no existing or pending legal proceedings against us, nor are we involved as a plaintiff in any proceeding or pending litigation. There are no proceedings in which any of our 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. Our address for service of process in Nevada is Business Filings, Incorporated located at 311 S. Division Street, Carson City, Nevada 89703.

ITEM 4. MINE SAFETY DISCLOSURES

None.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND MARKET INFORMATION FOR COMMON STOCK

The Company’s common stock is traded on the over-the-counter market and quoted on the Over-The-Counter Bulletin Board (OTCBB) under the trading symbol “EXEO”. Our common stock is also quoted on OTCQB, a segment of OTC Link LLC and OTC Markets Group. As of the date of this report, there is a limited public market for our common stock. For purpose of this Item, the existence of limited or sporadic quotations should not of itself be deemed to constitute an “established public trading market,” if any, for our common stock. We can provide no assurance that our shares will be actively traded on the OTC or, that the public market will achieve or continue with any particular daily volume or price for our listed securities.

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. On January 13, 2014, the Company filed a Certificate of Designation to add to the authorized capital of the Company 1,000,000 Series B Preferred Stock at par value $0.0001. The Company has no other class of stock authorized by the State of Nevada.

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.

Recent Sales of Unregistered Securities

Common Stock

The Company has 100,000,000 shares at $0.0001 par value common stock authorized and 24,764,129 and 24,255,231 shares issued and outstanding at November 30, 2016 and 2015, respectively. During the month of March, 2015, one accredited investor, previously known by the officers of the Company, as well as having been a prior investor in the common stock of the Company, subscribed to 322,188 shares of common stock of the Company upon the exercise of his common stock warrants. The Company accepted this subscription at a discounted price of $0.31037 per share. Prior private party sales of the Company’s common stock occurred in August, 2014 and such sales by the Issuer were at $0.80 per share. The discount in sales price represented by this transaction cannot be reasonably ascertained due to the lack of recent sales of issuer securities. Reasons for such discount may include various factors such as the dollar amount of the single transaction, limitations upon the immediate marketability of the common stock of the company, restrictive legends applied to this stock certificate, and price volatility, if applicable, as reflected in the open market. At the time of this subscription,the Common shares of the Company were quoted at $1.00 per share and were not actively trading on the OTC BB and OTC Markets- QB. For the reasons stated above, the price quotation in the open market should not be relied upon for purpose of the determination of the discount rate applied to this sales transaction. As of the date of this filing, the shares have not been issued and are recorded to stock payable. The shares were issued in January 2017.

On November 20, 2015, the Company issued 114,631 shares of common stock for services totaling $91,705. The shares were valued based on the stock price on the market at the time which was $0.80 per share.

During the year ended November 30, 2016, the Company received subscriptions for 525,237 shares of common stock for cash totaling $389,900. As of November 31, 2016, 16,339 shares have not been issued to an investor. The price per share is equal to eighty-five percent of the average daily “Ask Price” as quoted on the OTC Electronic Bulletin Board Quotation System for the ten trading days immediately preceding the Closing. In addition, for each share of common stock purchased, each investor shall receive two warrants. Warrant A shall provide the investor the right to purchase one additional share of the Company’s common stock equal to one hundred percent of the average daily “Ask Price” as quoted on the OTC Electronic Bulletin Board Quotation System for the ten trading days immediately preceding the Closing. Warrant B shall provide the investor the right to purchase one additional share of the Company’s common stock equal to one hundred twenty-five percent of the average daily “Ask Price” as quoted on the OTC Electronic Bulletin Board Quotation System for the ten trading days immediately preceding the Closing.

Equity Issuance Costs

We incurred equity issuance costs of $1,446 and $3,403 for the years ended November 30, 2016, and 2015, respectively. Rather than expense these costs, such items are charged against the Company’s equity. Our employees coordinate various matters associated with the sales of issuer securities to accredited investors. Equity issuance costs include such wages. These costs also 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.

Preferred Stock

Issuances of Series B Convertible Preferred Stock

During the year ended November 30, 2015, forty-five accredited investors subscribed to 206,640 shares, in total, of Series B Preferred Stock in exchange for cash consideration of $1,033,200, in total, at $5.00 for each share. The Company relies upon an exemption from registration under the Securities Act of 1933 pursuant to Regulation D, Section 506. The Company agreed to pay interest on such funds at 12% per annum. 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. Stock warrants were not sold or included in the offering to such investors.

During the year ended November 30, 2016, twelve accredited investors subscribed to 45,050 shares, in total, of Series B Preferred Stock in exchange for cash consideration of $225,250, in total, at $5.00 for each share. The Company relies upon an exemption from registration under the Securities Act of 1933 pursuant to Regulation D, Section 506. The Company agreed to pay interest on such funds at 12% per annum. 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. Stock warrants were not sold or included in the offering to such investors.

All shares of redeemable convertible preferred stock have been presented outside of permanent equity in accordance with ASC 48-10, Classification and Measurement of Redeemable Securities. The Company accretes the carrying value of its Series A and B redeemable convertible preferred stock to its estimate of fair value (i.e. redemption value) at period end. The estimated fair value of the Series A and Series B redeemable convertible preferred stock at November 30, 2016 was $134,112 and $1,431,294, respectively.

Incentive Stock Option Grants to Officers

Pursuant to the 2012 Employees/Consultants Stock Compensation 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.

The fair value of the options is calculated using the Black-Scholes method as of the date of grant. The current stock price at the dates of grant, which is July 15, 2012 and August 15, 2012, is $0.25 based on the private sale to accredited investors 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. Further information regarding the determination of the volatility and the assumptions used during the course of preparing an analysis using the Black-Scholes method may be found in Note G to the Company’s financial statements.

There were 4,000,000 stock options outstanding to the Company’s management as of November 30, 2016, and within this group, 3,500,000 stock options were capable of being exercised at November 30, 2016. The remaining number of options are not exercisable as of November 30, 2016, as each of the two officers had not yet completed the “incentive”, i.e. the future monthly terms in office in order to exercise such options. The weighted average exercise price is $0.25 per share and the weighted average remaining life is 20.5 months.

