-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)

   X .

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


For the quarterly period ended September 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 333-153035 Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e),

the Company is not required to provide the information required by this Item.


[F10Q093016_10Q001.JPG]


MOMENTOUS ENTERTAINMENT GROUP, INC.

(Exact name of registrant as specified in its charter)


Nevada

46-4446281

(State or other jurisdiction

(IRS Employer

of incorporation or organization)

Identification Number)


PO Box 861, Sugar Land, Texas  77487-0861

(Address of principal executive offices)

 

800-314-8912

(Registrant’s telephone number)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  X .   No       .


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


Large accelerated filer

        .

Accelerated filer

        .

Non-accelerated filer

        . (Do not check if a smaller reporting company)

Smaller reporting company

   X .


Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

Yes       .   No  X .


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

Yes       .   No  X .


At November 14, 2016 the number of shares of the Registrant’s common stock outstanding was 267,135,483.




27




MOMENTOUS ENTERTAINMENT GROUP, INC.


INDEX





 

PART I

 

ITEM 1

FINANCIAL STATEMENTS

4

ITEM 2

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

15

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

21

ITEM 4

CONTROLS AND PROCEDURES

21

 


PART II

 

ITEM I

LEGAL PROCEEDINGS

22

ITEM 1A

RISK FACTORS

22

ITEM 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

22

ITEM 3

DEFAULTS  UPON SENIOR SECURITIES

22

ITEM 4

MINE SAFETY DISCLOSURES

22

ITEM 5

OTHER INFORMATION

22

ITEM 6

EXHIBITS

22




2




PART I


This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management's beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under the heading “Management's Discussion and Analysis of Financial Condition or Plan of Operation.” Forward- looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.


Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. The Company's future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.





3




MOMENTOUS ENTERTAINMENT GROUP, INC


BALANCE SHEETS

SEPTEMBER 30, 2016 AND DECEMBER 31, 2015

(Unaudited)



 

 

2016

 

2015

ASSETS

 

 

 

 

Current Assets:

 

 

 

 

Cash

$

8

$

14

Inventory

 

3,294

 

5,984

Deferred production costs, net of impairment of $4,964

 

60,825

 

41,131

Prepaid expenses and other assets

 

27,114

 

294

Total Current Assets

 

91,241

 

47,423

Total Assets

$

91,241

$

47,423

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

$

146,824

$

65,929

Accrued expenses

 

14,375

 

8,313

Due to Company President

 

77,089

 

119,745

Notes payable

 

2,500

 

7,500

Notes payable – related party

 

365,680

 

368,330

Convertible notes payable

 

209,500

 

352,000

Derivative liability

 

163,910

 

-

Total Current Liabilities

 

979,878

 

921,817

Total Liabilities

 

979,878

 

921,817

 

 

 

 

 

Stockholders’ Deficit:

 

 

 

 

Preferred stock: $0.001 par value; 50,000,000 shares authorized;

  1,000 shares issued or outstanding

 

1

 

1

Common stock: $0.001 par value; 450,000,000 shares authorized;

  102,080,290 and 81,380,810 shares issued and outstanding

 

102,080

 

81,381

Paid-in capital

 

1,450,181

 

764,274

Accumulated deficit

 

(2,440,899)

 

(1,720,050)

Total Stockholders’ Deficit

 

(888,637)

 

(874,394)

Total

$

91,241

$

47,423





See accompanying notes to the financial statements.




4





MOMENTOUS ENTERTAINMENT GROUP, INC.


STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(Unaudited)



 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30

 

September 30

 

 

2016

 

2015

 

2016

 

2015

 

 

 

 

 

 

 

 

 

Revenue

$

-

$

-

$

2,500

$

81

 

 

 

 

 

 

 

 

 

Operating  Expenses:  

 

 

 

 

 

 

 

 

Project Costs

 

-

 

-

 

-

 

32,504

Marketing, general and administrative

 

121,121

 

36,663

 

542,062

 

94,386

Total Operating Expenses

 

121,121

 

36,663

 

542,062

 

126,890

 

 

 

 

 

 

 

 

 

Loss from Operations

 

(121,121)

 

(36,663)

 

(539,562)

 

(126,809)

 

 

 

 

 

 

 

 

 

Other Income(Expense)

 

 

 

 

 

 

 

 

Interest Expense

 

6,538

 

4,490

 

289,767

 

8,425

Change in Derivative Liability

 

(69,545)

 

-

 

(108,480)

 

-

Total Other Income(Expense)

 

(63,007)

 

(4,490)

 

181,287

 

(8,425)

 

 

 

 

 

 

 

 

 

Net (Loss)

$

(58,114)

$

(41,153)

$

(720,849)

$

(135,234)

 

 

 

 

 

 

 

 

 

Net (Loss) Per Share:  Basic and Diluted

$

(0.00)

$

(0.00)

$

(0.01)

$

(0.00)

 

 

 

 

 

 

 

 

 

Weighted Average Number of Shares Outstanding:

  Basic and Diluted

 

91,454,000

 

73,949,450

 

87,142,990

 

71,914,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to the financial statements.













5




MOMENTOUS ENTERTAINMENT GROUP, INC.


STATEMENT OF STOCKHOLDER’S DEFICIT

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016

(Unaudited)




 

Preferred

Stock

Preferred

Stock

Amount

Common

Stock

Common

Stock

Amount

Additional

Paid-In

Capital

Deficit

Total

 

 

 

 

 

 

 

 

Balance, December 31, 2015

1,000

$             1

81,380,810

$   81,381

$  764,274

$(1,720,050)

$(874,394)

 

 

 

 

 

 

 

 

Issuance of shares upon conversion of debt

-

-

12,777,193

12,777

364,428

-

377,205

Issuance of shares for services

-

-

7,922,287

7,922

312,157

-

320,079

Issuance of warrants for services

-

-

-

-

9,322

-

9,322

Net loss

-

-

-

-

-

(720,849)

(720,849)

Balance, September 30, 2016

1,000

$            1

102,080,290

$  102,080

$ 1,450,181

$(2,440,899)

$(888,637)






See accompanying notes to the financial statements.






