UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

Amendment No. 1

(Mark One)

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

 

For the quarterly period ended June 30, 2017

 

[   ] 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.

 

PICTURE 1  

 

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 August 21, 2017, the number of shares of the Registrant’s common stock outstanding was 2,488,266,331.


1


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

21

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

27

ITEM 4

CONTROLS AND PROCEDURES

27

 

 

 

 

PART II

 

ITEM I

LEGAL PROCEEDINGS

28

ITEM 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

28

ITEM 3

DEFAULTS UPON SENIOR SECURITIES

28

ITEM 4

MINE SAFETY DISCLOSURES

28

ITEM 5

OTHER INFORMATION

28

ITEM 6

EXHIBITS

28

 

SIGNATURES

29


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.

 

The purpose of the Amendment No. 1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, filed with the Securities and Exchange Commission on August 21, 2017 (the “Form 10-Q”), is to furnish Exhibit 101 to the form 10-Q and to update the Consolidated Balance Sheets, Consolidated Statement of Operations, and Consolidated Statement of Cash Flows, along with Note 2 - Summary of Significant Accounting Policies, Note 8 – Segment Reporting, Note 9 - Accounts Payable and Accrued Expenses, and in the Management and Discussion sections - Operations and Liquidity.

 

No other changes have been made to the form 10-Q.

 

This Amendment No. 1 to the Form 10-Q continues to speak as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date of August 21, 2017.

 

Pursuant to rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1033, as amended, are deemed not filed for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.


3


MOMENTOUS ENTERTAINMENT GROUP, INC.

Consolidated Balance Sheets

June 30, 2017 and December 31, 2016

(Unaudited)

 

 

 

 

 

June 30,

2017

 

December 31,

2016

 

 

 

 

 

ASSETS

 

 

 

 

Current Assets:

 

 

 

 

Cash

$

18,219

$

15,704

Accounts receivable

 

126,653

 

-

Deferred production costs

 

51,670

 

47,543

Total Current Assets

 

196,542

 

63,247

Fixed assets

 

4,577

 

-

Intangible assets

 

2,617,885

 

-

Prepaid acquisition costs and other assets

 

29,600

 

23,397

Total Assets

$

2,848,604

$

86,644

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable

$

40,613,058

$

148,476

Accrued expenses

 

85,382

 

20,993

Taxes payable

 

631,997

 

-

Due to Company president

 

17,795

 

52,543

Convertible notes payable, net

 

311,676

 

164,000

Notes payable

 

214,571

 

18,735

Notes payable – related party

 

333,437

 

365,680

Derivative liability

 

1,155,595

 

913,079

Total Current Liabilities

 

43,363,511

 

1,683,506

Total Liabilities

 

43,363,511

 

1,683,506

 

 

 

 

 

Stockholders’ Deficit:

 

 

 

 

 

 

 

 

 

Preferred stock A: $0.001 par value, 1,000 shares issued and authorized

 

1

 

1

Preferred stock B: $0.001 par value; 50,000,000 shares authorized; 133,060 and 138,000 shares issued and outstanding

 

133

 

137

Common stock: $0.001 par value; 5,000,000,000 shares authorized; 1,128,433,976 and 520,921,319 shares issued and outstanding

 

1,128,434

 

520,921

Paid-in capital

 

1,415,209

 

1,417,371

Accumulated deficit

 

(43,058,684)

 

(3,535,292)

Total Stockholder's Deficit

 

(40,514,907)

 

(1,596,862)

Total

$

2,848,604

$

86,644

 

 

 

 

 

See accompanying notes to the financial statements.


4


MOMENTOUS ENTERTAINMENT GROUP, INC.

Consolidated Statement of Operations

For the Six Months Ended June 30, 2017 and 2016

(Unaudited)

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30

 

June 30

 

 

2017

 

2016

 

2017

 

2016

 

 

 

 

 

 

 

 

 

Revenue

$

138,390

$

-

$

171,631

$

2,500

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

Costs and expenses: server and programming

 

109,712

 

-

 

150,697

 

-

Marketing, general and administrative

 

607,568

 

167,057

 

961,189

 

413,836

Goodwill impairment loss

 

692,550

 

-

 

41,266,823

 

-

Total Operating Expenses

 

1,409,830

 

167,057

 

42,378,709

 

413,836

 

 

 

 

 

 

 

 

 

Loss from Operations

 

(1,271,440)

 

(167,057)

 

(42,207,078)

 

(411,336)

 

 

 

 

 

 

 

 

 

Other Income(Expense)

 

 

 

 

 

 

 

 

Interest expense

 

(93,830)

 

(63,784)

 

(106,277)

 

(283,229)

Depreciation expense

 

(3,109)

 

-

 

(3,109)

 

-

Change in derivative liability

 

242,516

 

48,022

 

37,927

 

38,935

Debt discount amortization

 

80,410

 

-

 

-

 

-

Foreign Currency -Gain

 

2,755,145

 

-

 

2,755,145

 

-

Total Other Expense

 

2,981,132

 

(15,762)

 

2,683,686

 

(244,294)

 

 

 

 

 

 

 

 

 

Net Income (Loss)

$

1,709,692

$

(182,819)

$

(39,523,392)

$

(655,630)

 

 

 

 

 

 

 

 

 

Net Income (Loss) Per Share: Basic

$

0.01

$

0.00

$

(0.11)

$

(0.01)

 

 

 

 

 

 

 

 

 

Net Income Per Share: Diluted

$

0.00

$

0.00

$

(0.11)

$

(0.01)

 

 

 

 

 

 

 

 

 

Weighted Average Number of Shares Outstanding: Basic

 

176,538,596

 

86,732,665

 

353,308,694

 

85,003,758

Weighted Average Number of Shares Outstanding: Diluted

 

2,731,222,074

 

 

 

 

 

 

 

 

See accompanying notes to the financial statements.


5


MOMENTOUS ENTERTAINMENT GROUP, INC.

Consolidated Statement of Stockholders’ Deficit

For the Six Months Ended June 30, 2017

(Unaudited)

 

 

 

 

 

Preferred

A

Stock

Preferred

B

Stock

Preferred

Stock

Amount

Common

Stock

Common

Stock Amount  

Additional

Paid-In

Capital

Accumulated

Deficit

Total  

 

 

Balance January 1, 2016

1,000

-

$ 1

81,380,810

$ 81,381

$ 764,274

$ (1,720,050)

$ (874,394)

Issuance of Preferred Stock B to President and Officers for services

-

137,000

137

-

-

163,863

-

164,000

Issuance of shares upon conversion of debt

-

-

-

393,885,364

393,885

227,585

-

621,470

Issuance of shares for services

-

-

-

24,255,620

24,256

342,228

-

366,484

Cancellation of Common Shares – Conversion of Common to Preferred

-

-

-

(53,501,800)

(53,502)

(27,000)

-

(80,502)

Issuance of Warrant Shares

-

-

-

74,901,325

74,901

(53,579)

-

21,322

Net loss

-

-

-

-

-

-

(1,815,242)

(1,815,242)

Balance, December 31, 2016

1,000

137,000

$ 138

520,921,319

$ 520,921

$1,417,371

$ (3,535,292)

$(1,596,862)

Issuance of shares upon conversion of debt

-

 

-

333,399,556

333,400

(229,018)

-

104,382

Issuance of shares for services

-

36,000

36

206,345,727

206,346

137,810

-

344,192

Issuance of Warrant Shares

-

 

-

1,680,417

1,680

55,093

-

56,773

Issuance of shares for S8 Acquisition

-

60

0

26,086,957

26,087

33,913

-

60,000

Cancellation of Preferred Shares - Conversion of Preferred to Common

-

(40,000)

(40)

40,000,000

40,000

40

-

40,000

Net loss

-

-

-

-

-

-

(39,523,392)

(39,523,392)

Balance, June 30, 2017

1,000

133,060

$ 134

1,128,433,976

$1,128,434

$1,415,209

$(43,058,684)

$(40,514,907)

 

 

 

 

 

 

 

 

 

See accompanying notes to the financial statements.