Stock Warrants Issued to Investors

There were no 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 from August 16, 2012 to August 31, 2013, in connection with a private placement, the Company raised $1,250,000 from the sale of securities. 2,500,000 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. As of November 30, 2015, there were 48,750 warrants outstanding. During the year ended November 30, 2016, the Company issued 1,050,474 warrants. As of November 30, 2016, there were 1,099,224 warrants outstanding, with a weighted average exercise price of $1.03 and the weighted average remaining life is 24.8 months.

Dividends

There are no restrictions in our Articles of Incorporation or bylaws that restrict us from declaring dividends. The Nevada Revised Statutes, however, prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:

(A)

We would not be able to pay our debts as they become due in the usual course of business; or

(B)

Our total assets would be less than the sum of our total liabilities, plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

We have neither declared nor paid any cash dividends on our capital stock and do not anticipate paying cash dividends in the foreseeable future. Our current policy is to retain any earnings in order to finance the expansion of our operations. Our board of directors will determine future declaration and payment of dividends, if any, in light of the then-current conditions they deem relevant and in accordance with the Nevada Revised Statutes.

ITEM 6. SELECTED FINANCIAL DATA

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

ITEM 7. MANAGEMENT’S DISCUSSION AND PLAN OF OPERATIONS

Comparison of Twelve Month Results –for the fiscal years ended November 30, 2016 and 2015, respectively

Revenues and Gross Profit

Revenues for the twelve months ended November 30, 2016 and 2015 were $28,767 and $27,247, respectively. Gross profit for the periods ended November 30, 2016 and 2015 were $8,773 and $16,192, respectively. The Company has incurred significant costs in research and development activities. See discussion below for further information. At November 30, 2016, the Company had incurred an accumulated deficit of $5,714,983 since inception.

Costs and Expenses

Total cost and expenses increased to $1,355,316 for the year ended November 30, 2016 as compared to $1,333,626 for the year ended November 30, 2015. These increases in the fiscal year ended November 30, 2016, were primarily due to the increasing costs associated with public relations, royalty fees, sponsorships and advertisement of our audio headphone products.

Research and Development Costs

The Company incurred $23,080 and $7,850 for research and development costs during the fiscal years ended November 30, 2016 and 2015, respectively. These costs relate to hardware engineering, design and development of the Krankz™ Bluetooth wireless audio headphones, the Zaaz™ Keyboard, the Extreme Gamer®, and the Psyko Krypton™ 5.1 surround sound gaming headphones for personal computers. A similar unit under development connects to current generation video game consoles offered by Nintendo®, Microsoft®, and Sony®.

Other Income and Expenses

During the course of our business, we experienced a gain from foreign currency transactions of $8,940 in the year ended November 30, 2016 as compared to a gain of $22,031 for the year ended November 30, 2015. This gain is due to royalty payments owed to a foreign company.

During the year ended November 30, 2016, we had other losses totaling $312. This losses are associated with the refund of deposits.

Interest expense associated with obligations to related parties was $4,586 in the twelve months ended November 30, 2016, compared to $4,699 in the period ended November 30, 2015. Interest expense was $1,389 and $968 in the twelve months ended November 30, 2016 and 2015, respectively.

Effect of Inflation

Inflation has not had a significant impact on the Company’s operations or cash flows.

Liquidity and Capital Resources

Long-Term Debt / Note Payable and Other Commitments

Other than what is described in this Item, the Company had no material commitments for capital expenditures at November 30, 2016 or November 30, 2015. On May 25, 2011, Exeo Entertainment, Inc. entered into an exclusive license agreement with Digital Extreme Technologies, Inc. whereby Exeo Entertainment, Inc. will manufacture and market the Extreme Gamer and Zaaz keyboard. Exeo Entertainment, Inc. will pay Digital Extreme Technologies, Inc. a 5% royalty fee on gross sales of both products.

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. For the year ended November 30, 2016, the Company has made a total of $50,000 towards this obligation and no royalty invoices have been received from Psyko Audio Labs. In fiscal year 2016, the Company incurred increasing minimum royalty expenses as follows: $72,497 (CDN $100,000), $77,770 (CDN $100,000), $76,823 (CDN $100,000), and $75,072 (CDN $100,000) in each of the four quarters, respectively. The total minimum royalty fee expense in fiscal year ended November 30, 2016 and 2015 were $327,095 and $311,594, respectively. Prepaid expenses as of November 30, 2016 and 2015 consist of royalty fees of $1,840 and $1,840, respectively, paid to Psyko Audio Labs. These prepaid expenses shall be applied towards royalty expenses incurred in the first quarter of the following fiscal year. Unless the Royalty Agreement is modified by Psyko Audio Labs Canada and the Company, at January 1, 2016, the Company is obligated to pay minimum monthly royalties of $80,000 (CDN $100,000) per quarter for the remaining term of the contract. No such modification has been made as of the date of this report. 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, 2016, which equals $70,060 as of November 30, 2015. The monthly minimum rental payment is $7,006. Rent expense was $84,072 and $84,072 for the fiscal years ended November 30, 2016 and 2015, respectively.

Obligation to Purchase Additional Inventory of the Psyko Krypton 5.1 surround sound headsets

In early September, 2014 the Company issued a purchase order for the acquisition of $200,000 in inventory for the Psyko® Krypton™ 5.1 surround-sound gaming headphones with amplifiers made for use with personal computers. Sometime thereafter, the Company and the manufacturer agreed to divide the single purchase order in to several separate purchase orders of $40,000 each. On December 5, 2014, the Company paid the first installment of $40,000. The headphone units were shipped to the Company and were received and accepted on December 30, 2014. On January 9, 2015, the Company paid $80,000 for two additional installments under this agreement. The headphone units were shipped to the Company and were received and accepted on January 28, 2015. It is possible, but not probable, that the Company remains liable for the $80,000 balance as to this September, 2014 purchase order, even if the Company does not order additional inventory.

