10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

CMG HOLDINGS GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada	87-0733770
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

875 North Michigan Avenue
Chicago, IL	60611
(Address of principal executive offices)	(Zip Code)

  Registrant's telephone number including area code(646) 688-6381

(Former Name or Former Address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasonal issuer, as defined in Rule 405 of the Securities Act. Yes o   No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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.  YesoNo   x *

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data 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   o    No   x

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10- K or any amendment to this Form 10-K.   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or small reporting company. See the definition of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x

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

As of June 28, 2013, the aggregate market value of the Registrant’s voting and none-voting common stock held by non-affiliates of the registrant as of the end of the second quarter of the last fiscal year was approximately: $3,756,498 at $0.01 price per share, based on the closing price on the OTCQB. As of April 15, 2014, there were 290,716,364 shares of common stock of the registrant issued and outstanding.

Documents Incorporated by Reference: None

* The Company did not furnish the Company’s consolidated financial statements and related notes from the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2013 formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T.

Explanatory Note

The purpose of this Amendment No. 1 to CMG Holdings Group, Inc. (the “Company”) Annual Report on Form 10-K/A for the year ended December 31, 2013 is to amend and replace the Annual Report on Form 10-K which was submitted by the Company's EDGAR filing service without the Company's knowledge or consent due to an administrative error by such EDGAR filing service. 

CMG HOLDINGS GROUP, INC.
FORM 10-K/A Amendment No. 1
TABLE OF CONTENTS
Part I
ITEM 1.	Business	3
ITEM 1A.	Risk Factors	8
ITEM 1B.	Unresolved Staff Comments	8
ITEM 2.	Properties	8
ITEM 3.	Legal Proceedings	8
ITEM 4.	Mine Safety Disclosures	9
Part II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	9
ITEM 6.	Selected Financial Data	11
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
ITEM 8.	Financial Statements and Supplementary Data	16
ITEM 9.	Change in and Disagreements with Accountants on Accounting and Financial Disclosure	16
ITEM 9A.	Controls and Procedures	16
ITEM 9B.	Other Information	17
Part III
ITEM 10.	Directors, Executive Officers, and Corporate Governance	18
ITEM 11.	Executive Compensation	20
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	21
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	22
ITEM 14.	Principal Accountant Fees and Services	22
Part IV
ITEM 15.	Exhibits and Financial Statement Schedules	22
	Signature	24

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FORWARD LOOKING STATEMENTS

This annual report on Form 10-K/A contains forward-looking statements which include, but are not limited to, statements concerning expectations as to our revenues, expenses, and net income, our growth strategies and plans, the timely development and market acceptance of our products and technologies, the competitive nature of and anticipated growth in our markets, our ability to achieve cost reductions, the status of evolving technologies and their growth potential, the adoption of future industry standards, expectations as to our financing and liquidity requirements and arrangements, the need for additional capital, and other matters that are not historical facts. These forward-looking statements are based on our current expectations, estimates, and projections about our industry, management’s beliefs, and certain assumptions made by it. Words such as “anticipates”, “appears”, “expects”, “intends”, “plans”, “believes, “seeks”, “estimates”, “may”, “will” and variations of these words or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements, which are included in accordance with the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, are not guarantees of future performance and are subject to risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results could differ materially and adversely from those results expressed in any forward-looking statements, as a result of various factors. Readers are cautioned not to place undue reliance on forward-looking statements, which are based only upon information available as of the date of this report. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Unless the context indicates otherwise, the terms “Company”, “Corporate”, “CMGO”, “our”, and “we” refer to CMG Holdings Group, Inc. and its subsidiaries.

ITEM 1: DESCRIPTION OF BUSINESS

Our History

CMG Holdings Group, Inc. (the “Company” or “CMG”) was incorporated in the State of Nevada on July 30, 2004 under the name of “Pebble Beach Enterprises, Inc.” From the date of incorporation until August 2004, it was a wholly-owned subsidiary of Fresh Veg Broker.com, Inc. (“Fresh Veg”), a Nevada corporation. In August 2004, the Company was spun off from Fresh Veg. Until May 27, 2008, the Company was a real estate investment company with three areas of operation: a) real estate acquisition and re-sale; b) real estate development and re-sale; and c) real estate consulting and joint ventures. On February 20, 2008, a majority of the shares of the Company were sold by the shareholders who were actively involved in the Company’s prior real estate business (the “Change in Control”). Also on February 20, 2008, the Company changed its name to “CMG Holdings, Inc.” Since the Change in Control, the Company started to engage in the business of providing marketing, entertainment and management services.

In October 2011, the Company changed its name from “CMG Holdings, Inc.” to its current name “CMG Holdings Group, Inc.” to better reflect the business of the Company.

