10-Q 1 cmgo_2024mar30-10q.htm QUARTERLY REPORT
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

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

 

For the quarter ended March 31, 2024 

Commission file number 000-51770

 

  

CMG HOLDINGS GROUP, INC.

 

(Exact name of registrant as specified in its charter)

 

Nevada   87-0733770
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)

 

 

2130 North Lincoln Park West 8N    
Chicago, IL   60614
(Address of principal executive offices)   (Zip Code)

 

 

(773) 770-3440
Registrant's telephone number including area code

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

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

 

 

 

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or small reporting company. See the definition of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act. 

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
Emerging growth company [ ]

 

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

 

As of June 29, 2024, there were 438,672,016 shares of common stock of the registrant issued and outstanding. 

 

  

 

 

 

1

 

 

 

 

 

 

CMG HOLDINGS GROUP, INC. FORM 10-Q

TABLE OF CONTENTS

 

 

Item #

 

 

Description

  Page Numbers
   

 

PART I FINANCIAL INFORMATION

   
ITEM 1   CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   3

 

ITEM 2

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

 

15

ITEM 3   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FACTORS   16
ITEM 4   CONTROLS AND PROCEDURES   16

 

PART II OTHER INFORMATION

 

ITEM 1 LEGAL PROCEEDINGS 17
ITEM 1A RISK FACTORS 17
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 17
ITEM 3 DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4 MINE SAFETY DISCLOSURES 18
ITEM 5 OTHER INFORMATION 18
ITEM 6 EXHIBITS 18

 

 

2

 

 

 

 

 

 

 

 

 

 

PART I FINANCIAL INFORMATION

 

ITEM 1- CONSOLIDATED FINANCIAL STATEMENTS

 

CMG HOLDINGS GROUP, INC.

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 2024 AND 2023

 

CONTENTS  
Consolidated Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023 (Audited)     4
Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 (Unaudited)     5
Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2024 and 2023 (Unaudited)     6
Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (Unaudited)     7
Notes to Consolidated Financial Statements (Unaudited)     8

 

3

 

 

 

 

 

 

 

CMG Holdings Group, Inc.
Consolidated Balance Sheets          

 

      (Unaudited)     (Audited)  
    March 31,      December 31,   
     2024     2023 
ASSETS        
CURRENT ASSETS          
Cash  $174,634   $240,598 
Loan to officer        100,000 
Loan receivable   1,681,689    1,649,189 
           
Total current assets   1,856,323    1,989,787 
           
Property and equipment            
           
           
Total Assets  $1,856,323   $1,989,787 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
CURRENT LIABILITIES          
Accrued Interest  $68,261   $58,511 
Deferred compensation   463,314    532,914 

Convertible promissory note

   712,000    712,000 
Loan from outside party   15,000    15,000 
Note payable   60,000    60,000 
           
Total current liabilities   1,318,575    1,378,425 
           
TOTAL LIABILITIES   1,318,575    1,378,425 
           
COMMITMENTS AND CONTINGENCIES          
           
STOCKHOLDERS' DEFICIT          
Common Stock 450,000,000 shares authorized; $0.001 par value,          
438,672,016 shares issued and outstanding          
Common Stock 450,000,000 shares authorized; $0.001 par value, 438,672,016 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively   438,672    438,672 
Additional paid in capital   14,630,689    14,630,689 
Accumulated deficit   (14,531,613)   (14,457,999)
           
TOTAL STOCKHOLDERS DEFICIT   537,748    611,362 
           
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT  $1,856,323   $1,989,787 
           
The accompanying notes are an integral part of these financial statements.

 

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CMG Holdings Group, Inc.
Consolidated Statements of Operations
Unaudited

 

   For the three  For the three
   months ended  months ended
   March 31, 2024  March 31, 2023
       
Revenues  $315,420   $159,614 
           
Cost of revenues   263,196    129,491 
           
Gross Profit   52,224    30,123 
           
           
Operating expenses          
General and administrative expenses   148,588    150,014 
Total operating expenses   148,588    150,014 
           
Net income from operations   (96,364)   (119,891)
           
Other income (expense)          
Interest Income   32,500    32,425 
Interest expense   (9,750)   (9,750)
Total other income (expense)   22,750    22,675 
     .      .  
Net income  $(73,614)  $(97,216)
           
Weighted Average Number of Common Shares Outstanding - Basic and Diluted   438,672,016    438,672,016 
           
Income (Loss) per Common Share - Basic and Diluted  $     $   
           
The accompanying notes are an integral part of these financial statements.