Cash Flow Information

The Company had working capital of approximately $(358,326) and a current ratio of 0.53 at November 30, 2016. The Company had working capital of $183,520 and a current ratio of 1.38 at November 30, 2015. The decrease in working capital and the current ratio at November 30, 2016 as compared to November 30, 2015, was primarily due to financing activities (an decrease of $531,396 from fiscal year 2015 to 2016. The Company believes it has insufficient cash resources to meet its liquidity requirements for the next 12 months.

During the twelve months ended November 30, 2016, the Company had cash and cash equivalents of approximately $131,001 as compared to cash and cash equivalents of $427,663 at November 30, 2015. This represents a decrease of $296,662.

Cash used in Operating Activities

The Company used approximately $868,629 of cash for operating activities in the twelve months ended November 30, 2016, as compared to using $965,612 of cash for operating activities in the twelve months ended November 30, 2015.

Cash used for Investing Activities

Investing activities for the twelve months ended November 30, 2016, used approximately $3,930 of cash as compared to using $40,701 of cash in the twelve months ended November 30, 2015. This increase in use is attributable to the acquisition of equipment in fiscal year ended November 30, 2015, as compared to fiscal year ended November 30, 2016.

Cash Provided by Financing Activities

Financing activities for the twelve months, ended November 30, 2016, provided $575,897 of cash as compared to providing $1,107,293 of cash in the twelve months ended November 30, 2015.

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.

There is no assurance that Company may secure funding, or whether it can do so on terms acceptable to it, or at all, and its liquidity would be severely compromised.

The accompanying financial statements have been prepared assuming that the company will continue as a going concern which contemplates, amongst other things, the realization of assets and satisfaction of liabilities in the course of business.

We anticipate that our future liquidity requirements will arise from the need to fund our growth, pay our 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.

Going Concern Consideration

Our independent auditors included an explanatory paragraph in their report on the accompanying financial statements expressing concerns about our ability to continue as a going concern. We agree with this assessment. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

Off-Balance Sheet Arrangements

We have 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information requested by this item is set forth in Item 15(a) of this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

None.

ITEM 9A. 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 concludedthat 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.

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 November 30, 2016. 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.

ITEM 9B. OTHER INFORMATION

Material Contracts

U.S. Distribution Agreement with Global Marketing Partners

As of November 30, 2016, the Company has received no revenue on the following contract with Global Marketing Partners, Inc. On April 30, 2014, the Company entered into a non-exclusive contract with Global Marketing Partners, Inc., a California corporation doing business in Agoura Hills, California (the “Agreement”). The Agreement provides the Company with an avenue for the distribution of its products through various retailers. Global serves as a marketing partner to facilitate and administer the distribution of the Company’s products. A key component includes the introduction of the Company’s products to retailers using the distribution channel operated by Speed Commerce, formerly known as Navarre. The Company hopes to participate in a one-stop shop form of an arrangement via Global to access the retailers via Speed Commerce. Using this arrangement, the Company is not responsible for entering into agreements with each retailer.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The name, age and position of each of our directors and executive officers are as follows:

Name	Age	Position

Jeffrey Weiland	52	President and Director
Robert S. Amaral	47	CEO, Treasurer, Secretary and Director

Jeffrey A. Weiland, Age 52, President/Director

Mr. Weiland has over 20 years’ experience in management, sales and marketing, and product development. Mr. Weiland was a Sergeant in the United States Marine Corps and served from 1985 - 1993. Mr. Weiland was awarded several military service medals, including the Navy Achievement Medal, and received various letters of appreciation and meritorious masts, personal commendations, and good conduct medals. He was honorably discharge after serving in Desert Storm. From 1993 - 1997, Mr. Weiland was a metrology supervisor for Gensia Laboratories, LTD/Sicor Pharmaceuticals, based in Irvine California. Mr. Weiland received his Bachelor of Science in Business Management, from the University of Phoenix in 1997. From 1997 - 2003, Mr. Weiland was the National Marketing Director for Guardian Technologies USA based in Irvine, California. From 2003 - 2007, Mr. Weiland was a sole proprietor of Weiland Media, which focused on new product development. From 2008 - 2011, Mr. Weiland devoted 100 percent of his efforts to Digital Extreme Technologies, Inc. Prior to joining our Company, Mr. Weiland had not previously served as an officer or director of any public company.

Robert S. Amaral, Age 47, CEO, Secretary/Treasurer/Director

Mr. Amaral received his MBA in 1997 from Southern Oregon University. In 1996 he received his Bachelor’s Degree in Marketing from Southern Oregon State College. From 1997 – 2000 he was the Director of Marketing of CG Leasing Inc., which later merged with USA Capital Leasing. From 2000 – 2001 Mr. Amaral was a proprietor of a company named Finance Marketing Group, which generated lease finance applications from small businesses across the United States. In 2001, he worked as a Series 3 licensed commodity broker with U.S. Options Corp and Concorde Trading Group. In 2002 Mr. Amaral started Amaral Consultancy where he focused on funding development stage companies. Companies which Mr. Amaral performed contract labor for: L&L Financial, which subsequently changed its name to L& L Energy (LLEN); VSI Wireless, which was acquired by SARS Corporation (SARO.PK); Advanced Ultrasound Imaging, a private healthcare company located in Scottsdale, AZ; American Eagle Motorcycles based in Carlsbad, CA; and Ambient Control Systems located in El Cajon, CA. From 2008 – 2011 Mr. Amaral focused his energies on Digital Extreme Technologies, Inc. Prior to joining our Company, Mr. Amaral had not previously served as an officer or director of any public company.

Significant Employees

We have no significant employees other than the officers and directors described above.

Section 16(A) Beneficial Ownership Reporting Compliance Pursuant to Item 405 of Regulation S-K

Section 16(a) of the Exchange Act requires the Company's executive officers and directors, and persons who beneficially own more than ten percent of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based on its review of the copies of such forms received by it, the Company believes that during the fiscal year ended November 30, 2016 all such filing requirements applicable to its officers and directors were complied with exception that reports were filed late or not filed at all by the following persons:

Name and Principal Position	Number of late reports	Number of untimely reports	Number of Known Failures to File a Required Form
Robert S. Amaral, CEO	0	0	0
Jeffrey A. Weiland, Pres.	0	0	0

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth certain compensation information for: (i) each person who served as the chief executive officer of our Company at any time during the year ended November 30, 2016, regardless of compensation level, and (ii) each of our other executive officers, other than the chief executive officer, serving as an executive officer at any time during the year ended November 30, 2016. The foregoing persons are collectively referred to herein as the “Named Executive Officers.” Compensation information is shown for fiscal years ended November 30, 2016 and 2015, respectively.