6


MOMENTOUS ENTERTAINMENT GROUP, INC.

Consolidated Statement of Cash Flows

For the Six Months Ended June 30, 2017 and 2016

(Unaudited)

 

 

 

2017

 

2016

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

Net (loss)

$

(39,523,392)

$

(655,630)

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

 

 

 

 

Issued stock for services

 

384,192

 

240,079

Issued warrants for services

 

-

 

9,322

Changes in accounts receivable

 

(126,653)

 

-

Change in deferred production costs

 

(4,127)

 

(21,968)

Change in prepaid assets and other assets

 

(6,203)

 

(20,901)

Change in accounts payable and accrued expenses

 

(45,302)

 

58,645

Impairment of goodwill

 

40,574,273

 

-

Debt discount amortization

 

235,277

 

-

Effect of changes in exchange rates

 

(3,052,090)

 

-

Change in taxes payable

 

631,997

 

-

Change in value of derivative liability

 

480,317

 

233,455

Cash Flows Provided (Used) by Operating Activities

 

(451,711)

 

(156,998)

 

 

 

 

 

CASH FLOW FROM INVESTING

 

 

 

 

ACTIVITIES

 

 

 

 

Purchase of fixed assets

 

(4,577)

 

-

Purchase of intangible assets

 

(75,334)

 

-

Cash Flows Provided (Used) by Investing Activities

 

(79,911)

 

-

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

Proceeds from notes payable

 

65,500

 

197,000

Repayments of related party notes payable

 

(15,013)

 

(9,000)

Proceeds from convertible debt

 

535,585

 

10,000

Repayments of notes payable

 

(17,187)

 

-

Due to company president

 

(34,748)

 

(41,016)

Cash Flows Provided by Financing Activities

 

534,137

 

156,984

 

 

 

 

 

NET CHANGE IN CASH

 

2,515

 

(14)

Cash, beginning of period

 

15,704

 

14

Cash, end of period

$

18,219

$

-

 

 

 

 

 

Supplemental Cash Flow Information:

 

 

 

 

Non-Cash Financing Transactions:

 

 

 

 

Issuance of shares for business acquisitions

$

2,365,000

$

-

Intangible assets from acquisition

 

75,334

 

-

Derivative liability

 

442,288

 

233,455

Issuance of shares to settle convertible notes

 

767,691

 

340,000

Total

$

3,650,313

$

573,455

 

 

 

 

 

See accompanying notes to the financial statements.


7


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

NOTE 1–ORGANIZATION

 

Momentous Entertainment Group, Inc. (“MMEG” or 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. We had very limited activities until June 2011 when the Company started designing a detailed business plan focused on four key business segments that receive revenues from their own specific target markets. The business segments also share synergies and products cross selling opportunities amongst themselves. This significantly increases their available addressable market and number of potential buyers, resulting in an increased sales and revenue generating potential.

 

The Company has evolved into an online social media network company. It is vertically organized into four business areas:

 

1) Social Networking; 

2) Social Gaming; 

3) Ecommerce consumer products and services; and 

4) OTT ( O ver- T he- T op) streaming media content creation and distribution. 

 

On March 10, 2017, the Company formed Online Technologies, Inc., a C corporation in the state of Wyoming for the ecommerce consumer products and services division.

 

On March 10, 2017, the Company formed Momentous Films, Inc., a C corporation in the state of Wyoming for the over-the-top streaming media content creation and distribution division.

 

On April 3, 2017, the Company formed Nutritional Systems, Inc., a C corporation formed in Wyoming for the nutritional products sales.

 

NOTE 2–SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting

 

The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a calendar year-end.

 

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.

 

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. Due to the recording of a foreign currency realized gain during the second quarter 2017, the Company shows net income of $1,709,692. The Company computed the diluted earnings per share by dividing the diluted shares of 2,731,222,074 by the average market price of $0.0005, which resulted in diluted earnings per share of $0.00.

 

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.


8


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

Business Combinations and Goodwill

 

The Company follows the guidance of FASB ASC 805, Business Combinations that requires that the acquisition method be used for all business combinations. An acquirer is required to recognize the identifiable acquired assets, the liabilities assumed and non-controlling interest in the acquire at the acquisition date, measured at their fair value as of that date. Additionally, FASB ASC 805- 10-25-23 requires acquisition-related costs to be recognized as expenses as incurred, rather than included in the cost allocated to the acquired assets and assumed liabilities. However, the costs to issue debt or equity securities should be recognized in accordance with other applicable GAAP. For all business combinations, the guidance requires the acquirer to recognize goodwill as of the acquisition date, measured as the excess of (a) over (b) :

 

a. The aggregate of the following: 

 

i. The transferred consideration measured in accordance with FASB ASC 805-30, which generally requires acquisition-date fair value.  

ii. The fair value of any noncontrolling interest in the acquiree. 

iii. In a business combination achieved in stages, the acquisition-date fair value of the acquirer’s previously-held equity interest in the acquiree. 

 

b. The net of the acquisition-date amounts of the identifiable acquired assets and assumed liabilities, measured in accordance with FASB ASC 805. 

 

If the amounts in (b) are in excess of those in (a) , a bargain purchase has occurred. Before recognizing a gain on a bargain purchase, FASB ASC 805-30-30-5 requires the acquirer to reassess whether it has correctly identified all the acquired assets and assumed liabilities and to recognize any additional assets or liabilities in that review. If an excess still remains, the acquirer should recognize the following gain in earnings on the acquisition date.

 

Accounting for acquisitions requires the Company to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates and assumptions to accurately value assets and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

 

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.

 

NOTE 3–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 June 30, 2017.

 

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.


9


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

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

 

NOTE 4 – ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

 

A table reflecting assets and liabilities measured at fair value by measurement basis as of June 30, 2017, is reflected below:

 

 

 

 

Description

 

Quoted Market Prices in

Active Markets for

Identical Assets

Level I

 

 

Significant Other

Observable Inputs

Level 2

 

 

Significant

Unobservable Inputs

Level 3

 

Intangible Assets

 

 

 

$

 

2,617,885

 

 

Convertible debt

 

 

$

311,676

 

 

Derivative liabilities

 

 

 

 

$

1,155,595

 

A table reflecting assets and liabilities measured at fair value by measurement basis as of December 31, 2016, is reflected below:

 

 

 

 

Description

 

Quoted Market Prices in Active Markets for Identical Assets

Level I

 

 

Significant Other Observable Inputs

Level 2

 

 

Significant Unobservable Inputs

Level 3

 

Intangible Assets

 

 

 

$

 

-

 

 

Convertible debt

 

 

$

164,000

 

 

Derivative liabilities

 

 

 

 

$

913,079

 

NOTE 5–DEFERRED PRODUCTION COSTS

 

At June 30, 2017, the Company incurred costs of $51,670 to develop the new Crossings musical CD, the reality TV series with Bobby Dale Earnhardt, and the reality TV series with Dennis Gile. These costs have been deferred and will be amortized when the finished products are available for sale.