 

 

 

5

 

 

 

 

 

 

CMG Holdings Group, Inc.
Consolidated Statement of Stockholders Equity

 

                
    Common Stock                
              Additional         Total 
    Number of          Paid In    Accumulated     Stockholders' 
    Shares    Amount    Capital    Deficit    Equity 
Balance December 31, 2023   438,672,016   $438,672   $14,630,689   $(14,457,999)  $611,362 
                          
Net Income(Loss) for the year   —                  (73,614)   (73,614)
                          
Balance March 31, 2024   438,672,016   $438,672   $14,630,689   $(14,531,613)  $537,748 
                          
    Common Stock                
              Additional         Total 
    Number of          Paid In    Accumulated     Stockholders' 
    Shares    Amount    Capital    Deficit    Equity 
Balance December 31, 2022   438,672,016   $438,672   $14,630,689   $(14,335,483)  $733,878 
                          
Net Income(Loss) for the year   —                  (97,216)   (97,216)
                          
Balance March 31, 2023   438,672,016   $438,672   $14,630,689   $(14,432,699)  $636,662 
                          
The accompanying notes are an integral part of these financial statements.

 

  

 

 

 

6

 

 

 

 

 

 

CMG Holdings Group, Inc.
Consolidated Statement of Cash Flows

 

       
   For the three  For the three
   months ended  months ended
   March 31, 2024  March 31, 2023
CASH FLOWS FROM OPERATING ACTIVITIES          
Net income  $(73,614)  $(97,216)
Adjustments to reconcile net income to cash used in operating activities          
Depreciation        620 
Interest income   (32,500)   (32,425)
Deferred compensation   30,400    23,500 
Interest expense   9,750    9,750 
    —        
Net cash provided by operations   (65,964)   (95,771)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Net cash provided by investing activities            
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Loan receivable         15,000 
    —        
Net cash provided by financing activities         15,000 
           
Net increase in cash   (65,964)   (80,771)
Cash, beginning of period   240,598    338,156 
Cash, end of period  $174,634   $257,385 
           
The accompanying notes are an integral part of these financial statements.

 

 

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CMG HOLDINGS GROUP, INC.

Notes to the Consolidated Financial Statements

 

1 Nature of Operations and Continuance of Business

 

Creative Management Group, Inc. was formed in Delaware on August 13, 2002 as a limited liability company named Creative Management Group, LLC. On August 7, 2007, this entity converted to a corporation. The Company is a sports, entertainment, marketing and management company providing event management implementation, sponsorships, licensing and broadcast, production and syndication.

 

The Company’s operating subsidiaries are XA - The Experiential Agency, Inc. - which is a sports, entertainment, marketing and management company providing event management implementation, sponsorships, licensing and broadcast, production and syndication. Its President is Alexis Laken, the daughter of the Company’s president. The other subsidiary is Lincoln Acquisition Corp. which was formed for the purpose of liquidating shares in Good Gaming, Inc. and any other investment shares which might be held by CMG at any given time.

 

The results for the three months ended March 31, 2024 are not necessarily indicative of the results of operations for the full year. These financial statements and related footnotes should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10K for the year ended December 31, 2023, filed with the Securities and Exchange Commission.

 

The accompanying condensed financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2024 and for the related periods presented.

 

  

8

 

 

 

 

 

CMG HOLDINGS GROUP, INC.

Notes to the Consolidated Financial Statements

 

  

2 Summary of Significant Accounting

 

 

a) Basis of Presentation and Principle of Consolidation 

 

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP") and are expressed in US dollars. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, XA THE EXPERIENTIAL AGENCY INC. All intercompany transactions have been eliminated. The Company's fiscal year-end is December 31.