SUMMARY COMPENSATION TABLE

			ANNUAL COMPENSATION		LONG TERM COMPENSATION				TOTAL
			Cash	Bonus ($)	Stock Awarded ($)	Stock Options * ($)	Non-Equity Incentive Plan Comp. ($)	All Other Compensation ($)	Total Compensation ($)
Robert S. Amaral	CEO, Treasurer,	2016	$78,200	0	0	$100,002	0	0	$178,202
	Secretary. & Director	2015	$65,750	0	0	$100,002	0	0	$165,752
Jeffrey A. Weiland	President &	2016	$72,000	0	0	$100,002	0	0	$172,002
	Director	2015	$66,000	0	0	$100,002	0	0	$166,002

* Stock Options - Outstanding Equity Awards at 2014 Fiscal Year-End

Pursuant to the 2012 Employees/Consultants Stock Compensation Plan, on July 15, 2012, we granted 2,000,000 shares to each of our 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. There were no additional awards through the end of our fiscal year 2016.

Employment Contracts, Termination of Employment, Change-in-Control Arrangements

Employment Arrangements

As of November 30, 2016, we were a party to employment agreements with Jeffrey A. Weiland (dated June 1, 2015) and Robert S. Amaral (dated June 1, 2015), each of which is described directly below.

Employment Agreements with Jeffrey A. Weiland and Robert S. Amaral

Term and Compensation

The initial term of employment of each of Mr. Weiland and Mr. Amaral under their respective employment agreements is until such time the employment agreements are terminated by either party pursuant to the terms of the employment agreements.

Pursuant to his employment agreement, Mr. Weiland is entitled to an initial base salary of $72,000. Pursuant to his employment agreement, Mr. Amaral is entitled to an initial base salary of $78,200.

Severance

Each employment agreement provides for a severance equal to one month’s pay, less taxes and social security required to be withheld upon a termination by us without cause upon thirty (30) days written notice.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding the beneficial ownership of our common stock as of November 30, 2015, for:

●

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;

●

each of our executive officers;

●

each of our directors; and

●

all of our executive officers and directors as a group.

We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Unless otherwise indicated, the persons or entities identified in this table have sole votingand investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws, and the address for each person listed in the table is c/o Exeo Entertainment, Inc., 4478 Wagon Trail Ave., Las Vegas, Nevada 89118.

The percentage ownership information shown in the table below is calculated based on 24,764,129 shares of our common stock issued and outstanding as of February 29, 2017.

Title Of Class	Name, Title and Address of Beneficial Owner of Shares	Amount of Beneficial Ownership	Percent of Class

Common	Jeffrey A. Weiland President/Director	8,628,093	34.84%
Common	Robert S. Amaral Chief Executive Officer/Director	8,628,093	34.84%

	All Directors and Officers as a group (2 persons)	17,256,186	69.68%

We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our Company.

Except for the Stock Options and Warrants set forth in Item 5 of this report, we do not have any issued and outstanding securities that are convertible into common stock. Other than the shares covered by the registration statement filed with the Commission on August 16, 2013 using Form S-1, as amended, we have not registered any shares for sale by security holders under the Securities Act. None of our stockholders are entitled to registration rights.

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to our directors, officers or persons controlling us, we have been advised that it is the Securities and Exchange Commission’s opinion that such indemnification is against public policy as expressed in such act and is, therefore, unenforceable.

CHANGE IN CONTROL

We are not aware of any arrangement that might result in a change in control in the future.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Leasehold Interest in Real Estate

On October 25, 2012, the Company signed a lease for its current office and warehouse. The Company executed a one year extension effective October 1, 2014. The original lease contains an option for a three year renewal; which shall expire on September 30, 2016. The Company signed an additional one year lease at the same terms as the prior lease. 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.

Note Payable for Vehicle Financing Obligations

On September 27, 2012, the Company acquired a pre-owned company vehicle on credit. The original cost basis was $49,824. On November 13, 2015, the Company traded the vehicle for a new leased vehicle for $6,714 due at signing. The Company is obligated to pay a total of $48,944 for 36 months with a monthly payment of $1,196.56.

On November 13, 2015, the Company acquired a pre-owned company vehicle on credit. The original cost basis was $56,963. The Company paid $5,000 as a down payment. The amount financed by the seller is $48,259, and the Company makes monthly payments of $866. The Company is obligated to pay a total of $51,963 over the course of the loan. This note bears interest at the annual percentage rate of 2.9%, and the term is 60 months. The total finance charge associated with this note is $3,704.

Director Independence

We are not at this time required to have our board comprised of a majority of “independent directors.” Our determination of independence of directors is made using the definition of “independent director” contained in Rule 4200(a)(15) of the Marketplace Rules of the NASDAQ Stock Market (“NASDAQ”) , even though such definitions do not currently apply to us because we are not listed on NASDAQ. We have determined that none of our directors currently meet the definition of “independent” due to the fact that our directors also serve as our executive officers.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table sets forth fees billed to us by our independent auditors for the years ended 2015 and 2014 for (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services rendered that are reasonably related to the performance of the audit or review of our financial statements that are not reported as Audit Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance.

SERVICES	2016	2015

Audit fees	$23,046	$18,750
Audit-related fees	-	-
Tax fees	-	-
All other fees	-	-

Total fees	$23,046	$18,750

Audit fees and audit related fees represent amounts billed for professional services rendered for the audit of our annual financial statements and the review of our interim financial statements. Before our independent accountants were engaged by to render these services, their engagement was approved by our directors.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Item 15(a) Financial Statements

Index to Financial Statements:

Exeo Entertainment, Inc.'s audited Financial Statements, as described below, are attached hereto.