 

NOTE 6–BUSINESS COMBINATIONS AND GOODWILL

 

Poolworks (Germany), Ltd.

 

On February 8, 2017, the Company executed Share Exchange Agreement with the shareholders of VZ Network Holdings, Inc., a Delaware company (the “Selling Company” or “VZ”), purchasing all the issued and outstanding shares of VZ for newly-issued preferred stock of MMEG, with VZ becoming a wholly-owned subsidiary of the Company. VZ owns 100% of the equity of Poolworks (Germany) Ltd, (PGL) a German company with offices in Berlin. Poolworks (Germany), Ltd. owns and operates the social-media networking platforms studiVZ and meinVZ directed and offered primarily to individuals located in the Republic of Germany.

 

In exchange for the VZN Common Stock, the Company issued to the VNZ Majority Shareholders an aggregate of 10,000 shares of non-redeemable, convertible shares of Series C preferred stock of the Company (the “Company Series C Preferred Stock”).


10


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

The Company amended its articles of incorporation to authorize an aggregate of 10,000 shares of Company Series C Preferred Stock. The Company’s Series C Preferred Stock:

 

does not pay a dividend;  

has a stated aggregate of $2,305,000, as to all shares of Company Series C Preferred Stock;  

upon liquidation or a sale of control of the Company is senior to the Company Common Stock;  

provides that upon the occurrence of a “conversion event” (defined as the listing of shares of Company Common Stock on a “qualified stock exchange” (as defined)), the Company Series C Preferred Stock shall automatically convert into 20% of the Company’s “fully-diluted Common Stock” (as defined) on the date of conversion; and  

votes with the company’s outstanding Common Stock on an “as converted” basis;  

 

A “qualified stock exchange” is defined as any one of the New York Stock Exchange, the Nasdaq Stock Exchange (including the Nasdaq Capital Markets) or the NYSE: Market Amex Exchange.

 

Due to a recent valuation of the Poolworks (Germany) Ltd. intangible assets, the final purchase price of 10,000 shares of non- redeemable, convertible shares of Series C preferred stock of the Company issued is valued at $2,305,000. The Company allocated the purchase price of VZ Network Holdings, Inc. to:

 

Intangible Assets:

 

 

Brand name and market awareness of brand

$

919,200

Trademarks

 

459,600

Domain names

 

229,800

Vendor contracts – marketing, game, email

 

344,700

Unpatented proprietary technology

 

344,585

Fixed Assets

 

7,115

Total

$

2,305,000

 

Upon the purchase of Poolworks (Germany), Ltd. on February 8, 2017, the Company assumed an old intercompany payable of $40,356,424, originating from a former owner, that consists of $31,478,802 payable and $8,877,622 of accrued interest on this payable.  The Company recognized goodwill of $40,574,273, but subsequently recorded an impairment of the goodwill since these amounts represent an intercompany with the Company and are not realizable. Due to the assumption of an old outstanding V.A.T. assessment between the Berlin Tax Authority and Poolworks (Germany), Ltd. the Company recorded a $692,550 tax liability, which was recorded as an impairment to goodwill.

 

At June 30, 2017, the trial balance of the Poolworks (Germany) Ltd. from the acquisition date of February 8, 2017 through June 30, 2017 was consolidated into the Momentous Entertainment Group, Inc.’s financial statements as follows:

 

Revenue

$

106,443

Costs of Goods Sold:

 

 

Web Server Costs

 

50,099

Gross profit

$

56,344

Administrative Costs:

 

 

Payroll

 

118,976

Office

 

9,509

Legal fees

 

4,595

Rent

 

7,653

Repairs & Maintenance

 

2,316

Phone Services

 

1,931

Travel

 

5,606

Depreciation

 

3,109

Total Operating Costs

 

153,695

Net Loss

$

(97,351)


11


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

NOTE 7–ASSET ACQUISITION

 

Purchase of the Chimera® Game assets

 

On March 10, 2017, the Company executed an Asset Purchase Agreement with Nathan Levine, an individual, to purchase the domain name, ChimeraCompanyGames.com (the “Website”), as well as other associated domain names, Internet Protocol address of the website, web development, software development, design work, engineering work, images and pictures displayed on the website, computer software, artwork, programs and documentation used in the operation of the website, all tangible property mentioned, including but not limited to equipment, business machines, computer hardware and software, tooling and other fixed assets or personal property, all intangible property, including but not limited to all rights, titles and interests of the Seller, if any, under any leases of property or equipment, all intellectual property rights, including but not limited to, trademarks, trade names, service marks, service names copyrights, telephone numbers, telephone listings, email listings, databases and the like, all contracts and agreements relating to the business inventories, accounts receivable, and all other assets used in the operation of the business. Not included in the sale was existing cash on hand and any causes of action not related to the purchased assets.

 

The purchase price was established as $320,000 with $190,000 paid in a combination of cash and preferred stock and the $130,000 balance financed by a 6% note payable that will be paid in 18 equal monthly payments commencing April 1, 2017. The preferred stock is convertible at the holder’s option into 60,000 shares of common stock.

 

On March 10, 2017, the Company allocated the $320,000 purchase price of the Chimera® Game assets to:

 

Intangible Assets:

 

Chimera® Trademark

$

50,000

Email addresses

 

100,000

Chimera® Online Games

 

170,000

 

 

 

Total

$

320,000

 

The Company also signed a consulting agreement with Nathan Levine under which Mr. Levine has agreed to assist in the development of games for which he will be paid by the issuance of unrestricted common stock with a market value of $60,000.

 

The Company also executed consulting agreements with Arkham Labs, developers of Chimera Games to continue the growth of the gaming platform by creating new games for the German social media platform (VZ), and Facebook as well as to update and maintain games currently running. Prioritizing time towards games with the highest earnings and new development with the highest projected return on investment. These games are to be fully-owned by the Company. Payment for work done will be made by the issuance of unrestricted common stock.

 

The Company also signed a support services agreement with Arkham Labs to provide customer support to Chimera gamers as they enjoy the various platforms.


12


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

NOTE 8–SEGMENT REPORTING

 

As of June 30, 2017, the segment reporting is as follows:

 

 

 

Poolworks

 

 

 

 

(Germany) Ltd.

 

Chimera Games

 

 

Social Networking

 

Social Gaming

 

 

 

 

 

Revenues

$

106,443

$

65,188

 

 

 

 

 

Cost of Goods Sold

 

50,099

 

100,598

 

 

 

 

 

Gross Profit (Loss)

$

56,344

$

(35,410)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets - Intangibles

$

2,305,000

$

320,000

 

 

 

 

 

Liabilities - Tax

$

631,997

$

-

 

NOTE 9–ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

At June 30, 2017, the Company assumed $40,309,226 in accounts payable, which relate to a Poolworks (Germany) Ltd intercompany with Momentous, originating from an intercompany with a former owner and the Company incurred $303,832 in accounts payable for administrative and professional fees.  The Company accrued $85,382 in interest and professional fees payable at June 30, 2017.

