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EX-31 - RULE 13A-14(A)/15D-14(A) CERTIFICATION - Beta Music Group, Inc.ex31.txt
EX-32 - SECTION 1350 CERTIFICATION - Beta Music Group, Inc.ex32.txt


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
(Mark One)
|X|   QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
      OF 1934
      For the quarterly period ended: SEPTEMBER 30, 2009

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
      OF 1934
      For the transition period from _________ to __________

                       COMMISSION FILE NUMBER: 333-156235

                             BETA MUSIC GROUP, INC.
                             ----------------------
        (Exact name of small business issuer as specified in its charter)

            Florida                                               26-0582871
            -------                                               ----------
(State or other jurisdiction of                                 (IRS Employer
 incorporation or organization)                              Identification No.)

                               7359 Ballantrae Ct
                            Boca Raton, Florida 33496
                            -------------------------
                    (Address of principal executive offices)

                                  818-539-6507
                                  ------------
                           (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.                                                 |X| Yes |_| 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 file" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer |_|                        Accelerated filer |_|
Non-accelerated filer |_|                          Smaller reporting company |X|
(Do not check if a smaller reporting  company)

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).                                  |X| Yes |_| No

                      APPLICABLE ONLY TO CORPORATE ISSUERS

As of November 3, 2009 the Company had authorized 100,000,000 shares of $.01 par
value common stock of which 16,555,315 shares of common stock were issued and
outstanding.


PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BETA MUSIC GROUP, INC AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS September 30, December 31, 2009 2008 ------------- ------------ (unaudited) (audited) ASSETS Current Assets: Cash ......................................... $ 1,729 $ 8 Accounts receivable .......................... 49 - Prepaid expenses ............................. 12,039 18,992 --------- --------- Total Assets ................................... $ 13,817 $ 19,000 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable ............................. $ 953 $ 16,456 Accounts payable-related parties ............. 16,131 5,363 Due to related entity ........................ 2,250 - Accrued wages related party .................. 42,863 18,415 Accrued liabilities .......................... - 8,000 --------- --------- Total Current Liabilities .................. 62,197 48,234 --------- --------- Total Liabilities ............................ 62,197 48,234 Stockholders' Equity Common stock, $.01 par value 100,000,000 authorized 16,555,315 and 6,800,210 issued and outstanding, respectively ............... 165,553 68,002 Deficit Accumulated in the Development Stage . (213,933) (97,236) --------- --------- Total Stockholders' Equity ................... (48,380) (29,234) --------- --------- Total Liabilities and Stockholders' Equity ..... $ 13,817 $ 19,000 ========= ========= See Accompanying Notes to the Unaudited Consolidated Financial Statements 2
BETA MUSIC GROUP, INC AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED STATEMENTS OF OPERATIONS From July 5, 2006 (Date of Three Months Ended Nine Months Ended Inception) to September 30, September 30, September 30, September 30, September 30, 2009 2008 2009 2008 2009 ------------ ------------ ------------ ------------ ------------- Revenue ....................... $ 49 $ - $ 49 $ - $ 2,809 Cost of sales ................. 2,199 - 2,199 - 4,450 ------------ ------------ ------------ ------------ ------------ Gross profit .................. (2,150) - (2,150) - (1,641) General administrative expenses 38,853 7,971 114,547 27,630 212,292 ------------ ------------ ------------ ------------ ------------ Income (loss) before provision for income tax ............... (41,003) (7,971) (116,697) (27,630) (213,933) ------------ ------------ ------------ ------------ ------------ Income tax expense ............ - - - - - ------------ ------------ ------------ ------------ ------------ Net Loss ...................... $ (41,003) $ (7,971) $ (116,697) $ (27,630) $ (213,933) ============ ============ ============ ============ ============ Basic and Diluted Loss per Common Share ................. $ (0.00) $ (0.00) $ (0.01) $ (0.01) $ (0.06) ============ ============ ============ ============ ============ Basic and Diluted Weighted Average Common Shares Outstanding .................. 10,467,883 3,899,084 7,825,612 2,225,072 3,626,424 ============ ============ ============ ============ ============ See Accompanying Notes to the Unaudited Consolidated Financial Statements 3