6




MOMENTOUS ENTERTAINMENT GROUP, INC.


STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(Unaudited)



 

 

2016

 

 

2015

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net (loss)

$

(720,849)

 

$

(135,234)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Issued stock for services

 

320,079

 

 

18,160

Change in deferred production costs

 

(19,693)

 

 

(29,918)

Derivative liability

 

163,910

 

 

-

Issuance of Warrant Shares

 

9,322

 

 

-

Change in advances

 

-

 

 

(137,150)

Change in prepaid assets and other expenses

 

(26,820)

 

 

(10,471)

Change in inventory

 

2,690

 

 

(9,435)

Change in accounts payable and accrued expenses

 

86,956

 

 

1,694

Cash Flows Provided (Used) by Operating Activities

 

(184,405)

 

 

(302,354)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Proceeds of convertible promissory notes

 

234,705

 

 

310,100

Notes payable

 

(5,000)

 

 

-

Payments to related parties

 

(45,306)

 

 

12,560

Cash Flows Provided by Financing Activities

 

184,399

 

 

322,660

 

 

 

 

 

 

NET CHANGE IN CASH

 

(6)

 

 

20,306

Cash, beginning of period

 

14

 

 

10,744

Cash, end of period

$

8

 

$

31,050

 

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

 

 

Non-Cash Financing Transactions:

 

 

 

 

 

Conversion of convertible notes

$

377,205

 

$

121,780

Derivative liability

 

163,910

 

 

-

Issuance of warrant shares

 

9,322

 

 

-

 

$

550,437

 

$

121,780






See accompanying notes to the financial statements.







7




MOMENTOUS ENTERTAINMENT GROUP, INC.


Notes to the Financial Statements

September 30, 2016

(Unaudited)



NOTE 1–ORGANIZATION, BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES


Momentous Entertainment Group, Inc. (the “Company”) was founded by Kurt E. Neubauer as Financial Equity Partners, Inc., a Texas company, in 2004 and was incorporated as a C corporation under the laws of the State of Nevada as Momentous Entertainment Group, Inc. in November 2013. It had very limited activities until June 2011 when it started designing a detailed business plan focused on creating, producing and distributing quality entertainment content across various media channels utilizing direct response media marketing.


The Company’s business plan includes the sponsoring of live concerts and other musical events. On March 24, 2016, it incorporated a wholly-owned subsidiary, Music One Corp., a Nevada Corporation, which will be the entity that manages these events.


The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read in conjunction with the financial statements of the Company for the fiscal year ended December 31, 2015 and notes thereto contained in the Company's Annual Report on Form 10-K.


Use of Estimates and Assumptions


Preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. The Company has adopted the provisions of ASC 260.


Fair Value of Financial Instruments


The Company measures assets and liabilities at fair value based on expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale date of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.


The following are the hierarchical levels of inputs to measure fair value:


Level 1:  Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.


Level 2:  Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.


Level 3:  Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.


The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts payable and accrued expenses, approximate their fair values because of the current nature of these instruments. Debt approximates fair value based on interest rates available for similar financial arrangements. Derivative liabilities which have been bifurcated from host convertible debt agreements are presented at fair value.



8




Derivative Financial Instruments


Fair value accounting requires bifurcation of embedded derivative instruments such as convertible features in convertible debts or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the binomial option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if these is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.  


Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments, such as warrants, is also valued using the binomial option-pricing model.


Loss per Share


Net loss per common share is computed pursuant to ASC 260-10-45. Basic and diluted net income per common share has been calculated by dividing the net income for the period by the basic and diluted weighted average number of common shares outstanding assuming that the Company incorporated as of the beginning of the first period presented. There were no dilutive shares outstanding as of September 30, 2016 or December 31, 2015.  


Subsequent Events


The Company follows the guidance in ASC 855-10-50 for the disclosure of subsequent events. The Company evaluates subsequent events from the date of the balance sheet through the date when the financial statements are issued. Pursuant to ASU 2010- 09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them with the SEC on the EDGAR system.


Recently Issued Accounting Pronouncements


The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.


The Company is an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (JOBS Act). Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of the benefits of this extended transition period.


NOTE 2–GOING CONCERN


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the accompanying financial statements, the Company has very limited financial resources, with working capital and net shareholder deficits and had generated limited revenue as of September 30, 2016.


While the Company is undertaking its business plan to generate additional revenues, the Company’s cash position may not be sufficient to support the Company’s basic business plan and product development efforts. Management believes that the actions presently underway to increase the number of contracts undertaken have a realistic chance of succeeding. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The Company’s ability to continue as a going concern is dependent upon its ability to achieve profitable operations or obtain adequate financing.


The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.



9




NOTE 3–DEFERRED PRODUCTION COSTS


The Company incurred costs of $60,825 to develop a new song for the Company’s next musical CD’s, Tim Storey Scriptures CD, the reality series with Bobby Dale Earnhardt and the reality series with Dennis Gile. These costs have been deferred and will be amortized when the finished products are available for sale. During the three month period ended September 30, 2016, we recorded an impairment charge in the amount of $4,964 against capitalized productions costs related to the Greatest Story Ever Sung CD.


NOTE 4–CONVERTIBLE DEBT


Convertible debt as of September 30, 2016 and December 31, 2015, consisted of the following:


Short-Term convertible debt:

 

 

 

 

 

 

September 30

 

December 31,

Description

 

2016

 

2016

 

 

 

 

 

Note payable, non-interest bearing due in 2016, convertible at $2.00 per share on or before maturity, subsequently converted in 2016.

