Notes to the Consolidated Financial
Statements
1. Nature
of Operations and Continuance Of Business
Creative Management Group,
Inc. was formed in Delaware on August 13, 2002 as a limited liability company named Creative Management Group, LLC. On August 7,
2007, this entity converted to a corporation. The Company is a sports, entertainment, marketing and management company providing
event management implementation, sponsorships, licensing and broadcast, production and syndication.
On February 20, 2008,
Creative Management Group, Inc. formed CMG Acquisitions, Inc., a Delaware company, for the purpose of acquiring companies and expansion
strategies. On February 20, 2008, Creative Management Group, Inc. acquired 92.6% of
Pebble Beach Enterprises, Inc. (a publicly traded company) and changed the name to CMG Holdings Group, Inc. (“the Company”).
The purpose of the acquisition was to effect a reverse merger with Pebble Beach Enterprises, Inc. at a later date. On May 27, 2008,
Pebble Beach entered into an Agreement and Plan of Reorganization with its controlling shareholder, Creative Management Group,
Inc., a privately held Delaware corporation. Upon closing the eighty shareholders of Creative Management Group delivered all their
equity interests in Creative Management Group to Pebble Beach in exchange for shares of common stock in Pebble Beach owned by Creative
Management Group, as a result of which Creative Management Group became a wholly owned
subsidiary of Pebble Beach. The shareholders of Creative Management Group received one share of Pebble Beach’s common stock
previously owned by Creative Management Group for each issued and outstanding common share owned of Creative Management Group.
As a result, the 22,135,148 shares of Pebble Beach that were issued and previously owned by Creative Management Group, are now
owned directly by its shareholders. The 22,135,148 shares of Creative Management Group previously owned by its shareholders are
now owned by Pebble Beach, thereby making Creative Management Group a wholly owned subsidiary of Pebble Beach. Pebble Beach did
not issue any new shares as part of the Reorganization. The transaction was accounted for as a reverse merger and recapitalization
whereby Creative Management Group is the accounting acquirer. Pebble Beach was renamed CMG Holdings Group, Inc.
On April 1, 2009, the
Company, through a newly formed subsidiary CMGO Capital, Inc., a Nevada corporation, completed the acquisition of XA, The Experiential
Agency, Inc. On March 31, 2010, the Company and AudioEye, Inc. (“AudioEye”) completed a Stock Purchase Agreement under
which the Company acquired all the capital stock of AudioEye. On June 22, 2011 the Company entered into a Master Agreement subject
to shareholder approval and closing conditions with AudioEye Acquisition Corp., a Nevada corporation where the shareholders of
AudioEye Acquisition Corp. exchanged 100% of the stock in AudioEye Acquisition Corp for 80% of the capital stock of AudioEye. The
Company retained 15% of AudioEye subject to transfer restrictions in accordance with the Master Agreement; in October 2012, the
Company distributed to its shareholders, in a dividend, 5% of the capital stock of AudioEye in accordance with provisions of the
Master Agreement.
On March 28, 2014, CMG Holdings
Group, Inc. (the “Company” or “CMG”), completed its acquisition of 100% of the shares of Good Gaming, Inc.
(“GGI”) by entering into a Share Exchange Agreement (the “SEA”) with BMB Financial, Inc. and Jackie Beckford,
shareholders of GGI. The sole owner of BMB Financial, Inc. is also the sole owner of Infinite Alpha, Inc. which provides consulting
services to CMG. Pursuant to the SEA, the Company received 100% of the shares of GGI in exchange for 5,000,000 shares of the Company’s
common stock, $33,000 in equipment and consultant compensation and a commitment to pay $200,000 in development costs.