 

On April 19, 2017, the Company agreed to settle an old 2012 outstanding V.A.T. obligation between Poolworks (Germany), Ltd. and Finanzamt fur Korperschaften III (Berlin Tax Authority) for an amount of $692,550 through a monthly payment plan from April 28, 2017 through January 29, 2018. As of the June 30, 2017, the Company made payments of $60,553 against this tax payment plan, resulting in a balance of $631,997 note payable. Due to the assumption of this V.A. T. assessment by the Berlin Tax Authority, the Company recorded a $692,550 tax liability, which was recorded as impairment to goodwill

 

NOTE 10–CONVERTIBLE DEBT

 

The Convertible debt as of June 30, 2017, and December 31, 2016 consisted of the following Short-Term debt:

 

 

 

June 30,

 

December 31,

Description

 

2017

 

2016

LG Capital Funding

$

197,100

$

82,675

Quarum Holdings, LLC

 

134,495

 

80,325

Adar Bays, LLC

 

-

 

1,000

Power Up Lending Group, LLC

 

53,000

 

-

Actus Fund, LLC

 

75,000

 

-

Cerebus Finance Group, Inc.

 

28,890

 

-

Crossover Capital Fund II, LLC

 

36,750

 

-

Eagle Equities, LLC

 

26,750

 

-

JSJ Investments, Inc.

 

60,000

 

-

Total Convertible Notes

$

611,985

$

164,000

Less Debt Discount

 

(300,309)

 

-

Net Convertible Notes

$

311,676

$

164,000


13


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

The following is a table reflecting convertible debt activity for the six-month period ended June 30, 2017:

 

Description

 

Amount

 

Balance January 1, 2017

 

$

 

164,001

Proceeds of new notes

 

535,585

Conversions

 

(87,601)

 

Balance June 30, 2017

 

$

 

611,685

 

At June 30, 2017, the Company is obligated under convertible notes payable with an aggregate principal balance of $611,985, all of which mature in by February 2018. The notes are convertible at variable prices on the closing bid. The Company recorded debt discount of $300,309 from a derivative valuation of all the convertible promissory notes at June 30, 2017. The net value of the Convertible Promissory Notes at June 30, 2017 is $311,676.

 

On January 20, 2017, the Company entered into a $84,263 convertible promissory note with LG Capital Funding, LLC, bearing interest at 8%, with a maturity date of January 20, 2018. The note is convertible into common shares at a 45% discount to the lowest closing bid price with a 20 day look back. This agreement also includes an additional note of $84,263, for which the Company has not taken. The Company incurred legal fees of $3,750 and broker fees of $7,500 associated with this note. The Company issued a warrant exercisable into 11,253,333 common shares at an aggregate exercise amount of $16,853.

 

On February 8, 2017, the Company entered into a convertible promissory note with LG Capital Funding, LLC for $84,263, bearing interest at 8% with a maturity date of February 8, 2018. This note is convertible into common shares at a 45% discount to the lowest closing bid price with a 20 day look back. The agreement also includes another $84,263 promissory note that the Company has not taken. The Company incurred $3,750 in legal fees, $5,513 in original issue discount fees, and $7,500 in legal fees associated with this note. On February 8, 2017, the Company issued 3,370,000 in warrants to LG Capital Funding, LLC, exercisable into 3,370,000 shares of common stock at a price per share of $0.005 or an aggregate price of $16,850.

 

LG Capital Funding, LLC converted a total of $55,241, $54,100 in principal amount of notes payable and $1,141 of accrued interest into 165,353,986 shares of the Company’s common stock during the dates as follows:

 

Date Issued

 

Shares Common

 

Conversion

Price Per

Share

 

Interest

 

Principal

 

Total

1/3/2017

 

23,958,961

$

0.000385

$

24

$

9,200

$

9,224

1/12/2017

 

24,000,857

 

0.000385

 

40

 

9,200

 

9,240

2/9/2017

 

24,694,204

 

0.00044

 

115

 

10,750

 

10,865

5/10/2017

 

16,508,489

 

0.00049

 

239

 

7,850

 

8,089

6/9/2017

 

26,030,142

 

0.00028

 

288

 

7,000

 

7,288

6/27/2017

 

50,161,333

 

0.00021

 

434

 

10,100

 

10,534

Total

 

165,353,986

 

 

$

1,141

$

54,100

$

55,241

 

On January 20, 2017, the Company entered into a $28,890 convertible promissory note with Quarum Holdings LLC, bearing 8% interest, with a maturity date of January 20, 2018. The Company incurred $2,000 in legal fees and $1,890 in original issue discount fees associated with this note. This note is convertible into common shares at a price equal to 55% of the Company’s common stock of the lowest bid price for the twenty prior trading days. In addition, the Company issued a warrant exercisable into 3,852,000 shares at an aggregate exercise amount of $5,778 to Quarum Holdings, LLC.

 

On February 2, 2017, the Company entered into a $28,890 convertible promissory note with Quarum Holdings, LLC, bearing interest at 8% with a maturity date of February 8, 2018. This note is convertible into common shares at a price equal to 55% of the Company’s common stock of the lowest bid price for the twenty prior trading days. This note also includes another $28,890 for which the Company has not taken. The Company incurred $2,000 in legal expenses, $1,890 in original issue discount fees and $2,000 in investor fees, and $2,000 in lender fees associated with this note.


14


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

On February 8, 2017, the Company entered into a $28,890 convertible promissory note with Quarum Holdings, LLC, bearing interest at 8% with a maturity date of February 8, 2018. This note is convertible into common shares at a price equal to 55% of the Company’s common stock of the lowest bid price for the twenty prior trading days. This note also includes another $28,890 for which the Company has not taken. The Company incurred $2,000 in legal expenses, $1,890 in original issue discount fees and $2,000 in investor fees associated with this note.

 

Quarum Holdings, LLC converted a total of $49,527, $48,135 of principal amount of notes payable and $1,392 of accrued interest into 168,045,570 shares of common stock during the following dates:

 

Date

Issued

 

Shares

Common

 

Conversion

Price

Per Share

 

Interest

 

Principal

 

Total

1/5/2017

 

12,987,013

$

0.000385

$

-

$

5,000

$

5,000

1/12/2017

 

27,622,129

 

0.000385

 

-

 

10,635

 

10,635

6/1/2017

 

41,600,000

 

0.00035

 

560

 

14,000

 

14,560

6/21/2017

 

41,053,571

 

0.00028

 

495

 

11,000

 

11,495

6/29/2017

 

44,782,857

 

0.000175

 

337

 

7,500

 

7,837

 

 

168,045,570

 

 

$

1,392

$

48,135

$

49,527

 

On February 9, 2017, Quarum Holdings, LLC converted 1,680,417 warrant shares of the Company’s common stock at a conversion rate of $0.00077 per share, or an aggregate total of $1,294.

 

On January 4, 2017, the Company entered into a $28,000 convertible promissory note with the Power Up Lending Group, Ltd, bearing 8% interest, with a maturity date of October 28, 2017. The Company incurred legal costs of $2,000 and original issue discount fees of $1,000 associated with this note. The conversion price shall be subject to a discount of 45%, determined on the basis of the three lowest closing bid prices for the Company’s common stock during the prior 15 trading day period.

 

On February 9, 2017, the Company entered into a $25,000 convertible promissory note with Power Up Lending Group, Ltd, bearing interest at 8%, with a maturity date of 180 days. The conversion price shall be subject to a discount of 45%, determined on the basis of the three lowest closing bid prices for the Company’s common stock during the prior 15 trading day period. The Company incurred legal costs of $2,000 and $1,000 in investor fees associated with this note.