$

-

$

50,000

 

 

 

 

 

Notes payable, non-interest bearing due in 2016, convertible at $0.50 per share on or before maturity, all but $12,000 subsequently converted in 2016.

 

-

 

14,000

 

 

 

 

 

Notes payable, non-interest bearing, due in 2016, convertible at $0.50 per share on or before maturity, subsequently converted in 2016.

 

-

 

138,000

 

 

 

 

 

Note payable, non-interest bearing due in 2016, convertible at $0.25 per share on or before maturity, subsequently converted in 2016.

 

-

 

150,000

 

 

 

 

 

Typenex Co-Investment tranche 1 – loan agreement described below

 

62,500

 

-

 

 

 

 

 

LG Capital Funding tranche 1 – loan agreement described below

 

97,000

 

-

 

 

 

 

 

T. McNeil Advisors – loan agreement described below

 

15,000

 

-

 

 

 

 

 

Adar Bays, LLC tranche 1 – loan agreement described below

 

35,000

 

-

 

 

 

 

 

Total

$

209,500

$

352,000


On February 9, 2016, The Company has entered into a $317,500 Convertible Loan Agreement with TYPENEX CO-INVESTMENT, LLC, an unaffiliated entity, with the following key provisions:


·

The Note has a 9.1% Original Issue Discount and bears interest at the rate of 10%.


·

The conversion price is fixed at $.35 per share and is subject to reduction if the Company issues shares below the conversion price.


·

The Company will make automatic installment payments beginning 180 days from Closing (and continuing in equal installments for the next 14 months (for a total of 15 payments) or until the balance is paid in full.


·

The Installment Amount due on each Installment Date is equal to the sum of all accrued but unpaid interest and a principal amount equal to approximately $21,167. The Installment Amount can be paid in either cash or Common Stock. If the Company chooses to make a payment in Common Stock, such stock shall be issued at the Market Price. The Market Price of the common stock is defined as 70% of the average of the three lowest closing bid prices for the 20 consecutive trading days prior to the date on which the Market Price is measured. 70% shall be replaced with 60% if the average of the three lowest closing bid prices is less than $.10.



10




On February 9, 2016, the Company borrowed $45,000 against this Typenex Co-Investment, LLC convertible note. On March 18, 2016, the Company entered into an Exchange Note with Typenex Co-Investment for $37,500 for termination of the Warrant as part of the exchange.     The Company converted $20,000 of this debt on August 12, 2016 at a rate of $0.00275 for 7,272,727 shares of common stock.  As of September 30, 2016, the Company has $62,500 outstanding against this Convertible Loan Agreement.


On March 22, 2016, the Company entered into an agreement with LG Capital Funding, LLC, a New York Limited Liability Company with respect to a private investment of up to $260,000 of convertible debt securities with a 12 month term.  The $260,000 convertible debt is comprised of two $65,000 front-end notes and two $65,000 back-end notes.  The principal and interest outstanding under this Agreement will be convertible into shares of Common Stock of the Company at a 45% discount to the lowest closing bid price with a 20 day look back from the date converted.  The notes bear interest at 8%.   


On March 22, 2016, the Company borrowed $65,000 on this convertible debt.  On May 13, 2016, The Company borrowed $37,000 on this convertible debt.  On September 26, 2016, the Company converted $5,000 of the note payable and $205 of the accrued interest to 1,577,251 shares of common stock at a rate of $0.0033/share.  As of September 30, 2016, The Company borrowed a total of $97,000 against this Convertible Loan Agreement and accrued interest of $3,970 relating to this amount has been recorded. The Company has also recorded $13,600 in broker’s fees and $7,250 in legal fees associated with these borrowings.  


On March 22, 2016, the Company entered into an agreement with Adar Bays, LLC, a Florida Limited Company, with respect to a private investment up to $140,000 of convertible debt securities with a 12 month term. The $140,000 convertible debt is comprised of two $35,000 front-end notes and two back-end notes. The outstanding principal and accrued interest under the notes will be convertible into shares of common stock of the Company at a 45% discount to the lowest closing bid price with a 20 day look back. Until the Notes have been converted, the Company shall not consummate any convertible financing or a registered offering of securities. If the Company violates this provision, the discount rate set forth above shall be increased from 45% to 65% and the prepay premium shall be increased by 20%. The notes shall bear interest at 8%. As of September 30, 2016, the Company has borrowed $35,000 against this Convertible Loan Agreement and recorded $1,456 in accrued interest on this loan agreement.  The Company also recorded $3,500 in broker’s fees and $2,000 in legal fees associated with this borrowing.  


On June 3, 2016, the Company entered into a Convertible Note Agreement with T. McNeil Advisors, LLC for $15,000 with interest of 8% per annum and a maturity date of June 3, 2017.  The $15,000 note was issued as full consideration for three months of advisory services. The Company is entitled, at its option, at any time, to convert all or any of the outstanding principal into shares of common stock of Company at a conversion price for each share of common stock equal to 65% of the lowest trading price of the common stock as reported in the OTC Marketplace Exchange. As of September 30, 2016, the Company recorded accrued interest of $394 on this note agreement.


The Company evaluated the floating conversion rates associated with the debt instruments described above and determined that each constituted an embedded derivative as its nature was not clearly and closely associated with the host instrument. As such each were required to be separately accounted for from the host instrument. In accordance with the Statement of Financial Accounting Standard ASC 820-10-35-37 Fair Value in Financial Instruments, Statement of Financial Accounting Standard ASC 815 Accounting for Derivative Instruments and Hedging Activities the Company accounts for instruments with embedded derivative features at their fair values.  The Company engaged a valuation consultant to value the Typenex, LG Capital, Adar Bays and T. McNeil Advisors, LLC notes for the derivative portion of the instruments.  The consultant used the Binomial model to value the derivative liability for the quarter ended September 30, 2016 at $163,910, with a derivative liability expense of $(108,480).