 

b) Use of Estimates 

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and li abilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the recoverability of its long-lived assets, stock-based compensation, and deferred income tax asset valuation allownaces. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

c) Cash and Cash Equivalents 

 

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As of March 31, 2024 and December 31, 2023 the Company had no cash equivalents.

 

d) Basic and Diluted Net Income Per Share 

 

The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

 

9

 

 

 

 

 

CMG HOLDINGS GROUP, INC.

Notes to the Consolidated financial Statements

 

2.       Summary of Significant Accounting Policies (Continued) 

 

e) Financial Instruments 

 

ASC 820, '" Fair Value Measurements”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1

 

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

or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identic al assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The Company's financial instruments consist principally of cash, accounts payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of our cash is determined based on "Level I" inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations

 

t)       Property and Equipment

 

Property and equipment are comprised of a vehicle and is amortized on a straight-line basis over an expected

useful life of three years. Maintenance and repairs are charged to expense as incurred.

 

g) Impairment of long lived assets 

 

The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives at each balance sheet date. The Company records an impairment or change in useful life whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed.

 

h) Reclassifications 

Certain prior period amounts have been reclassified to conform to current presentation. 

 

i)     Substantial doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s negative cash flow from operations raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

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CMG HOLDINGS GROUP, INC.

Notes to the Consolidated financial Statements

 

 

3 Loan Receivable 

On November 15, 2019 the company entered into an agreement to a line of credit (LOC) with Pristec America Inc. (Pristec). The LOC was for $75,000. As of December 31, 2019, the Company had loaned to Pristec $67,500 at an interest rate of 12%, the loan matures in twelve (12) months. As of December 31, 2020 the Company loaned an additional $32,500 and extended the loan for another 12 months until December 31, 2023. Pristec is a late stage technology company that has 108 worldwide patents for the cold cracking of crude oil and other oil products. The Company has been granted the right to convert this loan into 100 shares of stock at price of $1,000. At the discretion of the Company, the Company has the option of entering into a revenue sharing at the same terms. Total amount owed including interest is $129,430 and $129,430 as of March 31, 2024 and December 31, 2023, respectively.

On June 24, 2020 The Company entered into an agreement with New Vacuum Technologies LLC(NVT) whereby the Company loaned NVT $50,000. During the year ended December 31, 2021 the Company loaned an additional $999,201 to NVT. NVT repaid $60,000 to the Company. The loan was originally due on December 24, 2020 at an interest rate of 10% per annum. The loan was extended on December 24, 2022 until December 24, 2023. The loan was verbally extended until December 24, 2024. The total amount owed including interest is $1,552,259 and $1,494,759 as of March 31, 2024 and December 31, 2023 respectively.

 

4       Equity

 

  a. Common Stock

 

During the periods ended March 31, 2024 and December 31, 2023, the Company did not sell any shares of its $0.001 par value per share common stock. 

 

  b. Common Stock Warrants

 

During the periods ended March 31, 2023 and December 31, 2023, the Company did not issue any warrants for its common shares. On December 15, 2017, the Company's Board of Directors lowered the strike price on the outstanding 40,000,000 Warrants previously issued to Glenn Laken to $0.0035 and extended the expiration date for an additional five (5) years. These warrants were extended to December 15, 2022. They were extended again to December 15, 2027. The remaining life at March 31, 2024 is 3 years 9 months(45 months)

 

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CMG HOLDINGS GROUP, INC.

Notes to the Consolidated financial Statements

 

5                  Notes Payable

 

Convertible Promissory Notes

 

