Attached files
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| EX-31 - SECTION 302 CERTIFICATION - Delta Entertainment Group, Inc. | ex_31.htm |
| EX-32 - SECTION 906 CERTIFICATION - Delta Entertainment Group, Inc. | ex_32.htm |
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended March 31, 2011 |
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| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
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| For the transition period from _______________ to _______________ |
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| Commission File Number 333-165719 |
Delta Entertainment Group, Inc.
(Exact name of small business issuer as specified in its charter)
Florida | 27-1059780 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation of organization) | Identification No.) |
1200 Stirling Road Suite 11A Dania Beach, Florida 33433
(Address of principal executive offices)
(305) 992-1475
(Issuer's telephone number)
____________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes 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. See the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated Filer |
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Non-accelerated filer (Do not check if a smaller reporting company) | Smaller Reporting Company 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
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: At May 1, 2011 the issuer had outstanding 30,152,815 shares of Common Stock, par value $.001 per share.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
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| March 31, |
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| December 31, |
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| 2011 |
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| 2010 |
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Assets |
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Current Assets: |
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Cash |
| $ | 4,294 |
| $ | 7,993 |
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Accounts receivable |
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| — |
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| 4,385 |
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Prepaid expenses |
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| — |
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| 4,000 |
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| 4,294 |
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| 16,378 |
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Computer equipment, net |
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| 1,026 |
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| 1,125 |
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Total Assets |
| $ | 5,320 |
| $ | 17,503 |
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Liabilities and Stockholders' Equity (Deficit |
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Current Liabilities: |
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Accounts payable |
| $ | 5,479 |
| $ | 167 |
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Accrued wages- related party |
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| 2,248 |
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| 614 |
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Accrued liabilities -related parties |
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| 1,850 |
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| 150 |
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Convertible notes payable-related party |
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| 5,000 |
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| — |
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Total Current Liabilities |
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| 14,577 |
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| 931 |
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Total Liabilities |
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| 14,577 |
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| 931 |
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Stockholder's Equity (Deficit) |
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30,152,815 shares and 29,837,815 shares issued as of March 31, 2011 and December 31, 2010 |
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| 30,153 |
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| 29,838 |
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Additional Paid in Capital |
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| 119,911 |
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| 117,076 |
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Deficit Accumulated in the Development Stage |
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| (159,321 | ) |
| (130,342 | ) |
Total Stockholder's Equity (Deficit) |
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| (9,257 | ) |
| 16,572 |
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Total Liabilities and Stockholders' Equity (Deficit) |
| $ | 5,320 |
| $ | 17,503 |
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The Accompanying Notes are an Integral Part of the Unaudited Condensed Consolidated Financial Statements
2
DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
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| From |
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| August 21, 2008 |
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| (Date of |
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| For the Three Months Ended |
| Inception) to |
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| March 31, |
| March 31, |
| March 31, |
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| 2011 |
| 2010 |
| 2010 |
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Revenue |
| $ | 1,550 |
| $ | 472 |
| $ | 12,584 |
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Cost of sales |
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| 1,079 |
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| 3,081 |
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| 25,021 |
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Gross profit |
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| 471 |
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| (2,609 | ) |
| (12,437 | ) |
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General administrative expenses |
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| 29,417 |
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| 40,603 |
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| 234,141 |
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Operating loss |
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| (28,946 | ) |
| (43,212 | ) |
| (246,578 | ) |
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Other income (expense) |
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Interest expense |
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| (33 | ) |
| — |
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| (33 | ) |
Gain on deconsolidation of subsidiary |
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| — |
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| — |
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| 87,290 |
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Other income (expense) |
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| (33 | ) |
| — |
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| 87,257 |
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Net Loss |
| $ | (28,979 | ) | $ | (43,212 | ) | $ | (159,321 | ) |
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Basic and Diluted Loss per Common Share |
| $ | (0.00 | ) | $ | (0.00 | ) |
| n/a |
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Basic and Diluted Weighted Average Common Shares Outstanding |
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| 30,044,315 |
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| 16,600,315 |
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| n/a |
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The Accompanying Notes are an Integral Part of the Unaudited Condensed Consolidated Financial Statements
3
DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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| From |
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| August 21, 2008 |
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| (Inception) to |
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| March 31, |
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| 2011 |