 

February 8, 2017, the Company entered into a $28,890 convertible promissory note with Cerberus Finance Group, LTD, bearing interest at 8% with a maturity date of February 8, 2018. This note is convertible into common shares at a price equal to 55% of the lowest closing bid of the Company’s common stock as reported on the OTC exchange for the twenty prior trading days. This note also includes another $28,890 note for which the Company has not taken. The Company incurred $2,000 in legal fees and $1,890 in original interest discount fees associated with this note. The Company issued a warrant exercisable into 1,155,600 shares of common stock with an aggregate value of $5,778 to Cerberus Finance Group, Ltd.

 

On February 10, 2017, the Company entered into a $36,750 convertible promissory note with Crossover Capital Fund II, LLC, bearing interest at 8% with a maturity date of February 10, 2018. This note is convertible into common shares at a price equal to 60% of the lowest trading price of the Company’s common stock for the twenty days prior trading days. The Company incurred legal fees of $2,000, original issue discount fees of $1,750, and investor fees of $3,500 associated with this note.

 

On February 15, 2017, the Company entered into a $60,000 convertible promissory note with JSJ investments, with a 12% interest rate, with a maturity date of nine months from issuance. This note is convertible into common shares at a price equal to a 45% discount to the lowest closing bid during the previous twenty trading days. The Company incurred $2,000 in legal fees and $4,200 in original issue discount fees associated with this note.

 

On February 16, 2017, the Company entered into a $75,000 convertible promissory note with Auctus Fund, LLC, bearing interest at 12% with a maturity date of November 16, 2017. This note is convertible into common shares at a price equal to the lesser of 55% multiplied by the lowest trading price during the previous twenty-day trading period and the variable conversion price of 50% of the market price, which is the lowest trading price during the last twenty-five trading days. The Company incurred $2,750 in legal fees, $7,000 in lender fees, and $3,263 in broker fees associated with this note.


15


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

On January 20, 2017, the Company issued a warrant to Quarum Holdings, LLC, exercisable into 3,852,000 shares of common stock at a price per share of $0.0015 or an aggregate price of $5,778. On February 8, 2017, the Company issued a warrant to Quarum Holdings, LLC exercisable into 1,155,600 shares of common stock at a price per share of $0.005 or an aggregate price of $5,778.

 

On February 23, 2017, the Company entered into a $26,500 convertible promissory note with Eagle Equities, LLC, bearing interest at 8% with a 12-month term. This note is convertible into common shares at a price equal to the lesser of 45% discount to the lowest closing bid price with a 20 day look back. The Company incurred $3,000 in legal fees and $1,750 in lender fees associated with this note. On February 23, 2017, the Company issued 2,140,000 in warrants to Eagle Equities, LLC at a price per share of $0.0025 or an aggregate price of $5,350.

 

NOTE 11–LOANS

 

On March 10, 2017, the Company entered into a note payable with Nathan Levine for $130,000 as part of the financed purchase of the Chimera Games assets. The $130,000 note bears interest at 8% and is due in 18 equal monthly payments commencing on April 1, 2017.

 

On April 28, 2017, the Company entered into a note payable with Veyo Partners, LLC for the principal amount of $28,000, bearing interest at 6%, with 12 monthly installments of $2,333, plus accrued interest, beginning October 1, 2017.

 

On May 18, 2017, the Company entered into a note payable with Michael Pope for the principal amount of $10,000, bearing interest at 6%, with 12 monthly installments of $833, plus accrued interest, beginning on October 1, 2017.

 

On June 9, 2017, the Company entered into a note payable with Veyo Partners, LLC for the principal amount of $7,000, bearing interest at 6%, with 12 monthly installments of $583, plus accrued interest, beginning on July 9, 2017.

 

On June 12, 2017, the Company entered into a Line of Credit with Mulligan Loans, LLC for the total amount of $27,675, including interest, payable in 189 daily payments of $146. As of June 30, 2017, the outstanding balance on this line of credit was $19,841.

 

As of June 30, 2017, the Company had a non-interest bearing, unsecured note for $17,230 with a former officer and director of the Company.

 

NOTE 12–DEMAND LOANS FROM RELATED PARTY

 

At June 30, 2017, the Company was obligated for demand loans aggregating $333,437 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 bear interest at 3% per annum. The Company accrued $17,795 in interest to the Company’s President on this loan.

 

NOTE 13–DERIVATIVE LIABILITIES

 

The Company identified the conversion features embedded within its convertible debts as financial derivatives. The Company has determined that the embedded conversion option should be accounted for at fair value.

 

Description 

 

Amount

Derivative liabilities - December 31, 2016

$

913,079

Add fair value at the commitment date for convertible notes issued during the current year

 

2,546,005

Less derivatives due to conversion

 

(670,687)

Fair value mark to market adjustment for derivatives

 

(1,632,802)

Derivative liabilities – June 30, 2017

$

1,155,595

 

The Company recorded derivative interest expenses for the period ended June 30, 2017 of $161,846. 


16


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions during the current quarter:

 

Assumption

 

Commitment

Date

 

Re-measurement

Date

 

 

 

 

 

Expected dividends

 

-%

 

-%

Expected volatility

 

362-388%

 

61-396%

Expected term in years

 

.71 - 1.74 Yrs

 

0.01 - 1.61 Yrs

Risk free interest rate:

 

.63 - 1.2%

 

.71 - 1.24%

 

NOTE 14–SHARE CAPITAL

 

During 2016, the Company issued 333,399,566 shares of common stock for promissory note conversions as outlined in Note 10.

 

On February 7, 2017, the Company issued 5,000 shares of the Company’s Preferred Series B stock to Laureen Falco, Chief Accounting Officer for $5,000 in services.

 

On February 7, 2017, the Company issued 30,000 shares of the Company’s Preferred Series B stock to David Micek, Senior V.P of Corporate Development, for $30,000 in services. On April 18, 2017, the Company issued 19,770,604 of common shares to David Micek for services.

 

On February 7, 2017, the Company issued 1,000 shares of the Company’s Preferred Series B stock to Dennis Gile for $1,000 in services.

 

On February 9, 2017, Quarum Holdings, LLC exercised a warrant into 1,680,417 shares of the Company’s common stock at a conversion rate of $.003815 per share or $1,293.

 

On March 21, 2017, the Company issued 9,261,958 shares of the Company’s common stock at $.0374 per share to Carter Terry for broker services or $34,640.

 

On March 21, 2017, the Company issued 26,086,957 shares of the Company’s common stock at $0.0023 for $60,000 to Nathan Levine as part of the S8 acquisition of Chimera® Game assets. The Company also issued 60 shares of Preferred Series B stock to Nathan Levine as part of the S8 acquisition of the Chimera® Game assets.

 

From March 21 through June 29, 2017, the Company issued 186,575,123 common shares for merger and acquisition services, finance services and investor services.

 

Due to the recording of a foreign currency realized gain during the second quarter 2017, the Company shows net income of $1,709,692. The Company computed the diluted earnings per share by dividing the diluted shares of 2,731,222,074 by the average market price of $0.0005, which resulted in diluted earnings per share of $0.00.

 

NOTE 15–RELATED PARTY TRANSACTIONS

 

At June 30, 2017, the Company had accrued interest on the demand note of $17,795 due to its President. This amount principally relates to payments made by the Company’s President on behalf of the Company in connection with administrative expenses, deferred production costs on the reality TV series and accrued interest on the $333,437 demand loan by the Company’s President.