8
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated Financial
Statements
1. Nature
of Operations and Continuance Of Business (continued)
On February 18,
2016, the Company sold the assets of Good Gaming, Inc. to HDS International Corp. and thereafter, HDS changed their name to Good
Gaming, Inc, from CMG Holdings Group, Inc. (OTCQB: GMER) (“Good Gaming”). The Company received in exchange 100,000,000
Class B Preferred Shares in Good Gaming which are convertible into shares of common stock at a rate of 200 common shares for each
Class B Preferred Shares. Good Gaming, Inc. did a 1,000 to 1 reverse split, thus the 100,000,000 Class B Preferred Shares were
converted to 100,000 Class B Preferred Shares. The Company has sold a portion of these Good Gaming shares to date in the market
and currently owns the equivalent of 14,076,200 common shares in the form of preferred stock and common stock.
The Company’s operating
subsidiary is XA - The Experiential Agency, Inc. - which is a sports, entertainment, marketing and management company providing
event management implementation, sponsorships, licensing and broadcast, production and syndication. Its President is Alexis Laken,
the daughter of the Company’s president.
2 Summary
of Significant Accounting Policies
|
a)
|
Basis of Presentation and Principles of Consolidation
|
These consolidated financial
statements and related notes are presented in accordance with accounting principles generally accepted in the United States of
America ("GAAP") and are expressed in US dollars. The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, XA - The Experiential Agency, Inc. All intercompany transactions have been eliminated. The Company's
fiscal year-end is December 31.
The preparation of financial
statements in conformity with generally accepted accounting principles in the United
States requires management to make estimates and assumptions that affect the reported amounts of assets and li abilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. The Company regularly evaluates estimates and assumptions related to the recoverability of its long-lived
assets, stock-based compensation, and deferred income tax
asset valuation allowances.
The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it
believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual
results experienced by the Company may differ materially and adversely from the Company's estimates. To
the extent there are material differences between the estimates and the actual results, future results of operations will
be affected.
|
c)
|
Cash and Cash Equivalents
|
The Company considers all
highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As of September
30, 2020 and December 31, 20 19, the Company had cash equivalents of $423,547 and $781,752, respectively.
9
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated Financial
Statements
2 Summary
of Significant Accounting Policies (continued)
|
d)
|
Basic and Diluted Net Loss Per Share
|
The
Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both
basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available
to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted
EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible
preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining
the number of shares assumed to be purchased from the exercise of stock options
or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
ASC 820, '" Fair
Value Measurements”, requires an
entity to maximize
the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. It establishes
a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.
A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant
to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there
are quoted prices in active markets for identical assets or liabilities.
Level 2
Level
2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identic al assets or liabilities in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to
the measurement of the fair value of the assets or liabilities.
The Company's financial
instruments consist principally of cash, accounts payable, and amounts due to related parties. Pursuant to ASC 820, the fair value
of our cash is determined based on "Level I"
inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all
our other financial instruments approximate their current fair
values because of their nature and respective maturity dates or durations.
10
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated Financial
Statements
2 Summary
of Significant Accounting Policies (continued)
|
f)
|
Property and Equipment
|
Property and equipment
are comprised of a vehicle and is amortized on a straight-line basis over an expected useful life of three years. Maintenance and
repairs are charged to expense as incurred. The land is not depreciated.
|
g)
|
Impairment of Long-lived Assets
|
The
Company evaluates the recoverability of long-lived assets and the related estimated remaining lives at each balance sheet date.
The Company records an impairment or change in useful life whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable or the useful life has changed.
Revenue is recognized
when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that
an entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature,
amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is
recorded reflects the consideration that the Company expects to receive in exchange for those services. The Company applies the
following five-step model in order to determine this amount: (i) identification of
the promised services in the contract; (ii) determination of whether the promised services are performance obligations, including
whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint
on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue
when (or as) the Company satisfies each performance obligation.
The Company only applies
the five-step model to contracts when it is probable that the entity will collect the consideration
it is entitled to in exchange for the services it transfers to the customer. Once a contract is determined to be within the scope
of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must
deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount of the transaction
price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied.