On September 27, 2016, a convertible promissory note of $12,000 was converted into 24,000 shares of common stock at a conversion rate of $0.50 per share.  


NOTE 5 – FAIR VALUE OF FINANCIAL INSTRUMENTS


The following is the major category of liabilities measured at fair value on a recurring basis as of September 30, 2016, using quoted prices in active markets for identical liabilities (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs


(Level 3):


Derivative Liabilities from Convertible Notes (Level 3)

$

163,910


Total

$

163,910




11




NOTE 6 – LOANS


At September 30, 2016, the Company was obligated for $54,162 due to the Company President for loans made from his personal resources, the proceeds from which were to finance operations.  The Company also owed the President $22,927 in interest on the demand loans at a rate of 3% per annum.  At September 30, 2016, the Company owed the Company President $77,089.


At September 30, 2016, the Company borrowed $2,500 non-interest bearing loan from a third party.


At September 30, 2016, the Company aggregated $343,450 in demand loans to the Company President at 3% interest per annum. In addition, the Company borrowed $22,230 in non-interest bearing demand loans due to a director and officer of the Company. The note is unsecured.  The total of notes payables to related parties is $365,680 at September 30, 2016.  See the table below.


 

 

9/30/2016

 

12/31/2015

Due to Company President

 

 

 

 

 - Accounts Payable

$

54,162

$

104,525

 - Interest on Demand Notes

 

22,927

 

15,220

Total - Due to Company President

$

77,089

$

119,745

 

 

 

 

 

Notes Payable - Third Parties

$

2,500

$

7,500

 

 

 

 

 

Notes Payable - Related Party

 

 

 

 

 - Demand Loan - President

$

343,450

$

343,430

 - Loan - Officer

 

22,230

 

24,900

Total - Notes Payable - Related Party

$

365,680

$

368,330


NOTE 7 – STOCKHOLDERS’ EQUITY


The Company issued 7,922,287 shares of common stock for professional services in relation to production costs and services relating to the reality television series and music production during the first nine months of 2016.  The Company issued 12,777,193 shares of common stock for note conversions for the nine month period ended September 30, 2016.


The Company entered into an advisory agreement with T. McNeil Advisors, LLC to perform advisory and strategic services for the Company on March 1, 2016.  The term of the agreement will renew quarterly up to two years, unless the Company gives 30 days’ notice to terminate. The Company agreed to pay $60,000 in annual consulting fees at the rate of $5,000 per month, renewable on a quarterly basis. As of September 30, 2016, the Company entered into a warrant agreement that could be exercised to purchase up to 461,538 shares at a price of $0.13 per share. The warrant agreement has been recorded at its fair value using a binomial valuation of $9,322.


On May 17, 2016, the Company entered into an advisory agreement with Posner McLane, LLC, to provide merger and acquisition consulting services.  The Company has agreed to pay Posner McLane, LLC a monthly consulting fee equal to $20,000 per month in cash or in the form of shares of common stock of the Company to be calculated at the closing price per share of the Company’s common stock as traded on the OTCBB or on the NASDAQ on the day the payment is due.  As of September 30, 2016, the Company issued 5,968,877 shares of common stock to Posner McLane, LLC at the average share price of $0.0215, equal to $80,000 with $70,000 in professional services and $10,000 in prepaid.


On July 28, 2016, the Company entered into an Equity Purchase Agreement with Southridge Partners II, LLP (Southridge) in which the Company has agreed to issue and sell Southridge (the “Put Shares”) of its common stock, $0.001 par value per share from time to time for an aggregate investment price of up to $3,000,000.  



12




Southridge will pay 88% of the average of the daily volume weighted average price during the Valuation Period for put shares and the equity line terminates on the earlier of: (i) 24 months from the effective date of the registration statement filed in connection with the Equity Purchase Agreement; or (ii) the date on which Southridge has purchased shares of our common stock pursuant to the Equity Purchase Agreement for an aggregate maximum purchase price of $3,000,000. The number of shares to be purchased by Southridge under the Equity Purchase Agreement may never exceed the number of shares that, when added to the number of shares of the Company’s common stock then beneficially owned by Southridge, would exceed 9.99% of the Company’s shares of common stock outstanding. The Company has agreed to file an S1 Registration Statement with the Securities and Exchange Commission with respect to the shares that may be sold under the Equity Purchase Agreement.  No sales will occur until that Registration Statement is effective.  


    

On July 28, 2016, The Company entered into a $50,000 Promissory Note with Southridge Advisors II, LLC, plus interest in the amount of 10% per annum on outstanding principal on January 31, 2017, the maturity date.  The Company entered into this Promissory Note as a commission for the Equity Purchase Agreement stated above.    Our only potential source of cash to pay this note is the Equity Line. If for any reason we are unable to draw funds from the Equity Line, we will be unable to satisfy the note. There are no assurances that the terms of the note can or will be modified.


Following the conversions of debt into common stock described in Note 9, there were 267,135,483 common shares outstanding.


NOTE 8–RELATED PARTY TRANSACTIONS


At September 30, 2016 the Company was obligated for:


i.

Demand loans aggregating $343,450 due to the Company’s President.  The loans were made from his personal resources, the proceeds from which were used to finance operations.  All demand loans made by the Company’s President bears interest at 3% per annum.  At September 30, 2016, accrued interest totaled $22,927.


ii.

Accounts payable of $54,162 due to its President.  The amount relates to payments made by the Company’s President on behalf of the Company in connection with deferred production costs for the Greatest Story Ever Sung CD, the Tim Storey Scriptures, CD, and the two reality series with Bobby Dale Earnhardt and Dennis Gile, which deferred costs will be amortized when the CD’s and the reality series are sold (Note 3), and administrative costs.  


iii.

Demand loan payable outstanding in the principal amount of $22,230, a non-interest bearing loan which is due to a director and officer of the Company. The note is unsecured.


