Delta Entertainment Group, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Delta Entertainment Group, Inc.	Financial_Report.xls
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

	For the quarterly period ended September 30, 2011

	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

	For the transition period from _______________ to _______________

	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.)

2950 West Cypress Creek Road Suite 201 Ft. Lauderdale, FL 33309

(Address of principal executive offices)

(954) 449-2690

(Issuer'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 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 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. 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

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 November 21, 2011 the issuer had outstanding 30,785,686 shares of Common Stock, par value $.001 per share.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2011			2010

Assets
Current Assets:
Cash	$	5,117		$	7,993
Accounts receivable		—			4,385
Prepaid expenses		2,589			4,000
Inventory		1,413			—
Advance royalty payments		30,000			—
		39,119			16,378

Computer equipment, net		1,821			1,125
Customer list, net		66,521			—
Other Assets		3,200			—
Total Assets	$	110,661		$	17,503

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable	$	18,889		$	167
Accounts payable-related party		4,667			—
Accrued wages- related party		6,151			614
Accrued liabilities		12,936			—
Accrued liabilities -related parties		26,182			150
Loan payable		15,000			—
Note payable		17,500			—
Convertible note payable		28,500			—
Convertible notes payable-related party		95,900			—
Total Current Liabilities		225,725			931
Total Liabilities		225,725			931

Stockholders' Equity (Deficit)
30,785,686 shares and 29,837,815 shares issued as of September 30, 2011 and December 31, 2010		30,786			29,838
Additional Paid in Capital		182,078			117,076
Accumulated Deficit		(327,928	)		(130,342	)
Total Stockholders' Equity (Deficit)		(115,064	)		16,572
Total Liabilities and Stockholders' Equity (Deficit)	$	110,661		$	17,503

The Accompanying Notes are an Integral Part of the Unaudited Consolidated Financial Statements

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DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended						For the Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2011			2010			2011			2010

Revenue	$	25,581		$	519		$	36,971		$	1,455

Cost of sales		19,397			8,433			22,990			14,331

Gross profit		6,184			(7,914	)		13,981			(12,876	)

General administrative expenses		132,682			18,380			208,295			97,132

Operating loss		(126,498	)		(26,294	)		(194,314	)		(110,008	)

Other income (expense)
Interest expense		(2,497	)		—			(3,272	)		—
Gain on deconsolidation of subsidiary		—			122,290			—			122,290
Other income (expense)		(2,497	)		122,290			(3,272	)		122,290

Net Income (Loss)		(128,995	)		95,996			(197,586	)		12,282
Net loss attributable to non controlling interest		—			523			—			1,941
Delta Net Income (Loss)	$	(128,995	)	$	96,519		$	(197,586	)	$	14,223

Basic and Diluted Loss per Common Share	$	(0.00	)	$	0.00		$	(0.01	)	$	0.00

Basic and Diluted Weighted Average Common Shares Outstanding		30,522,922			29,748,304			30,259,009			23,330,606

The Accompanying Notes are an Integral Part of the Unaudited Consolidated Financial Statements

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DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	September 30,			September 30,
	2011			2010

Operating Activities:
Net income (loss)	$	(197,586	)	$	14,223
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Shares issued for services		11,000			500
Shares issued for services-related parties and accrued liabilities-related party		9,450			21,945
Shares of former subsidiary issued for cash, services, and repayment of accrued liabilities-related party		—			16,691
Depreciation		336			—
Gain on deconsolidation of subsidiary		—			(122,290	)
Amortization of prepaid expenses		—			3,078
Changes in Assets and Liabilities:
Accounts receivable		4,385			834
Prepaid expenses		1,411			100
Inventory		1,684			—
Deposits		(3,200	)		—
Advance royalties		(17,500	)		—
Account payable		18,722			—
Accounts payable-related party		4,667			—
Accrued wages-related party		5,537			(819	)
Accrued liabilities		12,936			—
Accrued liabilities-related party		26,032			—
Net Cash Used by Operating Activities		(122,126	)		(65,738	)

Investing Activities
Purchase of computer equipment		(1,032	)		—
Purchase of customer list		(44,018	)		—
Cash of former subsidiary relinquished in deconsolidation		—			(107	)
Net Cash Used by Investing Activities		(45,050	)		(107	)