| 2010 |
| 2011 |
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Operating Activities: |
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Net loss |
| $ | (28,979 | ) | $ | (43,212 | ) | $ | (159,321 | ) |
Adjustments to reconcile net loss to net cash provided (used) by operating activities: |
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Shares issued for services |
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| — |
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| 15,510 |
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| 545 |
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Shares issued for services-related parties and accrued liabilities- related party |
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| 150 |
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| — |
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| 22,545 |
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Shares of former subsidiary issued for cash, services, and repayment of accrued liabilities-related party |
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| — |
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| — |
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| 16,691 |
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Depreciation |
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| 99 |
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| 165 |
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Gain on deconsolidation of subsidiary |
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| — |
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| — |
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| (87,290 | ) |
Amoritzation of prepaid expenses |
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| — |
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| 1,026 |
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| 7,523 |
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Changes in Assets and Liabilities: |
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Accounts receivable |
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| 4,385 |
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| 538 |
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| — |
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Prepaid expenses |
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| 4,000 |
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| (60 | ) |
| 100 |
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Account payable |
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| 5,312 |
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| 8,397 |
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| 5,479 |
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Accrued wages-related party |
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| 1,634 |
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| 2,625 |
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| 62,558 |
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Accrued liabilities-related party |
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| 1,700 |
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| — |
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| 4,450 |
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Net Cash Provided (Used) by Operating Activities |
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| (11,699 | ) |
| (15,176 | ) |
| (126,555 | ) |
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Investing Activities |
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Purchase of computer equipment |
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| — |
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| (1,191 | ) |
Cash of former subsidiary relinquished in deconsolidation |
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| — |
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| — |
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| (107 | ) |
Net Cash Used by Investing Activities |
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| — |
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| — |
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| (1,298 | ) |
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Financing Activities: |
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Proceeds from note payable |
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| 8,000 |
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| — |
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| 58,000 |
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Proceeds from advances from related parties |
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| — |
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| 15,200 |
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| 74,147 |
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Net Cash Provided by Financing Activities |
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| 8,000 |
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| 15,200 |
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| 132,147 |
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Net Increase in Cash |
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| (3,699 | ) |
| 24 |
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| 4,294 |
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Cash at Beginning of Period |
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| 7,993 |
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| 2,373 |
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| — |
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Cash at End of Period |
| $ | 4,294 |
| $ | 2,397 |
| $ | 4,294 |
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Supplemental Disclosures: |
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Cash paid for income taxes |
| $ | — |
| $ | — |
| $ | — |
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Cash paid for interest |
| $ | — |
| $ | — |
| $ | — |
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Noncash investing and financing activities |
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Common stock issued for convertible debt |
| $ | 3,000 |
| $ | — |
| $ | 3,000 |
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The Accompanying Notes are an Integral Part of the Unaudited Condensed Consolidated Financial Statements
4
DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation and Interim Consolidated Financial Statements
Delta Entertainment Group Inc. (“Delta”, “the Company”) was incorporated in Florida on October 2, 2009. The principal business purpose of Delta is to operate as a holding company of its subsidiaries Famous Records, Corp. (“Famous”) and Creative Music Group, Inc. (“Creative”).
Famous was incorporated in Florida on August 21, 2008 and was a subsidiary of the Company through September 2010 at which time Famous was deconsolidated due to the issuance of Famous shares which diluted the Company’s ownership and control of the subsidiary.
Creative was formed in the state of Florida in October 2010. The principal business purpose of Creative is the management, promotion and development of artists.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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. Actual results could differ materially from these estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of Delta Entertainment Group, Inc. and its wholly owned subsidiary Creative. All intercompany accounts and transactions have been eliminated in consolidation.
Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information required to be included in a complete set of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP). In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2011. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s 2010 Annual Report filed with the SEC on Form 10-K on March 31, 2011.
Note 2 - Income Loss Per Share
Basic income (loss) per share of common stock is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding during the period.
Diluted income (loss) per share is computed based on the weighted average number of shares of common stock and dilutive securities outstanding during the period. Dilutive securities are options and warrants that are freely exercisable into common stock at less than the prevailing market price. Dilutive securities are not included in the weighted average number of shares when inclusion would increase the earnings per share or decrease the loss per share. For the three months ended March 31, 2011 and 2010, no securities were included in weighted average shares outstanding as the effect would be anti-dilutive.