NOTE 9-SUBSEQUENT EVENTS


The Company has evaluated subsequent events through November 15, 2016, the date of issuance of the financial statements and has determined it does not have any material subsequent events to disclose except:


The Company received a $35,000 tranche 2 from Adar Bays, LLC on November 2, 2016, with expenses of $2,000 in legal fees and $3,500 in commission fees. Subsequent to September 30, 2016, Adar Bays, LLC converted a total of $67,799.15 of the notes payable and $1,676.76 in interest into a total of 79,668,451 shares of common stock during the dates as follows:


Date

Issued

Shares

Conversion

Price Per

Share

Note

Balance

Interest

Total

10/7/16

1,090,909

$0.002750

$3,000.00

-

$3,000.00

10/17/16

4,132,231

0.001210

5,000.00

-

5,000.00

10/27/16

6,065,734

0.000715

4,337.00

-

4,337.00

10/31/16

6,036,534

0.000880

5,312.15

-

5,312.15

11/1/16

7,159,091

0.000880

6,300.00

-

6,300.00

11/2/16

8,145,455

0.000825

6,720.00

-

6,720.00

11/3/16

6,068,800

0.000825

3,333.00

1,676.76

5,006.76

11/4/16

8,848,485

0.000825

7,300.00

-

7,300.00

11/8/16

9,575,758

0.000825

7,900.00

-

7,900.00

11/9/16

10,424,242

0.000825

8,600.00

-

8,600.00

11/11/16

12,121,212

0.000825

10,000.00

-

10,000.00

 

79,668,451

 

$67,799.15

$1,676.76

$69,475.91




13




Following these conversions, the remaining principal balance due to Adar Bays, LLC is $2,200.85.  See Note 4 for terms of the note payable.



Subsequent to September 30, 2016, LG Capital converted a total of $42,850 of notes payable and $2,110.54 of interest into a total of 50,070,024 shares of common stock during the dates as follows:


Date

Issued

Shares

Conversion

Price Per

Share

Note

Balance

Interest

Total

10/20/16

2,065,083

$0.001265

$     2,500

$112.33

$2,612.33

10/21/16

2,797,454

0.000935

2,500

115.62

2,615.62

10/27/16

4,702,125

0.000880

3,950

187.87

4,137.87

11/01/16

6,550,000

0.000880

5,500

264.00

5,764.00

11/04/16

6,617,840

0.000880

5,500

273.70

5,773.70

11/08/16

6,563,693

0.000880

5,500

276.05

5,776.05

11/09/16

10,384,750

0.000880

8,700

438.58

9,138.58

11/11/16

10,389,079

0.000880

8,700

442.39

9,142.39

 

50,070,024

 

$   42,850

$2,110.54

$44,960.54


Following these conversions, the remaining principal balance due to LG Capital is $17,100.  See Note 4 for terms of the note payable.


Subsequent to September 30, 2016, Typenex Co-Investment LLC converted a total of $36,350 of notes payable into a total of 35,316,713 shares of common stock during the dates as follows:


Date

Issued

Shares

Conversion

Price Per

Share

Total

10/19/16

9,417,040

$0.001338

$   12,600

10/28/16

11,177,754

0.000917

10,250

11/08/16

14,721,919

0.000917

13,500

 

35,316,713

 

$   36,350


Following these conversions, the remaining principal balance due Typenex Co-Investment LLC is $26,150. See Note 4 for terms of the note payable.  






14




ITEM 2.

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


Note Regarding Forward-Looking Statements


Certain matters discussed in this annual report on Form 10-Q are forward-looking statements. Such forward-looking statements contained in this annual report involve risks and uncertainties, including statements as to:


·

our future operating results,


·

our business prospects,


·

our contractual arrangements and relationships with third parties,


·

the dependence of our future success on the general economy and its impact on the industries in which we may be involved,


·

the adequacy of our cash resources and working capital, and


·

other factors identified in our filings with the SEC, press releases, if any and other public communications.



These forward-looking statements can generally be identified as such because the context of the statement will include words such as we “believe," “anticipate,” “expect,” “estimate” or words of similar meaning. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those anticipated as of the date of this Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this report and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.


The following discussion and analysis provides information which management believes to be relevant to an assessment and understanding of the Company's results of operations and financial condition. This discussion should be read together with the Company's financial statements and the notes to financial statements, which are included in this report.


This management's discussion and analysis or plan of operation should be read in conjunction with the financial statements and notes thereto of the Company for the quarter ended September 30, 2016. Because of its nature of a development stage company, the reported results will not necessarily reflect the future.


We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:


·

have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;


·

comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);


·

submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and


·

disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.


In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.



15




We will remain an “emerging growth company” for up to five years, or until the earliest of


i.

the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion,


ii.

the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed third fiscal quarter, or


iii.

the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.


Operating Plan


MMEG is a media company that plans to operate within four segments of the media industry. Our principal efforts for the next few months will be preparing and developing the following:


·

Film and TV Content Online Streaming Distribution


The Company has signed an agreement to deliver film, TV and sports content on a video on demand and subscription video on demand business model with Pool Works, Germany’s largest social media platform with 10 million plus members.  The Company will source the film, TV and sports content from their Hollywood and global relationships, and work with a designated video delivery platform to fulfill the integration into the social media websites. Revenues will be split with Pool Works.


·

Reality TV Series


The Company’s two planned reality TV series, The Bobby Earnhardt Show and Dennis Gile: Quarterback Academy , are being reviewed by a professional talent agency which is seeking potential promotional representation and parties interested in broadcasting the shows.  We are currently in discussions to determine the next steps.