Financing Activities:
Proceeds from note payable		15,000			50,000
Proceeds from advances from related parties		121,800			41,225
Proceeds from issuance of common stock		30,000			—
Repayment of notes payable		(2,500	)		—
Net Cash Provided by Financing Activities		164,300			91,225

Net Increase in Cash		(2,876	)		25,380

Cash at Beginning of Period		7,993			2,373
Cash at End of Period	$	5,117		$	27,753

The Accompanying Notes are an Integral Part of the Unaudited Consolidated Financial Statements

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DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO UNDAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation and Interim Consolidated Financial Statements

Delta Entertainment Group Inc. (“Delta”, the “Company”) was incorporated in the state of 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”), Creative Music Group, Inc. (“Creative”), PearlBrite Concepts, Inc.(“PearlBrite”) and Captivating Cosmetics Corp(“Captivating”).

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 recording artists.

PearlBrite was formed in the state of Florida on May 31^st 2011, The principal business purpose of PearlBrite is to supply and market professional teeth whitening products.

Captivating was formed in the state of Florida on June 1^st 2011 The principal business purpose of Captivating is to produce and market color cosmetics, such as nail polish, lipstick and lip gloss) through mass market retailers.

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 and its wholly owned subsidiaries Creative, PearlBrite and Captivating. 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 and nine months ended September 30, 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.

Development Stage

From the date of inception, August 21, 2008, through the date of the acquisition of PearlBrite Professional Teeth Whitening LLC (see Note 2), the Company was in the development stage as defined in ASC 915, “Accounting and Reporting by Development Stage Enterprises”. As a result of the acquisition of PearlBrite, the Company has begun to generate revenue from operations and has emerged from the development stage.

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DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO UNDAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2 – Asset Purchase Agreement

On June 3, 2011 PearlBrite Concepts, Inc., our wholly owned subsidiary, entered into a Bill of Sale with Pearl White Professional Teeth Whitening LLC. (the “Seller”) which provided in part for PearlBrite Concepts to acquire substantially all of the assets of the Seller used in connection with the sale of its teeth whitening system which are marketed under the names “PearlBrite” and “Pearl White Professional Teeth Whitening”. In accordance with FASB ASC 805 “Business Combinations” the company has recorded the purchase as a business combination.

The purchase price for the assets was $70,000 (the “Purchase Price”) of which $50,000 was paid at closing. The remaining portion of the Purchase Price will be paid pursuant to the terms and conditions of two promissory notes. PearlBrite Concepts will pay the Seller $10,000 within five calendar days following delivery by the Seller of Seller’s audited financial statements in accordance with Generally Accepted Accounting Principles and as required by the rules and regulations as promulgated by the Securities and Exchange Commission in connection with the acquisition of a business entity. The balance of the purchase price ($10,000) is due pursuant to the terms and conditions of a second promissory note which provides for four monthly payments of $2,500 commencing July 3, 2011 and continuing on the third day of each month thereafter. As of November 9, 2011, the Company is in default on the agreement due to failure to meet its monthly payment obligations.

The promissory notes are secured by all of the current and after-acquired assets, tangible or intangible, of PearlBrite Concepts related to the operations and sales of either the PearlBrite or Pearl White Professional Teeth Whitening systems.

The purchase price was allocated to inventory valued at $3,479, which represented the original cost basis, with the balance of $66,521 was allocated to the intangible asset Customer List to be amortized over three years, pending a final valuation determination.