EXEO ENTERTAINMENT, INC.

TABLE OF CONTENTS

NOVEMBER 30, 2016 AND 2015

	PAGE

Report of Independent Registered Public Accounting Firm	F-1
Report of Independent Registered Public Accounting Firm	F-2
Balance Sheets	F-3
Statements of Operations	F-4
Statement of Stockholders’ (Deficit)	F-5
Statements of Cash Flows	F-6
Notes to Financial Statements	F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Exeo Entertainment, Inc.

We have audited the accompanying balance sheets of Exeo Entertainment, Inc. as of November 30, 2016 and the related statements of income, stockholders’ equity (deficit), and cash flows for year ended November 30, 2016. Exeo Entertainment, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Exeo Entertainment, Inc. as of November 30, 2016 and the related statements of income, stockholders’ equity (deficit), and cash flows for the year ended November 30, 2016 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A to the financial statements, the Company has minimal revenues, has negative working capital at November 30, 2016, has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note A. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ AMC Auditing

AMC Auditing

Las Vegas, Nevada

March 15, 2017

F-1

PCAOB Registered Auditors – www.sealebeers.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Exeo Entertainment, Inc.

We have audited the accompanying balance sheets of Exeo Entertainment, Inc. as of November 30, 2014 and 2015, and the related statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended November 30, 2015. Exeo Entertainment, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Exeo Entertainment, Inc. as of November 30, 2014 and 2015, and the related statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended November 30, 2015, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A to the financial statements, the Company has minimal revenues, , has incurred recurring losses and recurring negative cash flow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note A. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Seale and Beers, CPAs

Seale and Beers, CPAs

Las Vegas, Nevada

March 1, 2016

F-2

EXEO ENTERTAINMENT, INC.

BALANCE SHEETS

(audited)

	November 30, 2016	November 30, 2015
ASSETS

Current assets
Cash and equivalents	$131,001	$427,663
Inventory	227,085	231,610
Prepaid expenses	51,869	1,840
Accounts Receivable	-	-
Total current assets	409,955	661,113

Property and equipment, net	64,943	92,953

TOTAL ASSETS	$474,898	$754,066

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

Liabilities
Current liabilities
Accounts payable and accrued expenses	$33,044	$20,328
Accrued interest payable – related party	14,139	9,553
Payroll liabilities	113,752	88,901
Due to related parties	75,000	75,000
Royalty payable	523,032	273,712
Notes payable	9,314	10,099
Total current liabilities	768,281	477,593

Long-term liabilities
Notes payable	29,840	41,864
Total long-term liabilities	29,840	41,864

Total liabilities	798,121	519,457

Series A redeemable convertible preferred stock; $0.0001 par value, 1,000,000 shares authorized; 19,500 shares issued and outstanding; 0 shares unissued as of November 30, 2016 (liquidation preference of $65,683). Stated at redemption value	134,113	119,487
Series B redeemable convertible preferred stock; $0.0001 par value, 1,000,000 shares authorized; 246,690 and 201,640 shares issued and outstanding; 0 and 5,000 shares unissued as of November 30, 2016 and 2015 (liquidation preference of $506,325). Stated at redemption value.	1,431,415	1,087,906

Stockholders’ equity (deficit)
Convertible Preferred Stock Series A - 15%, $0.0001 par value, 1,000,000 shares authorized, 19,500 and 19,500 shares issued, respectively	-	-
Convertible Preferred Stock Series B - 15%, $0.0001 par value, 1,000,000 shares authorized, 246,690 and 61,500 shares issued, respectively	-	-
Common stock - $0.0001 par value, 100,000,000 shares authorized; 24,764,129 and 24,255,231 shares issued and outstanding, respectively.	2,476	2,425
Additional paid-in capital	3,711,256	3,135,349
Stock payable	112,500	100,000
Deficit accumulated	(5,714,983)	(4,210,558)
Total stockholders’ equity (deficit)	(1,888,751)	(972,784)

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)	$474,898	$754,066

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

F-3

EXEO ENTERTAINMENT, INC.

STATEMENTS OF OPERATIONS

(audited)

	One year ending November 30, 2016	One year ending November 30, 2015
REVENUES	$28,767	$27,247
COST OF GOOD SOLD
Cost of direct materials, shipping and labor	(19,994)	(11,055)
GROSS PROFIT	8,773	16,192

OPERATING EXPENSES
General and administrative	787,077	793,528
Executive compensation	362,630	343,109
Professional fees	176,946	173,950
Depreciation	31,940	29,709
TOTAL OPERATING EXPENSES	1,358,593	1,340,296

INCOME (LOSS) FROM OPERATIONS	(1,349,820)	(1,324,104)

OTHER INCOME (EXPENSE)
Gain (Loss) from foreign currency transactions	8,940	22,031
Other loss	312	(9,694)
Interest expense - related party	(4,586)	(4,699)
Interest expense	(1,389)	(968)
TOTAL OTHER INCOME (EXPENSES)	3,277	6,670

NET INOME (LOSS)	(1,346,543)	(1,317,434)

DIVIDEND OF REDEEMABLE PREFERRED STOCK	(157,882)	(68,612)

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$(1,504,425)	$(1,386,046)

NET LOSS PER SHARE: BASIC	$(0.06)	$(0.05)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC
	24,365,101	24,147,019

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

F-4

EXEO ENTERTAINMENT, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(audited)

			Additional			Total
	Common Shares		Paid-In	Subscriptions	Deficit	Stockholders'
	Shares	Amount	Capital	Payable	Accumulated	Equity (Deficit)

Balance, November 30, 2014	24,140,600	$2,414	$2,839,003	$-	$(2,824,512)	$16,905

Contributed capital			8,052			8,052

Cash received for sale of
common stock				100,000		100,000

Stock options granted to officers			200,004			200,004

Shares issued for services at $0.80	114,631	11	91,693			91,705
Per share

Equity issuance costs			(3,404)			(3,404)

Net loss for the year ended
November 30, 2015					(1,386,046)	(1,386,046)

Balance, November 30, 2015	24,255,231	$2,425	$3,135,349	$100,000	$(4,210,558)	$(972,784)

Cash received for sale of
Common stock				75,000		75,000

Shares issued for cash at $0.80
per share	508,898	51	377,349	(62,500)		314,900

Stock options granted to officers			200,004			200,004

Equity issuance costs			(1,446)			(1,446)

Net loss for the year ended
November 30, 2016					(1,504,425)	(1,504,425)

Balance, November 30, 2016	24,764,129	$2,476	$3,711,256	$112,500	$(5,174,983)	$(1,888,751)

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

F-5

EXEO ENTERTAINMENT, INC.