Generally, the Company’s performance obligations are transferred to customers at a point in
time, typically upon delivery.
The Company generates
revenues through event management implementation, sponsorships, licensing and broadcast, production and syndication.
Cost of services
Consist of marketing and management expenses. The marketing expenses are for the marketing of an event prior to the event taking
place.
|
j)
|
General and Administrative Expense
|
General and administrative expense
are the overhead expense to maintain the Company.
Certain prior period amounts have
been reclassified to conform to current presentation.
11
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
2
Summary of Significant Accounting Policies (continued)
|
l)
|
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 pronouncements that have been issued that might have a material impact on its financial position or results of
operations except as noted below:
FASB
ASU 2017-01, Clarifying the Definition of a Business (Topic 805) –
In January 2017, the FASB issued 2017-01. The new guidance that changes the definition
of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The guidance requires
an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable
asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance
also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning
it with how outputs are described in ASC 606. The ASU is effective for annual reporting periods beginning after December 15, 2017,
and for interim periods within those years. Adoption of this ASU did not have a significant impact on the Company’s consolidated
results of operations, cash flows and financial position.
In December 2019, the
FASB issued ASU 2019-12, Income Taxes (Topic 740), which enhances and simplifies various aspects of the income tax accounting
guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination,
ownership changes in investments, and interim-period accounting for enacted changes in tax law. The amendment will be effective
for public companies with fiscal years beginning after December 15, 2020; early adoption is permitted. The Company is evaluating
the impact of this amendment on its consolidated financial statements.
In February 2020, the FASB issued
ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842)
- Amendments to
SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting
Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller
reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal
years beginning after December 15, 2022. The Company believes the adoption will modify the way the Company analyzes financial instruments,
but it does not anticipate a material impact on results of operations. The Company is in the process of determining the effects
adoption will have on its consolidated financial statements.
The Company 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.
3
Accounts Receivable
Accounts receivable
consist of invoices for events that occurred prior to year end that the payments were received in the following year. The Balance
of accounts receivable at September 30, 2020 and December 31, 2019 were $998 and $40,513, respectively.
12
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
On November 15, 2019
the company entered into an agreement to a line of credit (LOC) with Pristec America Inc. (Pristec). The LOC was for $75,000. In
January of 2020 the LOC was increased to $100,000. As of June 30, 2020, the Company had loaned to Pristec $100,000 at an interest
rate of 12%, the loan matures in twelve (12) months. Pristec is a late stage technology company that has 108 worldwide patents
for the cold cracking of crude oil and other oil products. The Company has been granted the right to convert this loan into 100
shares of stock at price of $1000. At the discretion of the Company, the Company has the option of entering into a revenue sharing
agreement with Pristec.
On June 24, 2020,
the Company loaned $50,000 to New Vacuum Technologies, LLC(NVT). The loan is due ninety (90) days from the date of receipt of funds.
The loan carries an interest rate of ten (10) percent per annum. After the loan is paid in full, there
will be 6 monthly payments of 1,000 a month as return on investment. The reason this loan was made was to open a relationship between
CMG and NVT. The CEO of CMG is extremely excited by NVT's technology for upgrading oil in a disruptive way and the 2 companies
are discussing possible avenues that they might get further involved in the near future.
Accounts payable consist of expenses
incurred during the year that had not yet been paid. The balance of accounts payable at September 30, 2020 is $10,500. The balance
of accounts payable at December 31, 2019 is $74,500.
During
the periods ended September 30, 2020 and December 31, 2019, the Company did not sell any shares of its $0.001 par value per share
common stock.
During
the periods ended September 30, 2020 and December 31, 2019, the Company did not issue any warrants for its common shares. On December
15, 2017, the Company's Board of Directors lowered the strike price on the outstandingc 40,000,000 warrants previously issued to
Glenn Laken to $0.0035 and extended the expiration date for an additional five (5) years.