On November 23, 2021, the Company borrowed $500,000 from GS Capital Partners LLC. The note is due and payable on November 23, 2022. The note has an interest rate of 6% per annum. The Holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price for each share of Common Stock at a price ("Conversion Price") of $0.0165 per share (the “Fixed Price”). Beginning on the 6th monthly anniversary of the Issuance Date of the Note, the Fixed Price shall be equal to $0.0092 per share. Provided, however that in the event, the Company’s Common Stock trades below $0.007 per share for more than seven (7) consecutive trading days, the Holder of this Note is entitled, at its option, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's Common Stock at a Conversion Price equal to the lower of the Fixed Price or 75% of the average of the two lowest VWAP’s of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the ten  prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion.  No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law.  The Company agrees to honor all conversions submitted pending this increase. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor). The conversion discount, look back period and other terms will be adjusted on a ratchet basis if the Company offers a more favorable conversion discount, prepayment rate, interest rate, (whether through a straight discount or in combination with an original issue discount), look back period or other more favorable term to another party for any financings while this Note is in effect, including but not limited to defaults, penalties and the remedy for such defaults or penalties. During the year ended December 31, 2022 the Company borrowed an additional $222,000 under the same terms. April 28, 2023 The Company made a payment of $10,000 to GS Capital to paydown the note as payment to extend the note for one year. At March 31, 2024 the balanced owed was $712,000.

 

The Company does not have sufficient shears available for the note to be converted, therefore management has determined that the note does not qualify as a derivative transaction.

 

NOTES PAYABLE

 

In 2017 the company borrowed 150,000 from 2 individuals in Ireland. 90k and 60k respectively. In 2021 the individual who was owed 90k(90,000) was paid back with interest. The CEO of  CMG had a disagreement with the second lender and they  have not spoken in almost 4-5 years, we are carrying the loan and at some point it will more than likely settle. . The balance at March 31, 2024 is $60,000.

 

6 Legal Proceedings

 

We are subject to certain claims and litigation in the ordinary course of business. It is the opinion of management that the outcome of such matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

 

The Company has no legal proceedings as of June 30, 2024

 

 

 

 

 

 

 

 

 

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CMG HOLDINGS GROUP, INC.

Notes to the Consolidated financial Statements

 

 

7             Income Taxes

 

The Company has a net operating loss carried forward of $14,579,363 available to offset taxable income in future years which commence expiring in 2031. The Company is subject to United States federal and state income taxes at an approximate rate of 21% (2024 and 2023). As at March 31, 2024 and December 31, 2023, the Company had no uncertain tax positions.

 

    2024   2023
Income tax recovery at Statutory rate   $ 20,236     $ 20,415  
Permanent differences and other                  
Valuation allowance change     (20,236 )     (20,415 )
Provision for income taxes   $        $     

 

 

 

The significant components of deferred income tax assets and liabilities at March 31, 2024 and December 31, 2023

are as follows:

 

 

    2024   2023
Net operating loss carried forward   $ 14,579,363     $ 14,482,999  
Valuation allowance   $ (14,579,363 )   $ (14,482,999 )
Net deferred income tax asset   $        $ —    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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CMG HOLDINGS GROUP, INC.

Notes to the Consolidated financial Statements

 

8          Segments

 

 

The Company splits its business activities during the year ended December 31, 2023 into two Reportable Segments. Each segment represents an entity of which are included in the consolidation. The table below represents the operations results for each segment or entity, for the period ended March 31, 2024

 

Reportable Segments

      CMG Holding   
   XA  Group  Total
Revenues   315,420          315,420 
                
Cost of Revenues   263,196          263,196 
                
Gross Profit   52,224          52,224 
                
Operating expenses   96,792    51,796    148,588 
                
Operating income (loss)   (44,568)   (51,796)   (96,363)
                
Other income (expenses)                  
                
Net income(loss)   (48,590)   (51,796)   (96,363)

 

 

The Company splits its business activities during the year ended December 31, 2023 into two reportable segments. Each segment represents an entity of which are included in the consolidation. The table below represents the operations results for each segment or entity, for the period ended March 31, 2023.

 

 

      CMG Holding   
   XA  Group  Total
Revenues   159,614          159,614 
                
Cost of revenues   129,493          129,493 
                
Gross profit   30,121          30,121 
                
Operating expenses   78,711    71,302    150,013 
                
Operating income (loss)   (48590)   (71,302)   (119,892)
                
Other income (expenses)         22,675    22,675 
                
Net income(loss)   (48,590)   (48,627)   (97,217)

 

 

 

 

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CMG HOLDINGS GROUP, INC.