The agreement with Bobby Earnhardt involves a potential television series and related ancillary materials in connection therewith. If a series is produced, of which there are no assurances as to the likelihood of this happening, Mr. Earnhardt will be entitled to 12% of the net profits, if any. We have a Memorandum of Understanding with Online Technologies, Inc. whereby we agreed to send Online Technologies, Inc. 25% of our net profits, as defined, realized from the Earnhardt agreement.


The agreement with Dennis Gile involves a potential television series and related ancillary materials in connection therewith for which Mr. Gile will receive a weekly fee of $1,500 to $3,000 during production of a show. He may also become eligible to receive 8 to 12% of profits if a show is produced and distributed. There are no assurances that a show will ever be produced.


·

Music


The Company has started work on a third album; title Crossing – From Here to Eternity which will feature singing artist Suzanne Olmon and a special appearance by Grammy award-winner singer, Cynthia Clawson.  The work will be focused on the adult contemporary listening market to offer the broadest appeal possible and afford us the opportunity for radio airtime play, and being rated on platforms such as Billboard. The album is currently in the planning and rehearsal phase with plans of moving into the recording studio by the fourth quarter of 2016. 


·

Merger and Acquisition Program


The Company has developed and started implementing an acquisition plan to acquire several international film and TV distribution companies. The Company has been working with an advisor to assist in this process.  Acquisitions, if they occur, will likely be done using common stock of the Company which, to accomplish, is likely to require increases in the trading volume and price of the Company’s common stock.



16




·

Direct Response Media Marketing


MMEG plans to utilize direct response media marketing and a variety of advertising channels to increase exposure among prospective purchasers for our products such as music albums and products that we are marketing for our customers. The direct response industry, consisting of direct response television and radio marketing, live home shopping channels, direct mail, catalogs, internet marketing and advertising, and outbound telemarketing, is one of the fastest growing segments of the retailing industry.


We cannot predict the likelihood or timing of the successful achievement of any of the foregoing operating plans.


Operations


A summary of operations for the nine months ended September 30, 2016 and 2015 as follows:


 

 

2016

 

2015

Revenue

$

2,500

$

81

Costs and Expenses: Project costs

 

-

 

32,504

Marketing, general and administrative

 

542,062

 

94,386

Loss from operations

 

(539,562)

 

(126,809)

Interest expense

 

289,767

 

8,425

Change in Derivative Liability

 

(108,480)

 

-

Net loss

$

(720,849)

$

(135,234)


Marketing, general and administrative costs consist principally of marketing costs and professional consulting fees.


Other


As a corporate policy, we will not incur any cash obligations that we cannot satisfy with known resources, of which there are currently none except as described in “Liquidity” below and/or elsewhere in this prospectus. We believe that the perception that many people, including potential customers and business associates, have of a public company make it more likely that they will be more likely to engage a public company for services or accept restricted securities from a public company as consideration for indebtedness to them than they would from a private company. We have not performed any studies of this matter. Our conclusion is based on our own observations. However, there can be no assurances that we will be successful in any of those efforts even if we are a public entity. Additionally, issuance of restricted shares would necessarily dilute the percentage of ownership interest of our stockholders.


Liquidity


The Company’s operations have not yet generated cash. All cash received by the Company has come from loans and investors. Cash used in operations amounted to $184,405 and $302,354 at September 30, 2016 and 2015 respectively. During the third quarter 2016, and 2015, $184,399 and $322,660 were provided by financing activities and to date, the Company has used no cash in investing activities.


At September 30, 2016 the Company was obligated for demand loans of $343,450 due to the Company’s President.  The loans were made from his personal resources, the proceeds from which were used to finance operations.  All demand loans made by the Company’s President bears interest at 3% per annum.  His personal resources do not permit him to make additional loans to the Company.


The Company has one demand loan payable outstanding in the principal amount of $22,230, from an officer and a director and is non-interest bearing.  The note is unsecured.


On February 9, 2016, The Company entered into a $317,500 Convertible Loan Agreement with TYPENEX CO-INVESTMENT, LLC, an unaffiliated entity, with the following key provisions:


·

The Note has a 9.1% Original Issue Discount and bears interest at the rate of 10%.


·

The conversion price is fixed at $.35 per share and is subject to reduction if the Company issues shares below the conversion price.



17




·

The Company will make automatic installment payments beginning 180 days from Closing (and continuing in equal installments for the next 14 months (for a total of 15 payments) or until the balance is paid in full.


·

The Installment Amount due on each Installment Date is equal to the sum of all accrued but unpaid interest and a principal amount equal to approximately $21,167. The Installment Amount can be paid in either cash or Common Stock. If the Company chooses to make a payment in Common Stock, such stock shall be issued at the Market Price. The Market Price of the common stock is defined as 70% of the average of the three lowest closing bid prices for the 20 consecutive trading days prior to the date on which the Market Price is measured. 70% shall be replaced with 60% if the average of the three lowest closing bid prices is less than $.10.


On February 9, 2016, the Company borrowed $45,000 against this Typenex Co-Investment, LLC convertible note. On March 18, 2016, the Company entered into an Exchange Note with Typenex Co-Investment for $37,500 for termination of the Warrant as part of the exchange.     The Company converted $20,000 of this debt on August 12, 2016 at a rate of $0.00275 for 7,272,727 shares of common stock.  As of September 30, 2016, the Company has $62,500 outstanding against this Convertible Loan Agreement


On March 22, 2016, the Company entered into an agreement with LG Capital Funding, LLC, a New York Limited Liability Company with respect to a private investment of up to $260,000 of convertible debt securities with a 12 month term.  The $260,000 convertible debt is comprised of two $65,000 front-end notes and two $65,000 back-end notes.  The principal and interest outstanding under this Agreement will be convertible into shares of Common Stock of the Company at a 45% discount to the lowest closing bid price with a 20 day look back from the date converted.  The notes bear interest at 8%.   