Following is an unaudited proforma income statement as if the asset purchase had been consummated as of January 1, 2010 and 2011:

	For the Three Months Ended						For the Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2011			2010			2011			2010

Revenue	$	67,214		$	45,715		$	78,604		$	193,128

Cost of sales		31,566			36,828			37,464			115,486

Gross profit		35,648			8,887			41,140			77,642

General administrative expenses		148,537			51,483			224,374			174,327

Operating loss		(112,889	)		(42,596	)		(183,234	)		(96,685	)

Other income (expense)
Gain on deconsolidation of subsidiary		—			122,290			—			122,290
Other income		—			—			714			6,316
Interest expense		(3,006	)		—			(3,558	)		—
Other income (expense)		(3,006	)		122,290			(2,844	)		128,606

Net Income (Loss)		(115,895	)		79,694			(186,078	)		31,921
Net loss attributable to non controlling interest		—			523			—			1,941
Delta Net Income (Loss)	$	(115,895	)	$	80,217		$	(186,078	)	$	33,862

Basic and Diluted Loss per Common Share	$	—		$	—		$	—		$	—

Basic and Diluted Weighted Average Common Shares Outstanding		30,522,922			29,748,304			30,259,009			23,330,606

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DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO UNDAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 – Going Concern

At September 30, 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 4 – Supplemental Schedule of Cash Flow Information

Supplemental cash flow information is as follows:

	September 30,		September 30,
	2011		2010
Supplemental Disclosures:
Cash paid for income taxes	$	—	$	—
Cash paid for interest	$	—	$	—

Noncash investing and financing activities
Common stock issued for Advance royalties	$	12,500	$	—
Common stock issued for convertible debt repayment	$	3,000	$	—
Common stock issued for repayment of notes payable	$	—	$	50,000
Purchase of customer list through note payable	$	25,600	$	—
Shares of subsidiary issued to minority interest	$	—	$	190
Common stock issued as repayment for related party advances, accured wages, and directors fees	$	—	$	59,075
Shares of subsidiary issued for related party advances	$	—	$	12,333

Note 5 – Convertible Notes Payable

On various dates during the nine months ended September 30, 2011, the Company received proceeds of $28,500 from 8% convertible notes payable. The notes plus accrued interest are convertible into common stock at the rate of $.10 per share. Based on our share price on the date the notes were entered into, there was no beneficial conversion feature associated with the notes.

The Company, analyzed the convertible notes for derivative accounting consideration under FASB ASC 815-15 and FASB ASC 815-40. The Company, determined the embedded conversion option in the convertible met the criteria for classification in stockholders equity under FASB ASC 815-15 and FASB ASC 815-40 and the recognition of non-controlling interest is not required under FASB ASC 810-10. Therefore, derivative accounting was not applicable for these convertible notes payable.

Note 6 – Loan Payable

In February 2011, the Company received proceeds from a loan payable in the amount of $15,000. The loan is due on demand and is non-interest bearing.

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DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO UNDAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 7 – Related Party Transactions

During the nine months ended September 30, 2011 the Company received proceeds from a note payable from related party in the amount of $3,000. During the period, the Company repaid the note through the issuance of 300,000 shares of its common stock.

On various dates during the nine months ended September 30, 2011, the Company received proceeds of $70,500 from 8% convertible notes payable. The notes plus accrued interest are convertible into common stock at the rate of $.10 per share. Based on our share price on the date the notes were entered into, there was no beneficial conversion feature associated with the notes

The Company, through our subsidiary PearlBrite received proceeds from 8% convertible notes payable of $8,400. The notes are convertible into shares of PearlBrite at the rate of $.0001. There was no beneficial conversion feature associated with this notes as the conversion price is deemed to represent the value of the subsidiary shares on the dates we entered into the notes.

During the period ended September 30, 2011, the Company received proceeds through its Creative subsidiary from convertible notes payable-related party in the amount of $9,500. The notes accrue interest at the rate of 8% per annum. The notes are convertible into shares of our subsidiary common stock at the rate of $.001. There was no beneficial conversion feature associated with the notes as the conversion price was deemed to be representative of the share price of the subsidiary on the dates of the notes.

During the period ended September 30, 2011, the Company received proceeds through its subsidiary Captivating Cosmetics from convertible notes payable-related party in the amount of $7,500. The notes accrue interest at the rate of 8% per annum. The notes are convertible into shares of our subsidiary common stock at the rate of $.001. There was no beneficial conversion feature associated with the notes as the conversion price was deemed to be representative of the share price of the subsidiary on the dates of the notes.

As of September 30, 2011 there are accounts payable, accrued wages, and accrued expenses due to related parties of $4,667, $6,151, and $26,182, respectively.