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DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Related Party Transactions
During the three months ended March 31, 2011 the Company received proceeds from convertible notes payable from a related party in the amount of $8,000. During the period, the Company repaid $3,000 of the convertible notes through the issuance of 300,000 shares of its common stock. The notes accrue interest at the rate of 8% per annum. The remaining $5,000 note is convertible into shares of common stock of Creative at $.01.
During January 2011, the Company issued 15,000 shares of its common stock to its Directors for accrued wages of $150.
Note 4 - Going Concern
At March 31, 2011 the Company has a working capital deficit. As such, the accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company does not have sufficient working capital for its planned activities, which raises substantial doubt about its ability to continue as a going concern.
Continuation of the company as a going concern is dependent upon obtaining additional working capital and the management of the Company has developed a strategy, which it believes will accomplish this objective through short-term loans from related parties and additional equity investments, which will enable the Company to continue operations for the coming year.
Note 5 - Subsequent Events
Management has evaluated subsequent events, and the impact on the reported results and disclosures.
During April 2011 the Company has received proceeds from convertible notes payable in the amount of $4,500. The notes bear interest at the rate of 8% per annum. The note is convertible into shares of Creative common stock at $.001.
The Company entered into employment and director agreements with Leonard Tucker to serve as the Company’s President, Chief Executive and Financial Officer, and Director effective April 19, 2011 contemporaneously with the resignation of Marshall Freeman from those positions. Mr. Freeman remains the President of the Company’s wholly owned subsidiary Creative. The employment agreement with Mr. Tucker allows for compensation in the amount of $3,000 per month for his service as President of the Company. Additionally, he is to receive 5,000 shares per month for his service as a Director. If he is to serve as Chairman of any committee, he is to receive an additional 2,500 shares per month for that service and for service on any committee he is to receive 1,250 shares.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Plan of Operation.
Overview
Delta Entertainment Group, Inc. (the "Company", the "Registrant", "Delta Entertainment" or "Delta") is a Florida corporation incorporated in the state of Florida on October 2, 2009. Through September 2010, Delta's business operations were conducted through its 93% owned subsidiary, Famous Records Corp. ("Famous Records"). In September, the ownership interest in Famous Records was reduced to 27.1% and the subsidiary was deconsolidated. Currently Delta’s business operations are being conducted through its wholly owned subsidiary Creative Music Group, Inc.
Delta Entertainment is a development stage company that will engage in concert promotions. Its initial focus will be the South Florida market. The Company's wholly owned subsidiary, Creative Music Group (“Creative”) is a Miami based entertainment company. Creative’s business strategy is to acquire, develop and represent upcoming artists in the entertainment field.
Products and Services
Creative is a service-based company focused on artist management services for recording artists. The company will offer bi-directional services. First, by selling artist management services to recording artists in exchange for commissions, and percentages of income. The second is by selling entertainment to consumers. This includes mediums such as CD’s, downloads, merchandise, live shows and other services of company clients. The company will rely on third parties such as record labels and agencies to sell talent services of its clients. The goal of Creative is to bring consumers and users of entertainment services, high quality and unique talent. Our management services will be customized to meet the needs of the individual artist. We intend to provide guidance, support, opportunities and career counseling for our artists
Our ability to fully implement this program will be dependent upon our ability to secure additional financing, of which there can be no assurance.
Target Market
Creative operates in the Miami Florida area, targeting the various event planners, promoters and entertainment venues in the area. The greater Miami metropolitan area is home to a large number of entertainment events each year with 2.1 million people in the immediate area
The Competition
Competition in the music industry is very diverse and uneven, creating substantial market opportunities for Creative. We will compete against both local, regional and national companies with far greater capital resources and name recognition. In order to effectively compete in these markets, Creative must be able to offer unique and personalized services, identifying strategic partners at colleges and universities and develop business relationships with local event organizers, record labels, agents and other entertainment companies. With limited capital, the Company will rely upon the personal contacts of our management.
Results of Operations
Three Months Ended March 31, 2011 and 2010
We did not generate significant revenues for the three months ended March 31, 2011 or 2010 or from the date of inception through March 31, 2011. Our revenues for each of the aforementioned periods were $1,550, $472 and $12,584 respectively.
Our cost of sales for the three months ended March 31, 2011 were $1,079 versus $3,081 for the three months ended March 31, 2010 and $25,021 from the date of inception through March 31, 2011.