On March 22, 2016, the Company borrowed $65,000 on this convertible debt.  On May 13, 2016, The Company borrowed $37,000 on this convertible debt.  On September 26, 2016, the Company converted $5,000 of the note payable and $205 of the accrued interest to 1,577,251 shares of common stock at a rate of $0.0033/share.  As of September 30, 2016, The Company borrowed a total of $97,000 against this Convertible Loan Agreement and accrued interest of $3,970 relating to this amount has been recorded. The Company has also recorded $13,600 in broker’s fees and $7,250 in legal fees associated with these borrowings.  


On March 22, 2016, the Company entered into an agreement with Adar Bays, LLC, a Florida Limited Company, with respect to a private investment up to $140,000 of convertible debt securities with a 12 month term. The $140,000 convertible debt is comprised of two $35,000 front-end notes and two back-end notes. The outstanding principal and accrued interest under the notes will be convertible into shares of common stock of the Company at a 45% discount to the lowest closing bid price with a 20 day look back. Until the Notes have been converted, the Company shall not consummate any convertible financing or a registered offering of securities. If the Company violates this provision, the discount rate set forth above shall be increased from 45% to 65% and the prepay premium shall be increased by 20%. The notes shall bear interest at 8%. As of September 30, 2016, the Company has borrowed $35,000 against this Convertible Loan Agreement and recorded $1,456 in accrued interest on this loan agreement.  The Company also recorded $3,500 in broker’s fees and $2,000 in legal fees associated with this borrowing.  


On May 17, 2016, the Company entered into an advisory agreement with Posner McLane, LLC, to provide merger and acquisition consulting services.  The Company has agreed to pay Posner McLane, LLC a monthly consulting fee equal to $20,000 per month in cash or in the form of shares of common stock of the Company to be calculated at the closing price per share of the Company’s common stock as traded on the OTCBB or on the NASDAQ on the day the payment is due.  As of September 30, 2016, the Company issued 5,968,877 shares of common stock to Posner McLane, LLC at the average share price of $0.0215, equal to $80,000 with $70,000 in professional services and $10,000 in prepaid.


On June 3, 2016, the Company entered into a Convertible Note Agreement with T. McNeil Advisors, LLC for $15,000 with interest of 8% per annum and a maturity date of June 3, 2017.  The $15,000 note was issued as full consideration for three months of advisory services. The Company is entitled, at its option, at any time, to convert all or any of the outstanding principal into shares of common stock of Company at a conversion price for each share of common stock equal to 65% of the lowest trading price of the common stock as reported in the OTC Marketplace Exchange. As of September 30, 2016, the Company recorded accrued interest of $394 on this note agreement.


The Company evaluated the floating conversion rates associated with the debt instruments described above and determined that each constituted an embedded derivative as its nature was not clearly and closely associated with the host instrument. As such each were required to be separately accounted for from the host instrument. In accordance with the Statement of Financial Accounting Standard ASC 820-10-35-37 Fair Value in Financial Instruments, Statement of Financial Accounting Standard ASC 815 Accounting for Derivative Instruments and Hedging Activities the Company accounts for instruments with embedded derivative features at their fair values.  The Company engaged a valuation consultant to value the Typenex, LG Capital, Adar Bays and T. McNeil Advisors, LLC notes for the derivative portion of the instruments.  The consultant used the Binomial model to value the derivative liability for the quarter ended September 30, 2016 at $163,910, with a derivative liability expense of $(108,480).



18




On September 27, 2016, a convertible promissory note of $12,000 was converted into 24,000 shares of common stock at a conversion rate of $0.50 per share.  


The Company received a $35,000 tranche 2 from Adar Bays, LLC on November 2, 2016, with expenses of $2,000 in legal fees and $3,500 in commission fees. Subsequent to September 30, 2016, Adar Bays, LLC converted a total of $67,799.15 of the notes payable and $1,676.76 in interest into a total of 79,668,451 shares of common stock during the dates as follows:


Date

Issued

Shares

Conversion

Price Per

Share

Note

Balance

Interest

Total

10/7/16

1,090,909

$0.002750

$3,000.00

-

$3,000.00

10/17/16

4,132,231

0.001210

5,000.00

-

5,000.00

10/27/16

6,065,734

0.000715

4,337.00

-

4,337.00

10/31/16

6,036,534

0.000880

5,312.15

-

5,312.15

11/1/16

7,159,091

0.000880

6,300.00

-

6,300.00

11/2/16

8,145,455

0.000825

6,720.00

-

6,720.00

11/3/16

6,068,800

0.000825

3,333.00

1,676.76

5,006.76

11/4/16

8,848,485

0.000825

7,300.00

-

7,300.00

11/8/16

9,575,758

0.000825

7,900.00

-

7,900.00

11/9/16

10,424,242

0.000825

8,600.00

-

8,600.00

11/11/16

12,121,212

0.000825

10,000.00

-

10,000.00

 

79,668,451

 

$67,799.15

$1,676.76

$69,475.91


Following these conversions, the remaining principal balance due to Adar Bays, LLC is $2,200.85.



Subsequent to September 30, 2016, LG Capital converted a total of $42,850 of notes payable and $2,110.54 of interest into a total of 50,070,024 shares of common stock during the dates as follows:


Date

Issued

Shares

Conversion

Price Per

Share

Note

Balance

Interest

Total

10/20/16

2,065,083

$0.001265

$     2,500

$112.33

$2,612.33

10/21/16

2,797,454

0.000935

2,500

115.62

2,615.62

10/27/16

4,702,125

0.000880

3,950

187.87

4,137.87

11/01/16

6,550,000

0.000880

5,500

264.00

5,764.00

11/04/16

6,617,840

0.000880

5,500

273.70

5,773.70

11/08/16

6,563,693

0.000880

5,500

276.05

5,776.05

11/09/16

10,384,750

0.000880

8,700

438.58

9,138.58

11/11/16

10,389,079

0.000880

8,700

442.39

9,142.39

 

50,070,024

 

$   42,850

$2,110.54

$44,960.54


Following these conversions, the remaining principal balance due to LG Capital is $17,100.  