Notes to the Consolidated financial Statements

 

9 Related Party Transactions

 

The Company borrowed $125,000 from a relative of the Company CEO. This amount is due on demand and has an interest rate of 0%. At March 31, 2023 the remaining balance of the loan was $15,000.

 

The Company issued the Company CEO a warrant to purchase 40,000,000 shares of the Company’s common stock at $0.0155. The warrant has an original term of 5 years. On December 15, 2017 the purchase price was changed to $.0035 and the term was extended 5 years. The warrants were extended 5 years on December 15, 2022. The warrants were vested 100% on April 7, 2014 when issued.

 

The board of directors approved a monthly salary for the Company CEO of $15,000 per month. Due to negative economic factors the company did not make any of these payments until January 15, 2019, when payments to the CEO began. The Company has recorded “Deferred Compensation” of $409,014 at March 31, 2023. The Company made payments of $(23,500) and $27,500 in excess of the current $45,000 and $45,000 salary for periods ended March 31, 2023 and 2022, respectively.

 

The Company paid $37,500 and $37,500 for the periods ended March 31, 2024 and 2023, respectively, as compensation to the President of XA, who is the daughter of the Company CEO.

 

10 Subsequent Events

 

The Company as an incentive to Loan New Vacuum Technologies LLC (NVT) It was agreed that in addition to paying back the loan, the Company would receive seven percent (7.0%) profit sharing of $3,600,000 if paid back by December 31, 2024. If the Loan is not paid back by December 31, 2024 the amount due would $4,800,000 if paid back by December 31, 2025. It is believed that NVT will begin collecting revenues by September 30, 2024 and will be in a position to pay off debt by December 31, 2024.

 

 

 

 

 

 

 

 

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

 

FORWARD LOOKING STATEMENTS

 

In addition to historical information, this Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, which includes, but are not limited to, statements concerning expectations as to our revenues, expenses, and net income, our growth strategies and plans, the timely development and market acceptance of our products and technologies, the competitive nature of and anticipated growth in our markets, our ability to achieve cost reductions, the status of evolving technologies and their growth potential, the adoption of future industry standards, expectations as to our financing and liquidity requirements and arrangements, the need for additional capital, and other matters that are not historical facts. These forward-looking statements are based on our current expectations, estimates, and projections about our industry, management’s beliefs, and certain assumptions made by it. Words such as “anticipates”, “appears”, “believe,”, “expects”, “intends”, “plans”, “believes, “seeks”, “assume,” “estimates”, “may”, “will” and variations of these words or similar expressions are intended to identify forward-looking statements. All statements in this Quarterly Report regarding our future strategy, future operations, projected financial position, estimated future revenue, projected costs, future prospects, and results that might be obtained by pursuing management’s current plans and objectives are forward-looking statements. Therefore, actual results could differ materially and adversely from those results expressed in any forward-looking statements, as a result of various factors. Readers are cautioned not to place undue reliance on forward-looking statements, which are based only upon information available as of the date of this report. You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this Quarterly Report was filed with the Securities and Exchange Commission (“SEC”). We expressly disclaim any obligation to revise or update publicly any forward-looking statements even if subsequent events cause our expectations to change regarding the matters discussed in those statements. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our stockholders. Unless the context indicates otherwise, the terms “Company”, “Corporate”, “CMGO”, “our”, and “we” refer to CMG Holdings Group, Inc. and its subsidiaries.

 

RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2024

 

Gross revenues decreased from $159,614 for the three months ended March 31, 2023 to $315,420 for the three months ended March 31, 2024. The decrease in revenues was mainly attributable to the slow down in business for the first quarter of 2023.

 

Cost of revenue decreased from $129,493 for the three months ended March 31, 2023 to $263,196 for the three months ended March 31, 2024. Thede increase in cost of revenues was mainly attributable to the slow down in business for the first quarter of 2024.

 

Operating expenses decreased from $147,612 for the three months ended March 31, 2023 to $148,588 for the three months ended March 31, 2024. The decrease in operating expenses is due to the decrease in support expenses to run business.

 

Net loss decreased from a loss of $97,217 for the three months ended March 31, 2023 to net loss of $73,614 for the three months ended March 31, 2024. The decrease in net loss to net income was mainly attributable to the Company having an increased gross profit on even ts for the quarter..