Note 8 – Common Stock

In January 2011, we issued 15,000 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.

In May 2011, we issued 45,000 shares of common stock at $.01 per share for officers and directors compensation.

In July 2011, we issued 40,000 shares of common stock for officer, director and advisory compensation. We issued 10,000 shares for services and 125,000 shares for the purchase of a licensing agreement. The aforementioned shares were all issued at $.10 per share.

In August 2011, we issued 50,000 shares of common stock for officer, director and advisory compensation, and 32,157 shares for services. We also issued 200,000 shares of common stock for cash proceeds of $20,000. The aforementioned shares were all issued at $.10 per share.

In September 2011, we issued 25,000 shares of common stock for officer, director and advisory compensation, and 5,714 shares for services. We also issued 100,000 shares of common stock for cash proceeds of $10,000. The aforementioned shares were all issued at $.10 per share.

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DELTA ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO UNDAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 9 – Commitments and Contingencies

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 and an additional 5,000 shares per month for serving as an officer. 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.

In June 2011, the Company, through its subsidiary PearlBrite, entered into a Merchandise License Agreement with Celebrity Brand Licensing, LLC whereby the Company can use the celebrity likeness of Teresa Giudice on its products. The three year agreement has minimum royalty payments due as follows: $12,500 plus 125,000 shares of the company’s common stock valued at $12,500 for year one, $50,000 minimum payment due for year two, and $75,000 minimum for year three. Royalty payments are due on net sales in excess of $250,000 annually, at the rate of 8%. The payments for year two are due quarterly beginning January 1, 2013 in the amount of $12,500 per quarter and year three in the amount of $18,750. Earned royalties are applied against the annual guarantees.

On June 1, 2011 the Company entered into advisory agreements with two individuals to provide services to its subsidiary Pearbrite. The agreements have a one year term and per the terms of the agreement the individuals are to receive compensation in the form of common stock of the Company valued at $500 per month.

On June 15, 2011, the Company entered into a Non-Exclusive License agreement through its subsidiary Captivating, whereby the Company can use the celebrity likeness of Teresa Giudice on its cosmetic products. The three year agreement requires royalty payments at the rate of 8% of net sales, with guaranteed minimum royalties due in year one of $15,000, year two of 75% of actual year 1 royalties and year 3 at the rate of actual year two royalties. The agreement is renewable for an additional three year term if sales minimums are achieved.

As of September 30, 2011 the Company has recorded amortization expense of $10,000 in relation to the advance royalty payments.

Note 10 – Subsequent Events

Management has evaluated subsequent events, and the impact on the reported results and disclosures. In October 2011, the Company received a notice of eviction on its lease for non-payment of rent. As of the date of the notice, the amount due to the landlord was $3,318.

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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 2010, the ownership interest in Famous Records was reduced to 27.1% and the subsidiary was deconsolidated. The investment in Famous was written off at that time due to the determination that the investment in Famous did not have any value.

Delta Entertainment is a primarily a holding company for its wholly owned subsidiaries. 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 recording artists in the entertainment field.

Our wholly owned subsidiaries PearlBrite Concepts, Inc. (“PearlBrite”) and Captivating Concepts Corp. (“Captivating”) are entities engaged in the business of branding and marketing health and beauty products.

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.

PearlBrite markets and sells a cosmetic teeth whitening system designed to be administered in 20 minutes by a certified technician. The process uses a light emitting laser which is focused on a mouthpiece which is preloaded with the whitening gel. The technician never touches the customer’s mouth. Customers will also be offered after care products. Teeth whitening after care products are one of the fastest growing products in beauty and convenience stores. The current after care products include: toothpaste, mouth rinse, whitening cream and whitening gum.

Captivating is engaged in the business of producing, outsourcing, packaging, marketing, distributing, advertising, promoting, merchandising and selling cosmetic products to the mass markets, including, but not limited to, nail polish, lipstick, eyeliners, mascara, make-up and related accessories.

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. PearlBrite sells its products primarily to salons throughout the United States and Canada. We also offer our products for sale through the website www.pearlbriteconcepts.com.

Captivating plans to sell its products primarily to mass market retailers and online through its website.

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.