7
Treasury Stock
During
the year ended December 31, 2019 the Company bought back 6,258,992 shares of its common stock for $39,000. During the period ended
September 30, 2020 the Company bought back an additional 2,897,016 shares of its common stock for $18,251. This treasury stock
was retired during the period end September 30, 2020.
13
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
During
the periods ended September 30, 2020 and December 31, 2019, the Company had the following
notes payable
Notes Payable
|
|
Balance December 31, 2019
|
|
Balance September 30, 2020
|
Kabbage
|
|
$
|
19,437
|
|
|
$
|
0
|
|
Notes Payable Irish Pension Fund
|
|
$
|
150,000
|
|
|
$
|
121,250
|
|
In
September of 2018 the Company took out a line of credit with Kabbage for $75,000. In the fourth quarter of 2018 the company took
draws against the line of $72,300. During that period the Company made principal payments of $804, leaving a principal balance
of $71,496 at December 31, 2018. During the year ended December 31, 2019 the company took an additional draw of $25,000. During
the year ended December 31, 2019 the Company made principal payments of $77,059, leaving a balance of $19,437. During the period
ended September 30, 2020 the Company made principal payments of $19,437, leaving a balance of $0. Interest expense was $2,875 and
$15,380 for the periods ended September 30 2020 and 2019, respectively. The interest rate on this loan is 10%.
In
2015 the Company borrowed $150,000 from the two Irish individuals pension funds. $90,000 was borrows from one individual pension
account and $60,000 was borrowed from the other. Repayment terms were to be negotiated after the settlement of the Hudson Gray
lawsuit. The lawsuit settled in January of 2019 and negotiations began. No payment terms were settled upon and were still being
negotiated as of December 31, 2019. In January of 2020 settlement was reached with the lender of the $90,000. The settlement terms
were for repayment of $180,000 over a period of eighteen months quarterly, payment began in January of 2020 with the payment of
$25,000. An additional payment of $12,500 was made in April 2020and $10,000 in July 2020. Settlement has not yet been reached on
the repayment of the $60,000 to the other party. The balance of these
loans was $121,250 at September 30, 2020. The payments were 50% against principle and 50% to settlement of loan payable.
14
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
We
are subject to certain claims and litigation in the ordinary course of business. It is the opinion of management that the outcome
of such matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
In
October 2014, Ronald Burkhard, XA’s
former Executive Chairman and former member of the Company's Board of Directors filed a lawsuit in the Supreme Court
of the State of New York, County of New York, alleging breach of his employment contract and seeking approximately $695,000 in
damages. This lawsuit, where a judgement was entered against the Company for approximately $775,000, was settled with Burkhard
for $105,000. In November and December of 2018, the Company paid Burkhard the amount due from this settlement.
On
September 25, 2019 the Company filed suit against Eaton & Van Winkle (EVW), Lawrence
Allen Steckman (Steckman) and Paul Lieberman (Lieberman). In December 2019 the defendants settled for a payment of $450,000. On
December 13, 2019 the Company received $378,500, which was the amount of proceeds net of attorney’s fee of $71,500.
In
2014 the Company filed a lawsuit against Hudson Gray et al. On January 14, 2019 the parties entered into arbitration.