 

LIQUIDITY AND CAPITAL RESOURCES:

 

As of March 31, 2024, the Company’s cash on hand was $174,634.

 

Cash used in operating activities for the three months ended March 31, 2023 was $95,771, as compared to cash provided by operating activities of $65,964 for the three months ended March 31, 2024. The decrease in net cash used in operations

 

Cash used in investing activities for the three months ended March 31, 2023 was $0 as compared cash used in investing activities of $0 for the three months ended March 31, 2024.

 

Cash used by financing activities for the three months ended March 31, 2024 was $0 as compared to $15,000 used in the three months ended March 31, 2023.

 

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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FACTORS

 

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

 

ITEM 4 - CONTROLS AND PROCEDURES

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2021. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2021, the Company’s disclosure controls and procedures were not effective due to the identification of a material weakness in our internal control over financial reporting which is identified below, which we view as an integral part of our disclosure controls and procedures. This conclusion by the Company’s Chief Executive Officer and Chief Financial Officer does not relate to reporting periods after March 31, 2024.

 

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2024 based on the framework stated by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 1992). Furthermore, due to our financial situation, the Company will be implementing further internal controls as the Company becomes operative so as to fully comply with the standards set by the Committee of Sponsoring Organizations of the Treadway Commission.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on its evaluation as of March 31, 2024, our management concluded that our internal controls over financial reporting were not effective as of March 31, 2024 due to the identification of a material weakness. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. As soon as our finances allow, we will hire sufficient accounting staff and implement appropriate procedures for monitoring and review of work performed by our Chief Financial Officer.

 

In performing this assessment, management has identified the following material weaknesses as of March 31, 2024:

 

  There is a lack of segregation of duties necessary for a good system of internal control due to insufficient accounting staff due to the size of the Company

 

  Lack of a formal review process that includes multiple levels of reviews

 

  Employees and management lack the qualifications and training to fulfill their assigned accounting and reporting functions

 

  Inadequate design of controls over significant accounts and processes

 

  Inadequate documentation of the components of internal control in general

 

  Failure in the operating effectiveness over controls related to valuing and recording equity based payments to employees and non-employees

 

  Failure in the operating effectiveness over controls related to valuing and recording debt instruments including those with conversion options and the related embedded derivative liabilities

 

  Failure in the operating effectiveness over controls related to recording revenue and expense transactions in the proper period

 

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

  

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The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial

reporting. As of March 31, 2024 no changes have occurred.

 

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

 

No change in the Company’s internal control over financial reporting occurred during the period ended March 31, 2024, that materially affected, or is reasonably likely to materially affect, the Company s internal control over financial reporting.

 

PART II OTHER INFORMATION ITEM 1 – LEGAL PROCEEDINGS

We are subject to certain claims and litigation in the ordinary course of business. It is the opinion of management that the outcome of such matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

  

ITEM 1A – RISK FACTORS

 

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

 

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

 

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

 

18

 

 

 

 

 

 

 

 

ITEM 3 – DEFAULT UPON SENIOR SECURITIES

 

None. 

 

ITEM 4 – MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5 – OTHER INFORMATION

 

None.

 

 

 

ITEM 6 – EXHIBITS

 

Description of Exhibit Filing Reference

 

 

Exhibit Number   Description of Exhibit   Filing Reference
         
31.01   Certification of Principal Executive Officer Pursuant to Rule 13a-14.   Filed herewith.
         
31.02   Certification of Principal Financial Officer Pursuant to Rule 13a-14.   Filed herewith.
         
32.01   CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act.   Filed herewith.
         
101.INS    XBRL Instance Document    
101.SCH   XBRL Taxonomy Extension Schema Document.    
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document.    
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document    
101.LAB   XBRL Taxonomy Extension Label Linkbase Document.    
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document    

 

 

 

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

 

 

 

 

 

 

 

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SIGNATURES

 

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

 

  CMG HOLDINGS GROUP, INC.

 

Dated: July 8, 2024

 

 

By: /s/ Glenn Laken

    Glenn Laken, Chief Executive Officer