The following discussion should be read in conjunction with the financial statements for the year ended December 31, 2022 included with this Form 10K. The following discussion and analysis provides certain information, which the Company's management believes is relevant to an assessment and understanding of the Company's results of operations and financial condition for the year ended December 31, 2022. The statements contained in this section that are not historical facts are forward looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties. Such forward looking statements may be identified by, among other things, 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. From time to time, we or our representatives have made or may make forward looking statements, orally or in writing. Such forward looking statements may be included in our various filings with the SEC, or press releases or oral statements made by or with the approval of our authorized executive officers.

These forward looking statements, such as statements regarding anticipated future revenues, capital expenditures and other statements regarding matters that are not historical facts, involve predictions. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward looking statements. We do not undertake any obligation to publicly release any revisions to these forward looking statements or to reflect the occurrence of unanticipated events. Many important factors affect our ability to achieve our objectives, including, among other things, technological and other developments within a given field, intense and evolving competition, the lack of an "established trading market" for our shares, and our ability to obtain additional financing, as well as other risks detailed from time to time in our public disclosure filings with the SEC.





Executive Summary

References in this Current Report on Form 10K to "CMG Holdings Group", "CMG", the "Company," "we," "us" and "our" for periods prior to the closing of the Reorganization refer to the Registrant, and for periods subsequent to the closing of the Reorganization refer to the Registrant and its subsidiaries. The Company reports its financial results in accordance with generally accepted accounting principles ("GAAP") of the United States of America ("US GAAP"). The Company's objective is to create shareholder value by building market leading strategies that deliver innovative, value added marketing communications and strategic consulting to our clients. The company manages the business by monitoring several financial and non financial performance indicators. The key indicators that we review focus on the areas of revenues and operating expenses. Revenue growth is analyzed by reviewing the components and mix of the growth, including: growth by major geographic location and growth from acquisitions.





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Financial analysis

Year ended December 31, 2022 compared to the year ended December 31, 2021 Liquidity and capital resources

As at December 31, 2022 the Company had a cash balance of $338,156 and working capital of $732,276 compared with a cash balance of $595,430 and a working capital of $702,906 at December 31, 2021. The decrease in cash was mainly due final receipt of settlement of a lawsuits.

Cash Flows from Operating Activities

During the year ended December 31, 2022, cash flows used in operating activities was $178,833 compared with provided by operating activities of $681,364 of cash flow during the year ended December 31, 2021. The decrease in cash flow from operating activities is mainly due to decrease final receipt of settlement of a lawsuit.

Cash Flows from Investing Activity

During the year ended December 31, 2022, cash flows used by investing activities were $0, compared to $0 for the year ended December 31, 2021.

Cash Flows from Financing Activities

During the year ended December 31, 2022, cash used in financing activities was $78,440 as compared to $497,070 for the year ended December 31, 2021.





Revenues

The Company had revenues of $2,033,712 in our fiscal year ended December 31, 2022, as compared to $1,618,874 in year ended December 31, 2021. The increase in revenues is mainly due to the increase for XA.





Cost of Sales

The Company had cost of sales of revenues of $1,502,046 in the year ended December 31, 2022, as compared to

$1,214,281 in the year ended December 31, 2021. The increase in cost of sales is mainly due to the increase of revenues for XA.





Expenses

The Company had total operating expenses of $683,185 in the year ended December 31, 2022, as compared to $715,165 in the year ended December 31, 2021. The decrease in operating expense is mainly due to the decrease in fees relating to the final settlement from a lawsuit.





Income

The Company had a net income of $21,500 in the year ended December 31, 2022 as compared to net income of $789,370 in the year ended December 31, 2021. The decrease in net income is mainly due to the decrease in income received relating to the final settlement from a lawsuit.