STATEMENTS OF CASH FLOWS

(audited)

	One year ending November 30, 2016	One year ending November 30, 2015

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period	$(1,346,543)	$(1,317,434)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation	31,940	29,709
Stock-based compensation to officers	200,004	200,004
Shares issued for services	-	91,705
Changes in assets and liabilities
Decrease (Increase) in pre-paid expenses	(50,029)	(1,840)
Increase in accounts receivable	-	110
Decrease (Increase) in inventory	4,586	(216,653)
(Decrease) Increase in accounts payable and accrued expenses	12,716	(18,185)
Decrease in accrued interest - related party	4,525	4,699
Increase in payroll liabilities	24,851	22,710
Increase in royalty payable	249,320	239,563
Net Cash Used in Operating Activities	(868,630)	(965,612)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment	(3,930)	(40,701)
Cash Flows Used in Investing Activities	(3,930)	(40,701)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of issuance costs	388,456	104,649
Proceeds from issuance of preferred stock, net of issuance costs	200,250	979,687
Proceeds from related party debt	-	-
Payments to related party debt	-	(10,000)
Payments on notes payable - auto loan (principal)	(12,809)	32,957
Cash Flows Provided by Financing Activities	575,897	1,107,293

Net increase in cash and cash equivalents	(296,663)	100,980

Cash and cash equivalents, beginning of the period	427,663	326,684

Cash and cash equivalents, end of the period	$131,001	$427,664

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$1,389	$3,606
Dividend of redeemable preferred stock	$157,882	$68,612

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

F-6

EXEO ENTERTAINMENT, INC.

Notes to Financial Statements

November 30, 2016

(Audited)

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. 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.

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.

Foreign Currency Transactions

Transaction gains and losses, such as those resulting from the settlement of nonfunctional currency receivables or payables, including intercompany balances, are included in foreign currency gain (loss) in our consolidated statements of earnings. Additionally, payable and receivable balances denominated in nonfunctional currencies are marked-to-market at month-end, and the gain or loss is recognized in our statements of operations.

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.

Inventory

Inventories are stated at cost, not to exceed fair market value. The cost of the Company’s inventory ($227,085 and $231,610 at November 30, 2016 and November 30, 2015, respectively) has been determined using the first-in first-out (FIFO) method. The reduction in current costs as compared to LIFO costs of inventory equals zero at November 30, 2016 and November 30, 2015, respectively.

F-7

EXEO ENTERTAINMENT, INC.

Notes to Financial Statements

November 30, 2016

(Audited)

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. No impairments were recorded at November 30, 2016 and 2015. 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.

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-8

EXEO ENTERTAINMENT, INC.

Notes to Financial Statements

November 30, 2016

(Audited)

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. For the years ended November 30, 2016 and 2015, the Company recognized $28,767 and $27,247 in revenue, respectively.

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 maximum insured by the FDIC per bank account is not an issue here since the Company’s bank accounts do not bear any interest and the FDIC limits far exceed balances on deposit. The Company’s funds were held in a single account. At November 30, 2016 and 2015, the Company’s bank balance did not 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-9

EXEO ENTERTAINMENT, INC.

Notes to Financial Statements

November 30, 2016

(Audited)

Note A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Liquidity and Going Concern

The Company has incurred an accumulated deficit of ($5,714,983) since inception. 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 November 30, 2016 and November 30, 2015:

	November 30, 2016	November 30, 2015
Furniture and fixtures	$21,499	$21,499
Office & computer equipment	37,982	34,051
Vehicles	96,943	96,943
Subtotal	156,424	152,494
Less: Accumulated depreciation	(91,481)	(59,541)
Property and equipment, net	$64,943	$92,953

Depreciation expense was $31,940 and $29,709 for the years ended November 30, 2016 and 2015.

Note C: HARDWARE DEVELOPMENT COSTS

The Company incurred $23,080 and $7,850 for research and development costs for the years ended November 30, 2016 and 2015, respectively. These costs relate to hardware engineering, design and development of the Krankz™ and Krankz Maxx™ Bluetooth Wireless Headset and the Psyko Krypton® surround sound gaming headphones for personal computers.

Note D: PREPAID EXPENSES

At November 30, 2016 and 2015, the balance of prepaid expenses on the balance sheet of the Company is $51,869 and $1,840, respectively, which primarily relates to a deposit on inventory not delivered and a prepayment of an annual fee for investor relations.

F-10

EXEO ENTERTAINMENT, INC.

Notes to Financial Statements

November 30, 2016

(Audited)

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). On April 2, 2015, Krank Amplifiers, LLC submitted to the U.S. Patent and Trademark Office a request for a design mark as to “Krank Amplifiers”) for registry on the Principal Register (serial number 86585697). This design mark includes the name Krank Amplifiers. The requested goods and services category is for IC 009, which is the same category in which our Company would request as to our common law trademark “Krankz™.” This amplifier company submitted its mark on the basis of 1B – not yet in commerce, while our Company has used the name Krankz™ in commerce for several years, well before Krank Amplifiers. As of the date of this report, no office action has been taken by the U.S. PTO. We may no longer be able to use the common law trademark “Krankz™” if Krank Amplifiers is granted its trademark and we do not file an opposition to such mark or we do not prevail in the defense of our mark in the U.S. Trademark and Trial Appeal Board (TTAB).