17


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

NOTE 16–2017 NON-STATUTORY STOCK OPTION PLAN

 

In March 2017, the Company adopted its 2017 Non-Statutory Stock Option Plan (hereinafter referred to as the “Plan”), the nature and purpose of which is to compensate the Company’s officers, directors, employees, and consultants (hereafter, collectively, “Participants” or individually a “Participant”) for services rendered to the Company and to generate an increased incentive to contribute to the progress of the Company. The Plan is attached as an exhibit to this filing and provides for the issuance of up to 150,000,000 shares of the Registrant’s common stock (par value $.001) in connection with common stock purchase options granted under the Plan (grants of common stock purchase options are hereafter generically referred to as “Awards.” Awards under the Plan may be made at any time up until March 15, 2027 (the “Plan Expiration Date”).

 

The Company’s Board of Directors (“Board”) may appoint and maintain as administrator of this Plan the Compensation Committee (the “Committee”) of the Board which shall consist of at least three members of the Board. Until such time as the Committee is duly constituted, the Board itself shall have and fulfill the duties herein allocated to the Committee. The Committee shall have full power and authority to designate Plan participants, to determine the provisions and terms of respective Awards (which need not be identical as to number of shares covered by any Award, the method of exercise as related to exercise in whole or in installments, or otherwise), including the Award price, and to interpret the provisions and supervise the administration of this Plan.

 

The purchase price of each share of stock placed under the Award shall be determined by the Board not be less than ten percent (10%) of the fair market value of such share on the date the Award is granted or more than the fair market value of such share on the date the Award is granted.

 

The stock subject to this Plan shall consist of un-issued shares or previously issued shares reacquired and held by the Company or any affiliated corporation, and such amount of shares shall be and is hereby reserved for sale for such purpose.

 

The Award exercise period shall be a term determined by the Committee but not for a period of more than ten years from the date of grant.

 

The Plan is not qualified under Section 401(a) of the Internal Revenue Code. To the extent that a participant receives an Award of common stock purchase options with an exercise price below the fair value of the underlying common stock, such Participant may recognize ordinary income with respect to the difference between the exercise price and fair value. To the extent that a Participant receives an Award of common stock, the Participant will recognize ordinary income equal to the aggregate fair market value of the shares issued to the Participant as of the date of issuance.

 

The termination of a participant’s directorship, employment, consulting relationship may result in the forfeiture of any unvested portion of an Award granted under the Plan. Moreover, any Award of common stock purchase options must be exercised within six months of the cessation of a Participant’s directorship, employment, or consulting relationship with the Company, as applicable. In the case of a participant’s death, such exercise period is extended an additional six months. In the case of a Participant’s termination or removal for “cause” as defined in the Plan, any unvested portion of an Award of common stock purchase options or other securities shall be immediately forfeited to the Company.

 

The Company filed a Registration Statement on Form S-8 in March 2017 to register those 150,000,000 shares of common stock underlying the options in the Plan.


18


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

NOTE 17–SUBSEQUENT EVENTS

 

Notes Payable

 

Subsequent to June 30, 2017, the Company entered into notes payable with the following lenders:

 

Date of

Loan

 

Lender

 

Amount

 

Interest

Rate

 

Draw

Date

7/26/2017

 

Veyo Partners, LLC

 

6,500

 

6%

 

7/26/2017

8/8/2017

 

Cerebus Finance Group, Ltd

 

107,527

 

8%

 

8/10/2017

2/8/2017

 

Cerebus Finance Group, Ltd

 

28,890

 

8%

 

8/8/2017

1/20/2017

 

Quarum Holdings

 

28,890

 

8%

 

8/11/2017

2/8/2017

 

Quarum Holdings

 

28,890

 

8%

 

8/11/2017

12/12/2016

 

LG Capital

 

45,675

 

8%

 

8/11/2017

8/9/2017

 

LG Capital

 

53,763

 

8%

 

8/15/2017

 

 

 

 

 

 

 

 

 

Total

 

 

 

300,135

 

 

 

 

 

Warrants

 

Subsequent to June 30, 2017, the company entered into warrant agreements with the following shareholders:

 

 

Date

Shareholder

Total Shares

Total Amount

 

 

 

 

8/8/2017

Cerebus Finance Group, Ltd.

26,881,250

$ 21,505

8/10/2017

LG Capital Funding, LLC

21,505,000

10,750

Total

 

48,386,250

$ 32,255

 

Note Payable Conversions:

 

Subsequent to June 30, 2017, LG Capital Funding, LLC converted a total of $79,894, $76,565 in principal amount of notes payable and $3,329 in accrued interest into 668,592,926 shares of common stock during the following dates:

 

Date Issued

 

Shares

Common

 

Conversion

Price Per

Share

 

Interest

 

Principal

 

Total

7/7/2017

 

55,990,214

$

0.000140

$

339

$

7,500

$

7,839

7/12/2017

 

61,280,142

 

0.000140

 

379

 

8,200

 

8,579

7/17/2017

 

66,394,000

 

0.000140

 

420

 

8,875

 

9,295

7/21/2017

 

29,942,857

 

0.000140

 

192

 

4,000

 

4,192

7/23/2017

 

53,944,285

 

0.000140

 

290

 

7,263

 

7,552

7/31/2017

 

79,313,238

 

0.000105

 

328

 

8,328

 

8,656

8/4/2017

 

97,220,095

 

0.000105

 

408

 

9,800

 

10,208

8/8/2017

 

112,218,667

 

0.000105

 

483

 

11,300

 

11,783

8/11/2017

 

112,289,428

 

0.000105

 

490

 

11,300

 

11,790

Total

 

668,592,926

 

 

$

3,329

$

76,565

$

79,894


19


MOMENTOUS ENTERTAINMENT GROUP, INC.

Notes to the Consolidated Financial Statements June 30, 2017

(unaudited)

 

Subsequent to June 30, 2017, Quarum Holdings, LLC converted a total of $80,088, $76,715 in principal amount of notes payable and $3,373 in accrued interest into 569,906,095 shares of common stock during the following dates:

 

Date Issued

 

Shares

Common

 

Conversion

Price Per

Share

 

Interest

 

Principal

 

Total

7/7/2017

 

52,328,571

$

0.00014

$

326

$

7,000

$

7,326

7/13/2017

 

59,714,285

 

0.00014

 

360

 

8000

 

8,360

7/18/2017

 

37,500,000

 

0.00014

 

250

 

5,000

 

5,250

7/20/2017

 

78,375,000

 

0.00014

 

473

 

10,500

 

10,973

7/20/2017

 

84,342,857

 

0.00014

 

508

 

11,300

 

11,808

7/31/2017

 

43,036,015

 

0.00014

 

301

 

6,025

 

6,326

8/3/2017

 

96,571,428

 

0.00014

 

520

 

13,000

 

13,520

8/7/2017

 

102,142,857

 

0.00014

 

550

 

13,750

 

14,300

8/7/2017

 

15,895,082

 

0.00014

 

85

 

2,140

 

2,225

Total

 

569,906,095

 

 

$

3,373

$

76,715

$

80,088

 

Subsequent to June 30, 2017, Power-Up Lending Group, Ltd. converted a total of $29,120, $28,000 in principal amount of notes payable and $1,120 in accrued interest into 121,333,334 shares of common stock during the following dates:

 

Date Issued

 

Shares

Common

 

Conversion

Price Per

Share

 

Interest

 

Principal

 

Total

7/12/2017

 

59,666,667

$

0.00024

$

1,120

$

13,200

$

14,320

7/13/2017

 

61,666,667

 

0.00024

 

-

 

14,800

 

14,800

Total

 

121,333,334

 

 

$

1,120

$

28,000

$

29,120

 

Stock Purchase of Blackfox, Inc.