BETA MUSIC GROUP, INC AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) Deficit Accumulated in the Total Common Paid in Development Stockholders' Stock Amount Capital Stage Equity ---------- ---------- ------- ----------- ------------- Balance, July 5, 2006, date of inception ........................... - $ - $ - $ - $ - Proceeds from Founders shares issued on July 14, 2006 at $.01 per share .. 10,000 100 - - 100 Net Loss ............................. - - - (100) (100) ---------- ---------- ------- ---------- ------------ Balance December 31, 2006 ............ 10,000 100 - (100) - Net Loss ............................. - - - (21,522) (21,522) ---------- ---------- ------- ---------- ------------ Balance, December 31, 2007 ........... 10,000 100 - (21,622) (21,522) Shares issued for conversion of accounts payable-related parties at $.01 per share on March 31, 2008 .... 2,160,087 21,601 - - 21,601 Shares issued for conversion of accounts payable-related party at $.01 per share on April 24, 2008 .... 244,000 2,440 - - 2,440 Shares issued for conversion of accounts payable-related party and accrued wages-related parties on May 27, 2008 at $.01 per share ...... 1,000,091 10,001 - - 10,001 Shares issued for conversion of accounts payable-related party and accrued wages-related parties on August 21, 2008 at $.01 per share ... 383,000 3,830 - - 3,830 Shares issued for conversion of accounts payable-related party and accrued wages-related parties on September 4, 2008 at $.01 at $.01 per share ...................... 1,126,590 11,266 - - 11,266 Shares issued for conversion of accounts payable-related party and accrued wages-related parties on October 22, 2008 at $.01 per share .. 645,500 6,455 - - 6,455 Shares issued for prepaid expenses on October 22, 2008 at $.01 per share .. 1,230,942 12,309 - - 12,309 Net Loss ............................. - - - (75,614) (75,614) ---------- ---------- ------- ---------- ------------ Balance December 31, 2008 (Audited) .. 6,800,210 68,002 - (97,236) (29,234) Shares issued for conversion of accounts payable-related party and accrued wages-related parties on Janaury 7, 2009 at $.01 per share ... 1,969,500 19,695 - - 19,695 Shares issued at $.01 per share for services and prepaid expenses on January 7, 2009 ..................... 550,000 5,500 - - 5,500 Shares issued at $.01 per share for conversion of accounts payable- related party and accrued wages- related parties on February 4, 2009 . 870,000 8,700 - - 8,700 Shares issued for accrued liabilities and consulting expenses on August 3, 2009 at $.01 .............. 100,000 1,000 - - 1,000 Shares issued at $.01 per share for conversion of accounts payable- related party and accrued wages- related parties on August 3, 2009 ... 4,790,605 47,906 - - 47,906 Shares at $.01 per share issued for accrued rent-related party .......... 750,000 7,500 - - 7,500 Shares issued at $.01 per share for conversion of accounts payable- related party and accrued wages- related parties on September 1, 2009 725,000 7,250 - - 7,250 Net Loss ............................. - - - (116,697) (116,697) ---------- ---------- ------- ---------- ------------ Balance September 30, 2009 (Unaudited) 16,555,315 $ 165,553 $ - $ (213,933) $ (48,380) ========== ========== ======= ========== ============ See Accompanying Notes to the Unaudited Consolidated Financial Statements 4
BETA MUSIC GROUP, INC AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) UNAUDITED STATEMENTS OF CASH FLOWS From July 5, 2006 (Date of Nine Months Ended Inception) to September 30, September 30, September 30, 2009 2008 2009 ------------- ------------- ------------- OPERATING ACTIVITIES: Net loss .......................................... $ (116,697) $ (27,630) $ (213,933) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Stock issued for services and accrued liabilities 6,500 - 35,863 Stock issued for accounts payable-related party . 36,300 49,138 36,300 Changes in Assets and Liabilities: Accounts receivable ........................... (49) - (49) Prepaid expenses .............................. 6,953 - (3,949) Accounts payable .............................. (15,503) 1,250 953 Accounts payable-related party ................ - (21,587) - Accrued wages-related parties ................. 30,848 - 42,863 Due to related entity ......................... 2,250 - 2,250 Accrued liabilities ........................... - - - ------------ ------------ ------------ Net Cash Used by Operating Activities ......... (49,398) 1,171 (99,702) ------------ ------------ ------------ INVESTING ACTIVITIES: Investment in common stock of subsidiary ........ - (281) (281) ------------ ------------ ------------ Net Cash Provided by Investing Activities ..... - (281) (281) ------------ ------------ ------------ FINANCING ACTIVITIES: Proceeds from loans-related party ............... 52,119 - 102,612 Repayment of loans-related party ................ (1,000) - (1,000) Proceeds from issuance of common stock .......... - - 100 ------------ ------------ ------------ Net Cash Provided by Financing Activities ..... 51,119 - 101,712 ------------ ------------ ------------ Net Increase (Decrease) in Cash ............... 