Note F: COMMON STOCK

The Company has 100,000,000 shares at $0.0001 par value common stock authorized and 24,764,129 and 24,255,231 shares issued and outstanding at November 30, 2016 and November 30, 2015, respectively. During the month of March, 2015, one accredited investor, previously known by the officers of the Company, as well as having been a prior investor in the common stock of the Company, subscribed to 322,188 shares of common stock of the Company upon the exercise of his common stock warrants. The Company accepted this subscription at a discounted price of $0.31037 per share. Prior private party sales of the Company’s common stock occurred in August, 2014 and such sales by the Issuer were at $0.80 per share. The discount in sales price represented by this transaction cannot be reasonably ascertained due to the lack of recent sales of issuer securities. Reasons for such discount may include various factors such as the dollar amount of the single transaction, limitations upon the immediate marketability of the common stock of the company, restrictive legends applied to this stock certificate, and price volatility, if applicable, as reflected in the open market. At the time of this subscription, the Common shares of the Company were quoted at $1.00 per share and were not actively trading on the OTC BB and OTC Markets- QB. For the reasons stated above, the price quotation in the open market should not be relied upon for purpose of the determination of the discount rate applied to this sales transaction. As of the date of this filing, the shares have not been issued and are recorded to stock payable. The shares were issued in January 2017.

During the year ended November 30, 2015, the Company issued 114,631 shares of common stock for services totaling $91,705. The shares were valued based on the stock price on the market at the time which was $0.80 per share.

F-11

EXEO ENTERTAINMENT, INC.

Notes to Financial Statements

November 30, 2016

(Audited)

Note F: COMMON STOCK (CONTINUED)

During the year ended November 30, 2016, t the Company received subscriptions for 525,237 shares of common stock for cash totaling $389,900. As of November 31, 2016, 16,339 shares have not been issued to an investor. The price per share is equal to eighty-five percent of the average daily “Ask Price” as quoted on the OTC Electronic Bulletin Board Quotation System for the ten trading days immediately preceding the Closing. In addition, for each share of common stock purchased, each investor shall receive two warrants. Warrant A shall provide the investor the right to purchase one additional share of the Company’s common stock equal to one hundred percent of the average daily “Ask Price” as quoted on the OTC Electronic Bulletin Board Quotation System for the ten trading days immediately preceding the Closing. Warrant B shall provide the investor the right to purchase one additional share of the Company’s common stock equal to one hundred twenty-five percent of the average daily “Ask Price” as quoted on the OTC Electronic Bulletin Board Quotation System for the ten trading days immediately preceding the Closing.

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.

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%.

F-12

EXEO ENTERTAINMENT, INC.

Notes to Financial Statements

November 30, 2016

(Audited)

Note G: STOCK OPTIONS AND WARRANTS (CONTINUED)

The following is a summary of the status of all of the Company’s stock options issued to the Company’s management as of November 30, 2016 and 2015 and the changes from December 1, 2014 to November 30, 2016.

	# of Options	Weighted Average Exercise Price	Weighted Average Remaining Life
Outstanding November 30, 2014	4,000,000	$0.25	-
Granted	-	$ -	-
Exercised	-	$ -	-
Cancelled	-	$ -	-
Outstanding at November 30, 2015	4,000,000	$0.25	-
Granted	-	$ -	-
Exercised	-	$ -	-
Cancelled	-	$ -	-
Outstanding at November 30, 2016	4,000,000	$0.25	8.50 months
Exercisable at November 30, 2016	3,500,000	$0.25	8.50 months
Outstanding at November 30, 2015	4,000,000	$0.25	20.50 months
Exercisable at November 30, 2015	2,700,000	$0.25	20.50 months

Stock Warrants Issued to Investors

Prior to March 3, 2014, the Company issued 48,750 common stock warrants to Series A Preferred Stock purchasers in February and March 2014. All of the warrants expired in February and March 2017.

The following is a summary of the status of all of the Company’s stock warrants as of November 30, 2016 and 2015, and the changes from December 1, 2014 to November 30, 2016.

	# of Warrants	Weighted Average Exercise Price	Weighted Average Remaining Life
Outstanding at November 30, 2014	1,841,250	$1.00	-
Granted	-	$1.00	-
Exercised	-	$ .80	-
Cancelled	(1,792,500)	$ -	-
Outstanding at November 30, 2015	48,750	$2.00	15 months
Granted	1,050,474	$1.09	36 months
Exercised	-	$ -	-
Cancelled	-	$ -	-
Outstanding at November 30, 2016	1,099,224	$1.03	24.8 months
Exercisable at November 30, 2016	1,099,224	$1.03	24.8 months
Outstanding at November 30, 2015	48,750	$2.00	3 month
Exercisable at November 30, 2015	48,750	$2.00	3 month

F-13

EXEO ENTERTAINMENT, INC.

Notes to Financial Statements

November 30, 2015

(Audited)

Note H: PREFERRED STOCK

Issuances of Series A Convertible Preferred Stock

Since March 3, 2014, the Company has not offered or sold any Series A Convertible Preferred Stock and has no intent to do so during fiscal year ended November 30, 2016.

Issuances of 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. During the conversion period, each Series B Preferred share may be converted to common stock at a fixed conversion price of $1.25 per share or the Variable Conversion Price set forth in the Company’s Certificate of Designation. Series B stock bears interest at 12% per annum, paid annually, with principal paid at maturity twenty-four (24) months after the date of issuance of the stock. See table below in this note. Principal repayment may not apply if the stockholder exercises the right to convert all preferred stock to common stock during the conversion period.

During the year ended November 30, 2015, forty-five accredited investors subscribed to 206,640 shares, in total, of Series B Preferred Stock in exchange for cash consideration of $1,033,200, in total, at $5.00 for each share. As of November 30, 2016, the shares have been issued and have been presented outside of permanent equity in accordance with ASC 48-10, Classification and Measurement of Redeemable Securities. The Company relies upon an exemption from registration under the Securities Act of 1933 pursuant to Regulation D, Section 506. The Company agreed to pay interest on such funds at 12% per annum. 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. Stock warrants were not sold or included in the offering to such investors.