Capital Resources

At December 31, 2022, we had assets totaling $1,896,920, compared to $1,792,978 at December 31, 2021. Assets at December 31, 2022 consisted primarily of cash of $338,156, loan receivable of $1,458,764 and property and equipment, net of $2,483.





Liabilities

Our liabilities at December 31, 2022 totaled $1,161,644 compared to $1,076,014 at December 31, 2021. Liabilities at December 31, 2022 consisted primarily of $385,514 in deferred compensation, loan from outside party of $15,000, loan payable of $666,000 and note payable of $60,000.







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Critical Accounting Policies and Estimates

For all periods following closing under the Reorganization Agreement, the Company intends to prepare consolidated financial statements of the Company and its subsidiaries, which will be prepared in accordance with the generally accepted accounting principles in the United States. During the preparation of the financial statements the Company will be required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company will evaluate its estimates and judgments, including those related to sales, returns, pricing concessions, bad debts, inventories, investments, fixed assets, intangible assets, income taxes and other contingencies. The Company intends to base its estimates on historical experience and on various other assumptions that it believes are reasonable under current conditions. Actual results may differ from these estimates under different assumptions or conditions. In response to the SEC's Release No. 338040, "Cautionary Advice Regarding Disclosure About Critical Accounting Policy," the Registrant identified the most critical accounting principles upon which its financial status depends. The Registrant determined that those critical accounting principles are related to the use of estimates, revenue recognition, income tax and impairment of intangibles and other long lived assets. The Company presents these accounting policies in the relevant sections in this management's discussion and analysis, including the Recently Issued Accounting Pronouncements discussed below.







Revenue Recognition

The Company recognizes revenues generated from clients are subject to contracts requiring the Company to provide services within specified time periods generally ranging up to twelve months. As a result, we have projects in process at various stages of completion on any given date and stages may extend from one quarter to the next quarter and from one year to the next year. Revenue for our services is recognized when the following criteria are satisfied: evidence of an arrangement exists; price is agreed upon at a fixed or determinable agreement level; services have been performed and collection is assured. Depending on terms of a client contract, fees for services performed can be recognized in three principal ways: individual project performances as is such in our event marketing division, monthly base retainers in our public relations, consulting or talent management division, and completed contracts were the Company work is based on success fee of the engagement and paid a percentage of the revenue generated by our clients. Depending on the terms of the client contract, revenue is derived from arrangements involving fees for services performed, commissions, performance or a combinations of each or all three. The revenues and commissions are generally earned on the date of the signing of the contract and then an invoice is distributed to the client with approvals. Our revenue is recorded as gross revenues less cost of goods sold or less pass through expenses charged to a client because there may be various pass through expenses, such as external production and marketing costs.

If the Company does not accurately manage our projects properly within the planned periods of time to satisfy our obligations under the contracts, then future profit margins may be significantly and negatively affected or losses on existing contracts may need to be recognized. Outside production costs consist primarily of costs to purchase media and program merchandise; costs of production; merchandise warehousing and distribution; third party contract fulfillment costs; and other costs directly related to marketing programs. Revenue recognition will not result in related billings throughout the duration of a contract due to timing differences between the contracted billing schedule and the time such revenue is recognized. In such instances, when revenue is recognized in an amount in excess of the contracted billing amount, we record such excess on our balance sheet as un billed contracts in progress. Alternatively, on a scheduled billing date, should the billing amount exceed the amount of revenue recognized, we record such excess on our balance sheet as deferred revenue. In addition, on contracts where reimbursable costs are incurred prior to the time revenue is recognized on such contracts, we record such costs as deferred contract costs on our balance sheet. Notwithstanding this, labor costs for permanent employees are expensed as incurred.

We use estimates of fair value to value derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, our policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads (including for our liabilities), relying first on observable data from active markets. Additional adjustments may be made for factors including liquidity, credit, bid/offer spreads, etc., depending on current market conditions. Transaction costs are not included in the determination of fair value. When possible, we seek to validate the model's output to market transactions.







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