1,721 890 1,729 ------------ ------------ ------------ Cash at Beginning of Period ....................... 8 79 - ------------ ------------ ------------ Cash at End of Period ............................. $ 1,729 $ 969 $ 1,729 ============ ============ ============ Supplemental Disclosures: Cash paid for income taxes ...................... $ - $ - $ - ============ ============ ============ Cash paid for interest .......................... $ - $ - $ - ============ ============ ============ Non Cash Transactions: Shares issued for conversion of loans payable-related party ...................... $ 41,351 $ 49,138 $ 82,344 ============ ============ ============ Shares issued for prepaid expenses ............ $ - $ - $ 12,309 ============ ============ ============ Shares issued for rent expense ................ $ 12,000 $ - $ 21,000 ============ ============ ============ Shares issued for accrued liabilities ......... $ 5,000 $ - $ 22,650 ============ ============ ============ See Accompanying Notes to the Unaudited Consolidated Financial Statements 5
BETA MUSIC GROUP, INC AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF ESTIMATES: NATURE OF BUSINESS AND BASIS OF PRESENTATION Beta Music Group, Inc. (Formerly known as The Next Pop Star, Inc.) ("the Company") was incorporated in the State of Florida on July 5, 2006 under the name Pop Starz Productions, Inc. On November 14, 2007, the Company changed its name to The Next Pop Star, Inc. On October 23, 2008, the Company filed an Article of Amendment to its Articles of Incorporation changing its name again to Beta Music Group, Inc. The principal business purpose of the Company originally was to produce live entertainment competitions (in installments or episodes) to be taped and/or filmed for distribution by television and/or internet means and become a reporting company under federal securities laws with a publicly-traded class of securities. The Company is currently a holding company. All of our operations are currently conducted through our subsidiary, Famous Records. Famous Records is a development stage company that is engaged in the business of "branding" recording artists. On August 21, 2008, the Company filed Articles of Incorporation in the State of Florida for Famous Records, Corp. ("Famous" ) Famous' principal business purpose is to commercially release and promote finished "Master" recordings for distribution on an exclusive basis during a specific term to record stores, other non traditional outlets and digitally through downloads & ringtones. At September 30, 2009, Famous is wholly owned by Beta Music Group, Inc. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principals for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation have been included. Management has evaluated subsequent events, and the impact on the reported results and disclosures, through November 16, 2009, which is the date these financial statements were filed with the Securities and Exchange Commission. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Beta Music Group, Inc. and its wholly owned subsidiary Famous Records, Corp. All intercompany accounts and transactions have been eliminated in consolidation. CONTROL BY PRINCIPAL STOCKHOLDERS The directors, executive officers and their affiliates or related parties, own beneficially and in the aggregate, the majority of the voting power of the outstanding shares of the common stock of the Company. Accordingly, the directors, executive officers and their affiliates, if they voted their shares uniformly, would have the ability to control the approval of most corporate actions, including increasing the authorized capital stock of the Company and the dissolution, merger or sale of the Company's assets or business. 6
BETA MUSIC GROUP, INC AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - GOING CONCERN As reflected in the accompanying financial statements, the Company has net losses of $41,003 and $116,697 for the three and nine months ended September 30, 2009, respectively, and net cash used in operations of $49,398 for the nine months ended September 30, 2009; and a working capital deficit of $48,380, a deficit accumulated during the development stage of $213,933 and a stockholders' deficit of $48,380 at September 30, 2009. In addition, the Company is in the development stage and has not yet generated any significant revenue. The ability of the Company to continue as a going concern is dependent on Management's plans, which include implementation of its business plan and continuing to raise funds short-term loans from related parties and through debt or equity raises. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. NOTE 3 - STOCKHOLDERS' EQUITY (DEFICIT) At inception, July 5, 2006, the authorized capital of the Company consisted of 10,000 shares of common stock with a par value of $.01. Effective March 31, 2008, the Articles of Incorporation were amended to increase the authorized number of shares of common stock to 100 million shares of common stock. At June 30, 2009, there are 10,189,710 shares outstanding. On January 7, 2009, the Company issued 1,009,500 shares of common stock to the Tucker Family Spendthrift Trust as repayment of $5,595 of advances made to the Company and $4,500 for accrued rent and rent expense. The Company issued 960,000 shares of common stock to Officers and Directors of the Company for their services. The Company also issued 550,000 shares of common stock for services. On February 4, 2009, the Company issued 550,000 to the Tucker Family Spendthrift Trust as repayment of $4,000 of advances made to the Company and $1,500 for rent expense. Also on that date, the Company issued 320,000 shares to Officers and Directors of the Company for their services. On August 3, 2009, the Company issued 3,940,605 shares of common stock to the Tucker Family Spendthrift Trust as repayment $31,906.05 of advances made to the Company and $7,500 of accrued rent The Company issued 1,600,000 shares of common stock to Officers and Directors for their services and also 100,000 shares to vendors for accrued liabilities and consulting expenses. On September 1, 2009, the Company issued 85,000 shares to the Tucker Family Spendthrift Trust as repayment of $850 of advances made to the Company. Also on that date, the Company issued 640,000 shares to Officers and Directors. On October 22, 2008, the Board of Directors approved the issuance of 1,230,942 shares of Company common stock to Mr. Collins in relation to his employment agreement. The Company issued 325,500 for repayment of $1,755 in advances from the Tucker Family Spendthrift Trust, $1,500 in accrued rent, as well as 320,000 shares to Directors and Officers for their services to the Company. 7
BETA MUSIC GROUP, INC AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On September 4, 2008, the Company issued 1,106,590 shares of common stock to the Tucker Family Spendthrift Trust as repayment of $2,816 of advances made to the Company and $8,250 of accrued rent. Also on that date, the Company issued 20,000 shares of common stock to Officers and Directors of the Company for their services. On August 21, 2008, the Company issued 298,000 shares of common stock to the Tucker Family Spendthrift Trust as repayment of advances made to the Company in the amount of $2,980. Also on that date, the Company issued 85,000 shares of common stock to Officers and Directors for their services to the Company. On May 27, 2008, the Company issued 940,091 shares of common stock to the Tucker Family Spendthrift Trust as repayment of advances made to the Company in the amount of $9,401. Also on that date, the Company issued 60,000 shares to Officers and Directors for their services to the Company. On April 24, 2008, the Company issued 244,000 shares of common stock as repayment of $2,440 of advances made by the Tucker Family Spendthrift Trust to the Company. On March 31, 2008, the Company issued 2,160,087 shares of common stock as repayment of $21,601 of amounts due to related parties. NOTE 4 - RECENT ACCOUNTING PRONOUNCMENTS In December 2007, the FASB issued FASB ASC 805-10 (Prior authoritative literature: FASB Statement 141 (R), "Business Combinations," which replaces FASB Statement No. 141). FASB ASC 805-10 is effective for the Company April 1, 2009 and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. FASB ASC 805-10 will change how business combinations are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. The adoption of FASB ASC 805-10 did not have an impact on the Company's financial position and results of operations although it may have a material impact on accounting for business combinations in the future which cannot currently be determined. In April 2009, the FASB issued FASB ASC 805-10-05 (Prior authoritative literature: FSP 141(R)-1 "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arises from Contingencies"). For business combinations, the standard requires the acquirer to recognize at fair value an asset acquired or liability assumed from a contingency if the acquisition date fair value can be determined during the measurement period. FASB ASC 805-10-05 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, with early adoption prohibited. The Company adopted these provisions at the beginning of the fiscal year April 1, 2009. FASB ASC 805-10-05 will be applied prospectively for acquisitions in fiscal 2010 or thereafter. 8
BETA MUSIC GROUP, INC AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In May 2009, the FASB issued FASC Topic 855, Subsequent Events, formerly SFAS 165 ("FASC 855"), which requires entities to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of their financial statements. FASC 855 is effective for interim and annual periods ending after June 15, 2009. We adopted FASC 855 for reporting in second quarter 2009. Adoption of FASC 855 did not have a material impact on our Consolidated Financial Statements. In June 2009, the FASB issued Accounting Standards Update ("ASU") 2009-01, Topic 105 - Generally Accepted Accounting Principles ("ASU 2009-01"), which superseded all accounting standards in U.S. GAAP, aside from those issued by the SEC. ASU 2009-01 is effective for reporting periods ending after September 15, 2009. We adopted ASU 2009-01 for reporting in the second quarter 2009. The codification does not change or alter existing GAAP. Adoption of ASU 2009-01 did not have