During the three months ended March 31, 2011 we incurred general and administrative expenses of $29,417 as compared to $40,603 for the three months ended March 31, 2010. The decrease in general and administrative expenses for the current year is due to a decrease in Officers’ and Directors compensation of approximately $8,500 as well as decrease in legal fees of approximately $6,000.
7
Liquidity
We have nominal assets. As of March 31, 2011 we had cash of $4,294. At December 31, 2010 we had cash of $7,993 accounts receivable of $4,385 and prepaid expenses of $4,000.
Our operations to date have primarily been funded through advances from a related party. Our total current liabilities at March 31, 2011 were $14,577 as compared to $931 at December 31, 2010. The increase in the current liabilities is due to the lack of revenues sufficient to fund our operations.
Off-balance sheet arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures. Our principal executive and financial officer, based on his evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, has concluded that (i) our disclosure controls and procedures are effective for ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
FORWARD-LOOKING INFORMATION
The statements contained in this Quarterly Report on Form 10-Q that are not historical fact are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements contained herein are based on current expectations that involve a number of risks and uncertainties. These statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” or “anticipates,” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. The Company wishes to caution the reader that these forward-looking statements that are not historical facts are only predictions. No assurances can be given that the future results indicated, whether expressed or implied, will be achieved. While sometimes presented with numerical specificity, these projections and other forward-looking statements are based upon a variety of assumptions relating to the business of the Company, which, although considered reasonable by the Company, may not be realized. Because of the number and range of assumptions underlying the Company’s projections and forward-looking statements, many of which are subject to significant uncertainties and contingencies that are beyond the reasonable control of the Company, some of the assumptions inevitably will not materialize, and unanticipated events and circumstances may occur subsequent to the date of this report. These forward-looking statements are based on current expectations and the Company assumes no obligation to update this information. Therefore, the actual experience of the Company and the results achieved during the period covered by any particular projections or forward-looking statements may differ substantially from those projected. Consequently, the inclusion of projections and other forward-looking statements should not be regarded as a representation by the Company or any other person that these estimates and projections will be realized, and actual results may vary materially. There can be no assurance that any of these expectations will be realized or that any of the forward-looking statements contained herein will prove to be accurate.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
The Company may from time to time be involved in legal proceedings arising from the normal course of business. As of the date of this report, the Company is not currently involved in any legal proceedings.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
In August 2008, we issued 16,555,315 shares of common stock to Beta Music Group, Inc. These shares were distributed by Beta to the shareholders of record on December 14, 2009 pursuant to the Sale and Stock Purchase Agreement of a controlling interest of Beta on December 15, 2009.
During 2009, we issued 45,000 shares of our common stock to related parties for services rendered. The shares were issued at par value of $.001
On March 31, 2010, we issued 45,000 shares of common stock to officers and directors as consideration for their services. Additionally on that date we issued 1,530,000 shares as repayment of accrued wages and 3,312,500 as repayment of advances from related parties. These shares were issued at $.01 per share.
On May 5, 2010 we issued 570,000 shares of common stock for accrued compensation, 15,000 to our officer and directors and 2,125,000 shares as repayment of related party advances. These shares were issued at $.01 per share. We also issued 50,000 shares for services. The aforementioned shares were all issued at $.01.
On May 31, 2010 we issued 470,000 to the Tucker Family Trust as repayment for advances made to the Company. We also issued 15,000 shares to our Officer and Directors. These shares were issued at $.01.
On June 30, 2010 we issued 5,000,000 shares of our common stock to an investor for the conversion of a note payable in the amount of $50,000. We also issued 15,000 shares to our Officer and Directors. These shares were issued at $.01.
On September 30, 2010 we issued 45,000 shares of common stock at $.01 per share for accrued compensation and directors’ fees.
On December 31, 2010 we issued 45,000 shares of common stock at $.01 per share for accrued compensation and directors’ fees.
In January 2011, we issued 45,000 shares of common stock at $.01 per share for directors compensation and 300,000 shares for repayment of a $3,000 advance from a shareholder.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Removed and Reserved
Item 5. Other information
None.
Item 6. Exhibits
| (a) | The following exhibits are filed herewith pursuant to Item 601 of Regulation S-K. | |
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| Section 302 Certification of Chief Executive and Financial Officer | |
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| Section 906 Certification | |
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Delta Entertainment Group, Inc.
Dated: May 16, 2011
By /s/ Leonard Tucker
Leonard Tucker
President and Chief Executive and Financial Officer
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