During the year ended November 30, 2016, twelve accredited investors subscribed to 45,050 shares, in total, of Series B Preferred Stock in exchange for cash consideration of $225,250, in total, at $5.00 for each share. As of November 30, 2016, the shares have been issued and have been presented outside of permanent equity in accordance with ASC 48-10, Classification and Measurement of Redeemable Securities. The Company relies upon an exemption from registration under the Securities Act of 1933 pursuant to Regulation D, Section 506. The Company agreed to pay interest on such funds at 12% per annum. 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. Stock warrants were not sold or included in the offering to such investors.

F-14

EXEO ENTERTAINMENT, INC.

Notes to Financial Statements

November 30, 2015

(Audited)

Note H: PREFERRED STOCK (CONTINUED)

The estimated fair value of the Series A and Series B redeemable convertible preferred stock at November 30, 2016 was $134,112 and $1,431,414, respectively.

The estimated fair value of the Series A and Series B redeemable convertible preferred stock at November 30, 2015 was $119,487 and $1,087,906, respectively.

We incurred equity issuance costs of $1,446 and $3,403 for the years ended November 30, 2016 and 2015, respectively. Rather than expense these costs, such items are charged against the Company’s equity. Our employees coordinate various matters associated with the sales of issuer securities to accredited investors. Equity issuance costs include such wages. These costs also 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 I: RELATED PARTY TRANSACTIONS

Notes Payable to Officer

An officer received promissory notes from the Company in exchange for loans from the officer for $85,000. The terms of the notes provide that the Company shall repay the principal of each note in full within nine 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 nine month term. The Officer agreed to extend the notes for an additional nine month period. The maturity dates after the extensions are reflected below. In November 2015, the Company made a $10,000 payment to an officer towards the entire principal of one note dated December, 2013. The Company made no payment towards $14,139 accrued interest.

Date of Each Note	Amount of Each Note	Accrued Interest through the Maturity Date	Maturity Date of Each Note
December 30, 2013	$ 25,000	$4,666	September 29, 2016
January 24, 2014	$ 50,000	$9,473	October 23, 2016

F-15

EXEO ENTERTAINMENT, INC.

Notes to Financial Statements

November 30, 2015

(Audited)

Note I: RELATED PARTY TRANSACTIONS (CONTINUED)

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. During June 2015, the Company increased the total monthly compensation to a total of $12,500 per month for both officers.

The amount paid to the two officers in total was $150,200 and $143,105 during the years ended November 30, 2016 and 2015, respectfully. 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.

Note J: COMMITMENTS AND CONTINGENCIES

Royalty Payable Obligation

At January 1, 2015, the Company is obligated to pay minimum monthly royalties of approximately $80,000 (CDN $100,000) per quarter for the remaining term of the Psyko Audio Labs contract. The company carries the risk of currency exchange rate fluctuations as our royalty obligation under the license agreement is stated in Canadian dollars. For the years ended November 30, 2016 and 2015, the Company has made a total of $50,000 and $50,000 towards this obligation and no royalty invoices have been received from Psyko Audio Labs. Royalty payable was $523,032 and $273,712 as of November 30, 2016 and 2015. For the years ended November 30, 2016 and 2015, royalty expense and the related gain on foreign currency transactions were $327,095 and $311,594, respectively.

Operating Lease Obligation

As of November 30, 2016 and 2015, the monthly minimum rental payment is $7,006. Rent expense was $84,072 and $84,072 for the years ended November 30, 2016 and 2015, respectively.

Note Payable for Vehicle Financing Obligations

F-16

EXEO ENTERTAINMENT, INC.

Notes to Financial Statements

November 30, 2015

(Audited)

Note K: SUBSEQUENT EVENTS

In December 2016, the Company agreed to issue 50,000 shares of common stock for services.

In December 2016 and January 2017, the Company sold 32,000 shares of common stock in exchange for cash of $16,000.

In January 2017, the Company issued 322,188 shares to an investor and reduced the stock payable by $100,000.

In January and February 2017, the Company sold units consisting of 96,638 shares of common stock, 96,638 warrant A and 96,638 of warrant B for total cash of $75,000.

F-17

Item 15(B) Exhibits

INDEX TO EXHIBITS

Exhibit		Description

3.1		Articles of Incorporation (1)
3.2		Amendment to Articles of Incorporation (1)
3.3		Bylaws (1)
3.4		Certificate of Designation (for Series A Preferred Stock) (1)
3.5		Certificate of Designation for Series B Convertible Preferred Stock (2)
10.1		Employment Agreement (Jeffrey Weiland, President) (1)
10.2		Employment Agreement (Robert S. Amaral, CEO) (1)
10.3		Consulting Agreement (Hildebrandt Consulting) (1)
10.4		Exclusive License Agreement (Psyko Audio Labs) (1)
10.5		Exclusive License Agreement (Digital Extreme Technologies, Inc.) (1)
10.6		Project Management Agreement (Elite Product Management) (1)
10.7		2012 Employees/Consultants Stock Compensation Plan Agreement (1)
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 September 12, 2014 (3)

	(1)	Not filed herewith, but this exhibit is incorporated by reference. Previously filed as an exhibit to Exeo Entertainment, Inc.’s Form S-1 filed with the Commission on August 16, 2013, as amended.

	(2)	Not filed herewith, but this exhibit is incorporated by reference. Previously filed as an exhibit to Exeo Entertainment, Inc.’s Form 10-K filed with the Commission on March 13, 2014.

	(3)	Not filed herewith, but this exhibit is incorporated by reference. Previously filed as an exhibit 99.1 to Exeo Entertainment, Inc.’s Form 10-Q filed with the Commission on October 6, 2014.

Item 15(c) Reports on Form 8-K

None.

Press Releases

None.

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, thereto duly authorized.

EXEO ENTERTAINMENT, INC.
(Registrant)

Signature	Title	Date

/s/ Jeffrey A. Weiland	President and Director	March 14, 2017
Jeffrey A. Weiland

/s/ Robert S. Amaral	Chief Executive Officer,	March 14, 2017
Robert S. Amaral	Treasurer and Director
	(Principal Executive and Financial Officer