a material impact on our Consolidated Financial Statements. FASB ASC 820-10-65-4 (Prior authoritative literature: FASB Staff Position No. FAS 157-4), "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that Are Not Orderly," provides additional guidance for estimating fair value in accordance with ASC 820 when the volume and level of activity for the asset or liability have significantly decreased. FASB ASC 820-10-65-4 also provides guidance for determining when a transaction is an orderly one. The Company adopted FASB ASC 820-10-65-4 during the quarter ended June 30, 2009 and the adoption did not have a significant impact on the Company's Consolidated Financial Statements. In August 2009, the FASB issued ASU 2009-05, Fair Value Measurement and Disclosures: Measuring Liabilities at Fair Value ("ASU 2009-05"), which provides clarification on measuring liabilities at fair value when a quoted price in an active market is not available. ASU 2009-05 is effective for the first reporting period beginning after issuance. We do not expect adoption of ASU 2009-05 to have a material impact on our Consolidated Financial Statements. NOTE 5 - SUBSEQUENT EVENTS On October 2nd 2009, the Company formed a Florida wholly owned subsidiary, Delta Entertainment Group, Inc. ("Delta'). During October and November 2009, the Tucker Family Spendthrift Trust has advanced the Company and or its affiliates approximately $17,300. 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. FORWARD LOOKING STATEMENTS The statements contained in this report that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are made based upon management's current expectations and beliefs concerning future developments and their potential effects upon the Company. There can be no assurance that future developments affecting the Company will be those anticipated by management. Actual results may differ materially from those included in the forward-looking statements. Readers are also directed to other risks and uncertainties discussed in other documents filed by the Company with the Securitis and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise. OVERVIEW AND HISTORY Beta Music Group Inc. ("BETA", the "Company" or the "Registrant") is a Florida corporation incorporated in the state of Florida on July 5, 2006 under the name Pop Starz Productions, Inc. On November 15, 2007 we changed our name to The Next Pop Star Inc. Our original business endeavor was to produce live entertainment competitions (in installments or episodes) to be taped and/or filmed for distribution by television and/or internet means. We were not successful and decided to refocus our operations. In conjunction with this change on October 23, 2008, we changed our name to Beta Music Group, Inc. On August 21, 2008, the Company formed a wholly owned subsidiary, Famous Records Corp., ("Famous Records'). Famous Records is a Florida corporation. The Registrant is currently a holding company. All of our operations are currently conducted through our subsidiary, Famous Records. Famous Records is a development stage company that is engaged in the business of "branding" recording artists. RESULTS OF OPERATIONS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 We did not generate significant revenues from continuing operations during the three or nine months ended September 30, 2009 or 2008. During the three months ended September 30, 2009 we incurred general and administrative expenses totaling $38,853, as compared to $7,971 for the same period in the prior year. During the nine months ended September 30, 2009 we incurred general and administrative expenses totaling $144,547, as compared to $27,630 for the same period of the prior year. The increase in the current year was due primarily to an increase in compensation expense, rent expense and other professional fees. Liquidity and Capital Resources We have nominal assets. At September 30, 2009 we had cash of $1,729 and prepaid expenses of $12,039. At December 31, 2008 we had cash of $8 and prepaid expenses of $18,992. The increase in our cash holdings was attributable to advances from a related party. 10
Our operations to date have been funded by loans and capital contributions made by our affiliates. Our total current liabilities at September 30, 2009 were $62,197 as compared to $48,234 at December 31, 2008. We have relied on related parties to provide working capital to cover professional fees, rent and compensation. We have a working capital deficit of $48,380. Unless we secure additional financing, of which there can be no assurance, or begin to generate revenues in excess of expenses, we may not be able to meet our obligations as they become due. Due to our operating losses and deficits, our independent auditors in our financial statements have raised doubts about our ability to continue as a going concern. Despite these historical losses, management believes that it will be able to satisfy ongoing operating expenses. If revenues from operations are insufficient to meet these obligations, management will seek to obtain third party financing. There can be no assurance that any financing will be available, or if available, will be offered on terms that will not adversely impact our shareholders. During the nine months ended September 30, 2009, we used cash in operating activities of $49,398 as compared to cash provided of $1,171 for the nine months ended September 30, 2008. During the 2009 period, we used cash to fund our net loss of $116,697 offset by an increase in accrued wages-related party $30,848 and other changes in operating assets and liabilities. During the nine months ended September 30, 2009, we received net cash from financing activities of $52,119 as compared to nil for the nine months ended September 30, 2008. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared pursuant to the rules and regulations of the SEC. Certain information related to our organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates related to (i) useful lives of depreciable lives of assets; (ii) income tax valuation allowances; (iii) valuation assumptions for share-based payments. We base our estimates on historic experience and various other factors related to each circumstance. Actual results could differ from those estimates based upon future events, which could include, among other risks, changes in the business environment in which we operate. There are several accounting policies that we believe are significant to the presentation of our financial statements and require management's most difficult, complex or subjective judgments about matters that are inherently uncertain. We believe our most critical accounting policies include (i) use of estimates, which is described more fully above and (ii) the carrying values of goodwill and other long-lived assets. Our significant accounting policies and critical accounting estimates are disclosed more fully in our Annual Report on Form 10-K for the year ended December 31, 2008. We do not believe there have been significant changes to our critical accounting policies and estimates subsequent to December 31, 2008. 11
RECENT ACCOUNTING PRONOUNCEMENTS In December 2007, the FASB issued FASB ASC 805-10 (Prior authoritative literature: FASB Statement 141 (R), "Business Combinations," which replaces FASB Statement No. 141). FASB ASC 805-10 is effective for the Company April 1, 2009 and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the goodwill acquired. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. FASB ASC 805-10 will change how business combinations are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. The adoption of FASB ASC 805-10 did not have an impact on the Company's financial position and results of operations although it may have a material impact on accounting for business combinations in the future which cannot currently be determined. In April 2009, the FASB issued FASB ASC 805-10-05 (Prior authoritative literature: FSP 141(R)-1 "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arises from Contingencies"). For business combinations, the standard requires the acquirer to recognize at fair value an asset acquired or liability assumed from a contingency if the acquisition date fair value can be determined during the measurement period. FASB ASC 805-10-05 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, with early adoption prohibited. The Company adopted these provisions at the beginning of the fiscal year April 1, 2009. FASB ASC 805-10-05 will be applied prospectively for acquisitions in fiscal 2010 or thereafter. In May 2009, the FASB issued FASC Topic 855, Subsequent Events, formerly SFAS 165 ("FASC 855"), which requires entities to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of their financial statements. FASC 855 is effective for interim and annual periods ending after June 15, 2009. We adopted FASC 855 for reporting in second quarter 2009. Adoption of FASC 855 did not have a material impact on our Consolidated Financial Statements. In June 2009, the FASB issued Accounting Standards Update ("ASU") 2009-01, Topic 105 - Generally Accepted Accounting Principles ("ASU 2009-01"), which superseded all accounting standards in U.S. GAAP, aside from those issued by the SEC. ASU 2009-01 is effective for reporting periods ending after September 15, 2009. We adopted ASU 2009-01 for reporting in the second quarter 2009. The codification does not change or alter existing GAAP. Adoption of ASU 2009-01 did not have a material impact on our Consolidated Financial Statements. FASB ASC 820-10-65-4 (Prior authoritative literature: FASB Staff Position No. FAS 157-4), "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that Are Not Orderly," provides additional guidance for estimating fair value in accordance with ASC 820 when the volume and level of activity for the asset or liability have significantly decreased. FASB ASC 820-10-65-4 also provides guidance for determining when a transaction is an orderly one. The Company adopted FASB ASC 820-10-65-4 during the quarter ended June 30, 2009 and the adoption did not have a significant impact on the Company's Consolidated Financial Statements. 12