 

On May 15, 2017, the Company entered into a Stock Purchase Agreement with Blackfox, Inc.(Blackfox) to purchase the company and website Blackfox.io, dedicated to mobile marketing for affiliates using in-house technology. The Company agreed to the terms of an 100% equity interest in Blackfox in exchange for $1,500,000.

 

The structure of the purchase price and payments are as follows:

 

a. The Company agrees to pay a non-refundable $5,000 deposit into an escrow account. 

b. The Company agrees to pay an additional $25,000 deposit prior to closing. 

c. Due at closing: $100,000. 

d. Due at closing: $200,000 in shares of the Company’s common stock with a six-month hold restriction after closing. The shares will be issued for the nominal value on closing. 

e. Due at closing: 1,000 shares of Preferred B stock valued at 1,000,000 shares of common stock. 

f. Due five months from closing: $227,500 on November 5, 2017. 

g. Note Payable: $142,500 paid in 12 equal monthly installments to the seller-broker. 

h. Note Payable: $500,000 note payable, paid in 48 equal monthly installments of principal and interest at 6% per annum. 

i. $300,000 in the form of owner salary paid in six equal monthly payments after closing for a consulting agreement.  

 

On August 12, 2017, the Company closed on the asset purchase of Blackfox, Inc. for $1,500,000.

 

Increase in Capitalization

 

On August 8, 2017, the Company amended the articles of incorporation in the state of Nevada to increase the total authorized shares

of common stock to 9,950,000,000 at par value of $0.001.


20


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-K. 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 June 30, 2017. 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. 


21


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.

 

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 second 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 operates within four segments of the media industry: social networking, social gaming, ecommerce sold consumer products and services, and OTT ( O ver- T he- T op) streaming media content creation and distribution.

 

With more than 11 million online registered users worldwide, MMEG’s value proposition serves multiple stakeholders: 1) Social network users, 2) OTT content users, 3) Online gamers, and 4) Consumers looking to buy products and services through our e-commerce portal and our social network.

 

Our principal efforts for the coming months will be preparing and developing the following:

 

1. Social Media Network  

 

On February 8, 2017, the Company executed a Share Exchange Agreement with the shareholders of VZ Network Holdings, Inc., a Delaware company (the “Selling Company” or “VZ”), purchasing all the issued and outstanding shares of VZ for 10,000 shares of newly-issued preferred C stock of MMEG, with VZ becoming a wholly-owned subsidiary of MMEG. VZ owns 100% of the equity of Poolworks (Germany) Ltd, a German company with offices in Berlin. The Company’s preferred C stock has an aggregate value of $2,305,000, as to all shares of Company Series C Preferred Stock. Poolworks (Germany), Ltd. owns and operates the social media networking platforms studiVZ and meinVZ directed and offered primarily to individuals, located in the Republic of Germany.

 

The studiVZ platform was founded in 2005 in Berlin and received investment capital from Lukasz Gadowski, Georg von Holtzbrinck Publishing Group and the Samwer brothers. It was acquired along with meinVZ by Georg von Holtzbrinck Publishing Group in 2007 for 85 million euros, and then by financiers Michael Pope and Adam Levin in 2012. Today, studiVZ and meinVZ has nearly 10 million registered users and over 41M ad impressions, largely in the German-speaking countries of Germany, Switzerland and Austria. MMEG is committed to relaunching the Poolworks (Germany) Ltd. web and mobile platforms to increase user engagement and retention. Users will see expanded video features such as a new OTT streaming service and easy-to-use e-commerce capabilities to attract a wider audience and additional revenue. The executive team at MMEG is committed to maintaining a strong focus on information security for its users, something that competing German social networks continue to neglect.

 

2. Social Gaming  

 

On March 10, 2017, the Company executed an Asset Purchase Agreement with Nathan Levine, an individual, to purchase the domain name, ChimeraCompanyGames.com (the “Website”), as well as other associated domain names, Internet Protocol address of the website, web development, software development, design work, engineering work, images and pictures displayed on the website, computer software, artwork, programs and documentation used in the operation of the website, all tangible property mentioned, including but not limited to equipment, business machines, computer hardware and software, tooling and other fixed assets or personal property, all intangible property, including but not limited to all rights, titles and interests of the Seller, if any, under any leases of property or equipment, all intellectual property rights, including but not limited to, trademarks, trade names, service marks, service names copyrights, telephone numbers, telephone listings, email listings, data bases and the like, all contracts and agreements relating to the business inventories, accounts receivable, and all other assets used in the operation of the business. Not included in the sale was existing cash on hand and any causes of action not related to the purchased assets.


22


The purchase price was established as $320,000 with $190,000 paid in a combination of cash and preferred stock and the $130,000 balance financed by a 6% note payable that will be paid in 18 equal monthly payments commencing April 1, 2017. The preferred stock is convertible at the holder’s option into 60,000 shares of common stock.

 

ChimeraCompanyGames.com is a well-established game platform with a portfolio of seven popular games and a loyal user community containing over one million users and 550,000 email addresses which produce an excellent ADPU (Average Dollar Per User) that exceeds the gaming industry average .

 

The asset purchase includes two website domains, www.ChimeraCompanyGames.com and www.ChimeraCompany.com, all online and social media games currently available on these websites, several Facebook social media accounts, all current customer accounts which include one million unique users, and 550,000 email addresses. The games within the Chimera portfolio include:

 

a) The Mob: Rise of the Don 

b) Monster Island 

c) Renegade 

d) Zombie Rezurrection 

e) Syndicate 

f) Mercenary Star 

g) Heroes: Knights of the Realm 

 

The assets are monetized by offering free to play games on social media and web portals with premium currency sold in the game. The current primary driver of user traffic comes from Facebook, but additional customers play the games directly on the Chimera games website portal at www.chimeracompanygames.com. MMEG will be expanding the worldwide usage and revenue generation of these social games by making them available on MMEG’s previously acquired Poolworks (Germany) Ltd (MeinVZ and StudiVZ) social media networks in Germany, Austria and Switzerland.

 

3. Ecommerce Marketing  

 

Although the Company has no current ecommerce business or business units, it plans sometime in the second quarter of 2017, to close on a Letter of Intent that was signed and announced in February 2017, with BD Health Partners, LLC to acquire their NeuroFuse supplement brand. If completed, this will be MMEG’s first ecommerce marketing acquisition. No assurances can be made that the acquisition will close.

 

4. Online Streaming Distribution and Content Development  

 

The Company is planning to deliver film, TV and sports content on a video on demand and subscription business model to its wholly-owned subsidiary, VZ Networks, Inc’s subsidiary, Poolworks (Germany) Ltd., one of Germany’s largest social media platform with almost 10 million 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 Poolworks (Germany), Ltd.

 

Reality TV Series

 

The Company’s two planned reality TV series, The Bobby Earnhardt Show and Dennis Gile: Quarterback Academy, are 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. 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 2017.


23


Summary of Current Roll-up Strategy

 

MMEG is developing a roll-up strategy to acquire distribution technology companies such as social media platforms, subscription based platforms and ecommerce products that can utilize these platforms for the delivery of both content and e-commerce sold products at the same time. MMEG will look to acquire future products, services and technologies to be used and made available through its social media network (meinVZ and studiVZ) allowing access to the Company’s full line of products, services and content over the internet and via mobile devices.

 

In addition to the Company’s roll-up strategy, MMEG will concentrate on reality content production for its Earnhardt and Gile Sports related reality projects for the next 12 months because of the agreements in place and additional ones being negotiated.