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Teeth whitening is a $12 billion annual business. It covers a broad spectrum of services ranging from laser treatments and gels administered in dental offices by licensed dental professionals to whitening strips sold by companies such as Proctor and Gamble and Colgate-Palmolive under the Crest and Colgate brand names. Teeth whitening is one of the most requested cosmetic procedure in the United States and in many parts of the world.

The market is dominated by several multi-national companies. However, there are many specialized and niche markets in the teeth whitening business which affords opportunities to smaller companies with limited resources and access to capital markets. We believe that PearlBrite has identified a niche market and will be able to compete based on product quality, pricing, convenience and marketing support

Cosmetics industry generated about $250 billion in sales in 2008, with the US industry share about 25% of the total; and largely dominated by a relative few leading brands from major corporations. L’Oreal, the world's largest beauty products company, owns more than 20 brands including Maybelline. Estee Lauder owns 25 brands, while others are owned by Revlon, Proctor & Gamble, Coty and Shiseido.

We plan to offer a line of duo-packed matching nail polish and lipstick with a standard “Buy One-Get One Free” value proposition for our tier-one distribution. Price points will also offer tremendous values for the domestically manufactured high-quality products. Another key feature is a Four-Season Rotation of products through seasonally-themed product colors and packaging in smaller 12-duo pre-packs that allow retailers to clear out their inventories, in order to stock new season products.

We believe the biggest market differentiator for our PearlBrite and Captivating subsidiaries is our celebrity endorsement licensing agreements with Teresa Giudice, known to millions of cable TV viewers for her high-visibility role on the hit reality show, The Real Housewives of New Jersey.

Results of Operations

Three and Nine months Ended September 30, 2011 and 2010

We generated revenues for the three months ended September 30, 2011 and 2010 of $25,581 and $519, respectively. The increase in the current period is primarily due to the revenues generated from our subsidiaries with revenues in the current three months of $11,635 from Creative and $13,946 from PearlBrite, there were no similar revenues generated from these subsidiaries in the same period of the prior year. We recognized revenues for the nine months ended September 30, 2011 and 2010 of $36,971 and $1,455, respectively. The nine month revenues were $21,681 from PearlBrite and $15,290 from Creative.

Our cost of sales for the three months ended September 30, 2011 and 2010 were $19,397 versus $8,433 for the three months ended September 30, 2010.

Our cost of sales for the nine months ended September 30, 2011 and 2010 were $22,990 versus $14,331 for the nine months ended September 30, 2010.

During the three months ended September 30, 2011 we incurred general and administrative expenses of $132,682 as compared to $18,380 for the three months ended September 30, 2010. The increase in general and administrative expenses for the current year is due to an increase in Officers’ and Directors compensation and other operating costs which we did not incur in the prior year due to our limited operating activities during the three month period ended September 30, 2010.

The general and administrative expenses for the nine months ended September 30, 2011 and 2010 were $208,925 and $97,132, respectively.

Liquidity

As of September 30, 2011 we had cash of $5,117 as compared to cash at December 31, 2010 of $7,993. We had total current assets at September 30, 2011 of $39,119 as compared to $16,378 at December 31, 2010. The increase in other current assets is primarily attributable to advance royalty payments made during the period ended September 30, 2011, which were funded through notes payable and the issuance of common stock. Our operations to date have primarily been funded through convertible notes payable and advances from a related party. Our total current liabilities at September 30, 2011 were $225,725 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.

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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.

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.

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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 15,000 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.

In May 2011, we issued 45,000 shares of common stock at $.01 per share for officers and directors compensation.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Removed and Reserved

Item 5. Other information

None.

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Item 6. Exhibits

(a)	The following exhibits are filed herewith pursuant to Item 601 of Regulation S-K.

	31	Section 302 Certification of Chief Executive and Financial Officer

	32	Section 906 Certification

	101*	Interactive Date Files of Financial Statements and Notes.

* In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”

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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: November 21, 2011

By /s/ Leonard Tucker

Leonard Tucker

President and Chief Executive and Financial Officer

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Delta Entertainment Group, Inc. - FORM 10-Q - November 21, 2011

Attached files

Delta Entertainment Group, Inc. Reports