In August 2009, the FASB issued ASU 2009-05, Fair Value Measurement and Disclosures: Measuring Liabilities at Fair Value ("ASU 2009-05"), which provides clarification on measuring liabilities at fair value when a quoted price in an active market is not available. ASU 2009-05 is effective for the first reporting period beginning after issuance. We do not expect adoption of ASU 2009-05 to have a material impact on our Consolidated Financial Statements. OFF BALANCE SHEET ARRANGEMENTS As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have: (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As a smaller reporting company we are not required to provide the information required by this item. ITEM 4. CONTROLS AND PROCEDURES. DISCLOSURE CONTROLS AND PROCEDURES In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 as amended (the "Exchange Act"), as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company's management evaluated, with the participation of the Company's principal executive and financial officer, the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act). Disclosure controls and procedures are defined as those controls and other procedures of an issuer that are designed to ensure that the information required to be disclosed by the issuer in the reports it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on her evaluation of these disclosure controls and procedures, the Company's chairman of the board, chief executive and financial officer has concluded that the disclosure controls and procedures were effective as of the date of such evaluation to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to her by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared. 13
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING There were no changes in our internal controls over financial reporting during the quarter ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None. ITEM 2. SALE OF UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS On September 1, 2009, the Company issued 85,000 shares to the Tucker Family Spendthrift Trust as repayment of $850 of advances made to the Company. Also on that date, the Company issued 640,000 shares to Officers and Directors. On August 3, 2009, the Company issued 3,940,605 shares of common stock to the Tucker Family Spendthrift Trust as repayment $31,906.05 of advances made to the Company and $7,500 of accrued rent The Company issued 1,600,000 shares of common stock to Officers and Directors for their services and also 100,000 shares to vendors for accrued liabilities and consulting expenses. On February 4, 2009, the Company issued 550,000 to the Tucker Family Spendthrift Trust as repayment of $4,000 of advances made to the Company and $1,500 for rent expense. Also on that date, the Company issued 320,000 shares to Officers and Directors of the Company for their services. On January 7, 2009, the Company issued 1,009,500 shares of common stock to the Tucker Family Spendthrift Trust as repayment of $5,595 of advances made to the Company and $4,500 for accrued rent and rent expense. The Company issued 960,000 shares of common stock to Officers and Directors of the Company for their services. The Company also issued 550,000 shares of common stock for services. On October 22, 2008, the Board of Directors approved the issuance of 1,230,942 shares of Company common stock to Mr. Collins in relation to his employment agreement. The Company issued 325,500 for repayment of $1,755 in advances from the Tucker Family Spendthrift Trust, $1,500 in accrued rent, as well as 320,000 shares to Directors and Officers for their services to the Company. On September 4, 2008, the Company issued 1,106,590 shares of common stock to the Tucker Family Spendthrift Trust as repayment of $2,816 of advances made to the Company and $8,250 of accrued rent. Also on that date, the Company issued 20,000 shares of common stock to Officers and Directors of the Company for their services. On August 21, 2008, the Company issued 298,000 shares of common stock to the Tucker Family Spendthrift Trust as repayment of advances made to the Company in the amount of $2,980. Also on that date, the Company issued 85,000 shares of common stock to Officers and Directors for their services to the Company. On May 27, 2008, the Company issued 940,091 shares of common stock to the Tucker Family Spendthrift Trust as repayment of advances made to the Company in the amount of $9,401. Also on that date, the Company issued 60,000 shares to Officers and Directors for their services to the Company. 14
On April 24, 2008, the Company issued 244,000 shares of common stock as repayment of $2,440 of advances made by the Tucker Family Spendthrift Trust to the Company. On March 31, 2008, the Company issued 2,160,087 shares of common stock as repayment of $21,601 of amounts due to related parties. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None ITEM 6. EXHIBITS. Set forth below is a list of exhibits to this quarterly report on Form 10Q. Exhibit Number Description ------- ---------------------------------------------------------------------- 31 Certification of the Chief Executive and Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certification of the Chief Executive and Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Beta Music Group, Inc. Date: November 16, 2009 By /s/ Michelle Tucker Michelle Tucker Chief Executive Officer 1