Subsequent to September 30, 2016, Typenex Co-Investment LLC converted a total of $36,350 of notes payable into a total of 35,316,713 shares of common stock during the dates as follows:


Date

Issued

Shares

Conversion

Price Per

Share

Total

10/19/16

9,417,040

$0.001338

$   12,600

10/28/16

11,177,754

0.000917

10,250

11/08/16

14,721,919

0.000917

13,500

 

35,316,713

 

$   36,350


Following these conversions, the remaining principal balance due Typenex Co-Investment LLC is $26,150.


On July 28, 2016, the Company entered into an Equity Purchase Agreement with Southridge Partners II, LLP (Southridge) in which the Company has agreed to issue and sell Southridge (the “Put Shares”) of its common stock, $0.001 par value per share from time to time for an aggregate investment price of up to $3,000,000.  



19




Southridge will pay 88% of the average of the daily volume weighted average price during the Valuation Period for put shares and the equity line terminates on the earlier of: (i) 24 months from the effective date of the registration statement filed in connection with the Equity Purchase Agreement; or (ii) the date on which Southridge has purchased shares of our common stock pursuant to the Equity Purchase Agreement for an aggregate maximum purchase price of $3,000,000. The number of shares to be purchased by Southridge under the Equity Purchase Agreement may never exceed the number of shares that, when added to the number of shares of the Company’s common stock then beneficially owned by Southridge, would exceed 9.99% of the Company’s shares of common stock outstanding. The Company has agreed to file an S1 Registration Statement with the Securities and Exchange Commission with respect to the shares that may be sold under the Equity Purchase Agreement.  No sales will occur until that Registration Statement is effective.  


Private capital, if sought, will be sought from former business associates of our founder or private investors referred to us by those business associates. To date, we have not sought any funding source and have not authorized any person or entity to seek out funding on our behalf. If a market for our shares ever develops, of which there can be no assurances, we may attempt to use shares of our common stock to compensate employees/consultants and independent contractors wherever possible. The prices that will be used will be determined during negotiations and may or may not be at perceived market values. We also believe that if a market does develop for our shares that our chances to raise funds will increase significantly.


We have become a public company and, by doing so, have incurred and will continue to incur additional significant expenses for legal, accounting and other services. We are subject to the reporting requirements of the Exchange Act of '34 and will incur ongoing expenses associated with professional fees for accounting, legal and a host of other expenses including annual reports and proxy statements, if required. We estimate, based on verbal discussions with consultants, accountants and lawyers that these costs may range up to $50,000 per year for the next few years. In the next one to two fiscal years, we will take every step possible to minimize these costs.


Through their past work and various participations in business organizations, our three executive officers know many professionals who are knowledgeable in the area of public company obligations. Although we have no formal commitments, we believe that some of these professionals may assist us for very reasonable costs. We also hope to be able to use our status as a public company to increase our ability to use noncash means of settling obligations and compensate independent contractors who provide professional and other services to us, although there can be no assurances that we will be successful in any of those efforts. We will reduce the compensation levels paid to management if there is insufficient cash generated from operations to satisfy these costs.


Recently Issued Accounting Pronouncements


The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.


Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may, therefore, not be comparable to those of companies that comply with such new or revised accounting standards.


Critical Accounting Policies


The preparation of financial statements and related notes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.


Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. There are no critical policies or decisions that rely on judgments that are based on assumptions about matters that are highly uncertain at the time the estimate is made. Note 2 to the financial statements, included in the Registration Statement on Form S1, includes a summary of the significant accounting policies and methods used in the preparation of our financial statements.



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Seasonality


We expect that business volume will typically be highest during the period May through October.


Off-Balance Sheet Arrangements


We have no off-balance sheet arrangements, as defined in Item 303(a) (4) (ii) of Regulation S-K, obligations under any guarantee contracts or contingent obligations. We also have no other commitments, other than the costs of being a public company that will increase our operating costs or cash requirements in the future.


ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item.


ITEM 4.

CONTROLS AND PROCEDURES


Management’s Report on Internal Controls over Disclosure Controls and Procedures and Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is 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 and to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms..


Our internal control over disclosure controls and procedures and financial reporting includes those policies and procedures that:


·

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;


·

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and


·

that our receipts and expenditures are being made only in accordance with authorizations of the Company's management and directors; and


·

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.


As of September 30, 2016, our management conducted an assessment of the effectiveness of the Company's internal control over disclosure controls and procedures and financial reporting. In making this assessment, management followed an approach based on the framework set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (known as “COSO”). Based on this assessment, management determined that the Company's internal control over disclosure controls and procedures and financial reporting as of September 30, 2016 was effective.


During the quarter ended September 30, 2016, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over disclosure controls and procedures and financial reporting.


The Company’s management, including the Company’s CEO/CFO, does not expect that the Company’s disclosure controls and procedures or the Company’s internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of the controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.



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


PART II


ITEM 1

LEGAL PROCEEDINGS


None


ITEM 1A.

RISK FACTORS


Not required for a smaller reporting company


ITEM 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


During the nine months ended September 30, 2016, we issued 7,922,287 shares of common stock for services.


ITEM 3

DEFAULTS UPON SENIOR SECURITIES


None


ITEM 4

MINE SAFETY DISCLOSURES


N/A


ITEM 5

OTHER INFORMATION


None


ITEM 6

EXHIBITS


Exhibit

Number

Description

 

 

31.1

Section 302 Certification of Chief Executive Officer and Chief Financial Officer

32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002






Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


MOMENTOUS ENTERTAINMENT GROUP, Inc.

                           (Registrant)


By: /s/ Kurt E. Neubauer                   

Kurt E. Neubauer

Chief Executive Officer


November 14, 2016




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