The parties reached agreement whereby the Company would be paid $2,750,000. The payments are scheduled as follows:
Due
|
|
Amount
Paid
|
|
Attorney's
Fees
|
Payment upon execution of the agreement
|
|
$
|
400,000
|
|
|
$
|
214,548
|
|
|
$
|
185,452
|
|
On or before February 8, 2019
|
|
$
|
100,000
|
|
|
$
|
53,650
|
|
|
$
|
46,350
|
|
On or before June 30, 2019
|
|
$
|
200,000
|
|
|
$
|
148,000
|
|
|
$
|
52,000
|
|
On or before September 30, 2019
|
|
$
|
200,000
|
|
|
$
|
148,000
|
|
|
$
|
52,000
|
|
On or before December 31, 2019
|
|
$
|
200,000
|
|
|
$
|
146,496
|
|
|
$
|
53,504
|
|
On or before March 31, 2020
|
|
$
|
200,000
|
|
|
$
|
148,000
|
|
|
$
|
52,000
|
|
On or before June 30, 2020
|
|
$
|
200,000
|
|
|
$
|
146,352
|
|
|
$
|
53,648
|
|
On or before September 30, 2020
|
|
$
|
250,000
|
|
|
$
|
184,175
|
|
|
$
|
63,825
|
|
On or before December 31, 2020
|
|
$
|
250,000
|
|
|
|
|
|
|
|
|
|
On or before March 31, 2021
|
|
$
|
250,000
|
|
|
|
|
|
|
|
|
|
On or before June 30, 2021
|
|
$
|
250,000
|
|
|
|
|
|
|
|
|
|
On or before September 30, 2021
|
|
$
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,750,000
|
|
|
$
|
1,189,221
|
|
|
$
|
558,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
The
Company has a net operating loss carried forward of $15,277,236 available to offset taxable income in future years which commence
expiring in 2028. The Company is subject to United States federal and state income taxes at an approximate rate of 21% (2019 and
2018). As of September 30, 2020 and December 31, 2019, the Company had no uncertain tax positions.
|
|
September 30, 2020
|
Income tax recovery at Statutory rate
|
|
$
|
(15,204
|
)
|
Permanent differences and other
|
|
|
—
|
|
Valuation allowance change
|
|
|
15,204
|
|
Provision for income taxes
|
|
$
|
—
|
|
The significant components
of deferred income tax assets and liabilities at September 30, 2020 and December 31, 2019 are as follows:
|
|
September 30, 2020
|
|
December 31,
2019
|
Net operating loss carried forward
|
|
$
|
15,257,846
|
|
|
$
|
15,185,444
|
|
Valuation allowance
|
|
$
|
(15,257,846
|
)
|
|
$
|
(15,185,444
|
)
|
Net deferred income tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
The
Company splits its business activities during the period ended September 30, 2020 into two reportable segments. Each segment represents
an entity of which are included in the consolidation. The table below represents the operations results for each segment or entity,
for the period ended September 30, 2020.
|
|
|
|
CMG Holding
|
|
|
|
|
XA
|
|
Group
|
|
Total
|
Revenues
|
|
|
9,609
|
|
|
|
—
|
|
|
|
9,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
259,902
|
|
|
|
271,887
|
|
|
|
531,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(250,293
|
)
|
|
|
(271,887
|
)
|
|
|
(522,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
—
|
|
|
|
449,777
|
|
|
|
449,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income(loss)
|
|
|
(250,293
|
)
|
|
|
177,890
|
|
|
|
(72,403
|
)
|
16
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
|
12
|
Related Party Transactions
|
During
the year ended December 31, 2015 the Company borrowed $96,100 from a Company shareholder. This amount is due on demand and has
an interest rate of 0%. The Company also borrowed $125,000 from a relative of the Company CEO. This amount is due on demand and
has an interest rate of 0%. During the year ended December 31, 2019 the Company paid off the $96,100 and $35,000 toward the $125,000
loans, leaving a balance of $90,000. Payments of $35,000 were made during the period ended September 30, 2020, leaving a balance
of $55,000.
The Company issued the
Company CEO a warrant to purchase 40,000,000 shares of the Company’s common stock at
$0.0155. The warrant
has an original term of 5 years. On December 15, 2017 the purchase price was changed to $.0035
and the term was extended 5 years. The warrants were vested 100% on April 7, 2014 when issued.
The
board of directors approved a monthly salary for the Company CEO of $15,000 per month. The Company made payments of $103,474 in
excess of the current $180,000 salary for year ended December 31, 2019. The Company made payments of $125,649 in excess of the
current $135,000 salary for period ended September 31, 2020.
Per management review, no material
subsequent events have occurred.