 

Co-Productions – involve raising and providing funds for films that have started production and require additional financing. If we are able to obtain financing through management contacts, we could be selective in these ventures which potentially benefit MMEG. The co-financing scenarios and requirements would look like this:

 

A studio project that is well-packaged with a good script, key actors, and notable director;  

An independent film project that is well-packaged with a good script, key actors, and notable Director with 50% financing in place; or  

An independent film project that is well-packaged with a good script, key actors, and notable director with worldwide distribution in place.  

 

Studios also often hire film production companies to produce films from their large inventories because they do not have the time and/or financial capability to undertake these projects due to emphasis being placed on larger mega productions. When the studio and the production company agree on a budget for the film, the production company keeps the difference between the budget and the actual cost of production, as well as a producer’s fee and a fixed percentage of the film’s income from all distribution sources.

 

MMEG’s ability to produce quality films at or under budget will stem from low overhead and strong relationships with industry suppliers. As MMEG will not receive funds (other than the producer’s fee which is paid over the course of production) from the studio until after the film is delivered, interim financing will be arranged to cover the cost of producing the film. A completion bond will be mandatory. We cannot provide any assurances as to the likelihood of being able to obtain interim financing or a completion bond.

 

Acquisition to Rights of Finished Films: we will identify potentially profitable, generally low-budget, films through our network of independent filmmakers as well as industry festivals and trade shows like Sundance, Tribeca, Cannes, and Toronto.

 

While it is possible that one or more of these films will be distributed in theaters, our business plan only relates to revenue sources from non-theatrical outlets.

 

We will negotiate to acquire the rights to license (as sales agent) these films for a period of seven to 25 years in return for a commission ranging from 10-30% of the licensing fees paid by the distributors. In some cases, we will incur minimal upfront costs including: advances to the filmmaker, costs for finalizing the film, and marketing costs. Upon signing a sales agent contract, we and the filmmakers will agree on the “market attendance fees”, trailer/artwork and other marketing costs. These costs, along with any advances to the filmmaker and/or costs to complete the film, will be recouped before any proceeds are paid to the filmmaker. We estimate that we will incur costs of approximately $25,000 to $150,000 per film to prepare marketing materials including the production of a trailer, artwork, etc.

 

MMEG will market these films to distributors in domestic by utilizing its relationships with distributors for various markets, as well as through industry shows and conferences. In the future, MMEG will consider distributing in international markets to be determined. However, no specific plans exist at this time and will not be undertaken unless and until we have the resources to do so.

 

Musical Concerts: our business plan includes the sponsoring of live concerts and other musical events. On March 24, 2016, we incorporated a wholly-owned subsidiary, Music One Corp., which will be the entity that manages these events.

 

All aspects of MMEG’s business plans require financing to implement. The Company is seeking such financing in a variety of places. No assurances can be given as to the likelihood or timing of receiving the necessary financing to implement all or any part of MMEG’s business plan.


24


Competition

 

The competition in the film and reality television industries ranges from major film production companies and networks to small independent film makers and distributors.

 

The videogames industry is highly competitive with multiple customer segments on multiple technology platforms. Most video games are not successful. The industry is highly competitive in terms of getting funding and/or contracts. In addition, the costs, risks, and complexities of developing games are continually increasing, making the entire process more difficult and competitive.

 

The competition in the social media industry is driven by consumer and business needs for information and entertainment. The profitability of individual companies depends on their ability to deliver relevant information to consumers and to offer advertisers desirable target markets. Large companies enjoy economies of scale in marketing and in their ability to develop and maintain multiple websites. Smaller companies can compete by focusing on niche markets. The US industry is highly concentrated: the top 50 companies account for about 80% of revenue.

 

Advertising is a major source of revenue, and Google holds the largest share. Facebook holds the second-largest share. Other market leaders include Microsoft, Yahoo!, and Twitter.

 

Companies in the internet publishing, broadcasting, and search portal industry also compete with other publishers and broadcasters, and with the internet-related businesses of leading technology and entertainment companies. Primary competitors for advertising spending include television, newspapers, magazines, and radio companies.

 

The competition for e-commerce solutions is extremely competitive and we may find ourselves unable to compete effectively. Because there are relatively low barriers to entry in the e-commerce market, we expect continued intense competition as current competitors expand their product offerings and new competitors enter the market. In addition, our clients and partners may become competitors in the future. Increased competition is likely to result in price reductions, reduced margins, longer sales cycles and a decrease or loss of our market share, any of which could negatively impact our revenue and earnings.

 

Most of these competitors have significantly more financial resources than do we. Our principal method to compete is to utilize the knowledge, experience and contacts of our management team. We cannot provide any assurances as to the likelihood of our success in this regard.

 

Intellectual Property

 

The Company currently owns the proprietary software games purchased with the ChimeraCompanyGames.com and websites and domain names with Poolworks (Germany), Ltd.

 

Operations

 

A summary of operations for the years ended June 30, 2017 and 2016 as follows:

 

 

 

2017

 

2016

Revenue

$

171,631

$

2,500

Costs and Expenses: server and programming

 

150,697

 

-

Marketing, general and administrative

 

961,189

 

413,836

Goodwill impairment loss

 

41,266,823

 

-

Loss from operations

$

(42,207,078)

$

(411,336)

Interest expense

 

(106,277)

 

(283,229)

Depreciation expense

 

(3,109)

 

-

Change in derivative liability

 

37,927

 

38,935

Foreign currency gain

 

2,755,145

 

-

Net loss

$

(39,523,392)

$

(655,630)


25


As of June 30, 2017, the Company earned advertising revenue from its subsidiary Poolworks (Germany) Ltd and revenue from Chimera Games of $171,931 and expensed operating costs of web server expenses and programming fees of $150,697. The Company expensed marketing, general and administrative expenses of $961,189, which consists of office expenses, marketing expenses, merger and acquisition consultants, valuation consultants, audit, accounting and tax professional fees, travel fees, SEC and corporate filing fees. The Company recorded $40,574,273 in goodwill upon the acquisition of Poolworks (Germany) Ltd. and then increased it by $692,550 for the assumption of the V.A.T. tax liability. The Company incurred interest expense of $106,277, (37,927) of debt discount of convertible promissory notes at June 30, 2017, and $3,109 in depreciation expense on Poolworks (Germany) Ltd. fixed assets. The Company also incurred a $2,755,145 foreign currency gain at June 30, 2017.

 

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

 

Currently, the Company's operations have generated revenue. Additional cash received by the Company has come from loans and investors. Cash used in operations amounted to $451,711 and $156,998 at June 30, 2017 and 2016, respectively. The Company's cash flow used in investing activities were $79,911 and $0 at June 30, 2017 and 2016 respectively. During the second quarter ended 2017 and 2016, cash flow from financing activities were $534,137 and $156,984.

 

At June 30, 2017, the Company was obligated for demand loans of $333,437 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 bear interest at 3% per annum. His personal resources do not permit him to make additional loans to the Company.

 

The Company has a demand loan payable outstanding in the principal amount of $17,230 from a former officer and a director and is non-interest bearing. The note is unsecured.

 

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 $100,000 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.


26


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.

 

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.  


27


As of June 30, 2017, 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 June 30, 2017 was effective.

 

During the quarter ended June 30, 2017, 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.

 

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 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

During the six months ended June 30, 2017, we issued 206,345,727 shares of common stock for services. We also issued 333,399,556 shares of common stock upon the conversion of notes payable.

 

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

 

 

 

101

 

XBRL


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SIGNATURES

 

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

 

August 22, 2017


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