17
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
In addition to historical
information, this Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, which
includes, but are not limited to, statements concerning expectations as to our revenues, expenses, and net income, our growth
strategies and plans, the timely development and market acceptance of our products
and technologies, the competitive nature of and anticipated growth in our markets, our ability to achieve cost reductions, the
status of evolving technologies and their growth potential, the adoption of future industry standards, expectations as to our financing
and liquidity requirements and arrangements, the need for additional capital, and other matters that are not historical facts.
These forward-looking statements are based on our current expectations, estimates,
and projections about our industry, management’s beliefs, and certain assumptions made by it. Words
such as “anticipates”, “appears”, “believe,”, “expects”, “intends”,
“plans”, “believes, “seeks”, “assume,” “estimates”, “may”, “will”
and variations of these words or similar expressions are intended to identify forward-looking statements. All statements in this
Quarterly Report regarding our future strategy, future operations, projected financial position, estimated future revenue, projected
costs, future prospects, and results that might be obtained by pursuing management’s current plans and objectives are forward-looking
statements. Therefore, actual results could differ materially and adversely from those results expressed in any forward-looking
statements, as a result of various factors. Readers are cautioned not to place undue reliance on forward-looking statements, which
are based only upon information available as of the date of this report. You should
not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks,
uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on
the information currently available to us and speak only as of the date on which this Quarterly Report was filed with the Securities
and Exchange Commission (“SEC”). We expressly disclaim any obligation
to revise or update publicly any forward-looking statements even if subsequent events
cause our expectations to change regarding the matters discussed in those statements. Over time, our actual results, performance
or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our
forward-looking statements, and such difference might be significant and materially adverse to our stockholders. Unless the context
indicates otherwise, the terms “Company”, “Corporate”, “CMGO”, “our”, and “we”
refer to CMG Holdings Group, Inc. and its subsidiaries.
RESULTS OF OPERATIONS FOR THE NINE MONTH PERIOD
ENDED September 30, 2020
Gross revenues decreased
from $2,289,738 for the nine months ended September 30, 2019 to $9,609 for the nine months ended September 30, 2020. The decrease
in revenues was mainly attributable to the worldwide pandemic that took place during the quarter. At least two major jobs that
were scheduled for the first quarter were canceled due to the pandemic.
Cost of revenue decreased
from $1,136,517 for the nine months ended September 30, 2019 to $14,228 for the nine months ended September 30, 2020. The decrease
in revenues was mainly attributable to the worldwide pandemic that took place during the quarter. At least two major jobs that
were scheduled for the first quarter were canceled due to the pandemic.
Operating expenses increased
from $441,410 for the nine months ended September 30, 2019 to $517,560 for the nine months ended September
30, 20205. The increase in operating expenses is due to the increase in salaries for its full-time employees.
Net income decreased from
$1,252,778 for the nine months ended September 30, 2019 to net loss of $72,402 for the nine months ended September 30, 2020. The
decrease in net income to net loss was mainly attributable to the worldwide pandemic that took place during the quarter. At least
two major jobs that were scheduled for the first quarter were canceled due to the pandemic.
LIQUIDITY AND CAPITAL RESOURCES:
As of September 30, 2020, the Company’s
cash on hand was $423,547.
Cash provided by operating
activities for the nine months ended September 30, 2020 was $40,899, as compared to cash provided by operating activities of $527,464
for the nine months ended September 30, 2019. The decrease in revenues was mainly attributable to the worldwide pandemic that took
place during the quarter. The large job that was scheduled was canceled.
Cash used in investing
activities for the nine months ended September 30, 2020 was $380,853 as compared cash used in investing activities of $166,744
for the nine months ended September 30, 2019. This was due to the Company loaning Pristec America an additional $10,000 during
the quarter.
Cash used in financing activities for the nine
months ended September 30, 2020 was $18,251, as compared to $22,575 used for the nine months ended September 30, 2019.
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