Business Overview

The Company through its wholly owned subsidiaries, XA, The Experiential Agency and Good Gamin, Inc., is a marketing communications company focused on the operation of organizations in the alternative advertising, digital media, experiential and interactive marketing, and entertainment and an eSports gaming company. XA was formed by a core group of executives who have held senior level positions with several of the largest companies in the entertainment and marketing management industry.  It  delivers customized marketing solutions at optimize profitability by concentrating our resources in those segments of the marketing communications and entertainment industry and operates in the sectors of experiential marketing, event marketing, commercial rights, and talent management.  Good Gaming is building a web-based platform on a subscription based revenue model to provide online gamers with the ability to improve their gaming skills with the goal of enabling them to enter gaming contests or even become professional gamers.

Experiential marketing includes production and promotion, event designs, sponsorship evaluation, negotiation and activation, talent buying, show production, stage and set designs, data analysis and management. We also offer branding and design services, including graphic, industrial and package designs across traditional and new media, public relations, social media, media development and relations and interactive marketing platforms to provide our clients with a customary private digital media networks to design and develop individual broadcasting digital media channels for our clients to sell, promote and enhance their digital media video contents through mobile, online and social mediums.

Below is the business description of XA, The Experiential Agency, Inc., our wholly-owned subsidiary.

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XA, The Experiential Agency, Inc. (“XA”)

Overview

XA, The Experiential Agency, Inc. (“XA”) is the Company’s wholly-owned subsidiary engaged in event marketing and management. XA was acquired by the Company on April 1, 2009. It engages in a diverse range of marketing services, including interactive event strategy and planning, creative development, public relations, and nontraditional marketing. XA has staged movie and show premiers, cross-country tours, hosted VIP events, staged press stunts, and other types of media events and services for leading shows, production houses, non-profit agencies and local communities across the United States. In addition to the physical event planning, logistics and event implementation, XA also engages in the interactive side of the events to increase branding awareness over the Internet.

XA’s strong competitive advantage are (i) its long-term presence and it is in its 25th year as a successful top tier event marketing agency, (ii) its outstanding long-term vendor relationships that help deliver exceptional programs to its clients, and (iii) the vertical integration that gives its clients a single-source for all their event marketing needs, which we believe will require less outsourcing and result in increased profitability and enable us to deliver superior customer service and create one-of-a-kind events and programs.

Business Model

Rooted in brand creativity and client partnerships, XA maintains unique client relationships by anticipating client challenges and providing innovative solutions. The XA business model is taking strategic marketing programs to new levels of audience experience through alternative advertising and experiential marketing and interactive media solutions. The XA marketing capabilities enable their clients and audience to “experience” events compared to just hearing or seeing their client’s messages through holistic experiences to boost sales and increase brand awareness and customer affinity.

While XA continues to seek opportunities and win projects from Fortune 500 clients in the larger enterprise segment, we believes that rapid revenue growth opportunities and margin improvements are available in the comprehensive advisory services to the small to medium enterprise (SME) segment. The SME market has many smaller firms that specialize in only a few aspects of the event marketing and business communications segments, yet SMEs face equally important challenges in terms of brand building and content management. By acting as a comprehensive integrated single source for the total marketing needs of the SMEs, XA has created a niche for itself on a national scale and will replicate the same success strategy internationally under the Company’s holding company model. Given the fact that brand marketers are demanding a full service agency for developing and executing integrated marketing campaigns, we believe that XA will take advantage of the accelerating secular trend of shifts in corporate emphasis toward online event/promotional marketing versus traditional media driven selling efforts. XA is specifically focused on strategically targeting key segments within the event marketing space in order to capture market share in its existing geographic locations as well as to enhance its national and international presence. XA is positioning itself as the one of the few source marketing partners in the market with its unique selling point being the ability to act as a source for the client’s total marketing needs. This would encompass the entire spectrum of services associated with marketing, from strategizing and defining an event portfolio, conceptualization of the event theme and content creation to the final implementation/management of events. XA will also provide an ultimate client return on investment assessment following each implementation.

Market Strategy

We have taken strategic steps to position the Company as a marketing communications company servicing clients in domestic and international markets. We operate in a marketing landscape that has vastly changed over the last few years and continues to fragment as clients are presented with different complex strategies to improve brand awareness and increase market share. To achieve our objectives of providing strategic solutions for our clients, we have recruited talents and have concentrated in high-growth areas to align our capabilities to meet the market demands. In order to grow with our clients, we have accelerated our investment in technologies, professional talent, and provided training throughout our Company. Our market strategy and offerings can improve our organic revenue growth and operating income margin, with our ultimate objective to be fully competitive with our industry peer groups. To increase our revenues and improve our operating margins, we will concentrate on controlling our staff expenses in non-revenue producing capacities, controlling real estate expenses such as office rent, reducing the complexity of our organization and divesting of underperforming business sectors.

Through our wholly-owned subsidiary, XA, an integrated experiential marketing services company, we develop, manage and execute sales promotion programs at both national and local levels, utilizing both online and offline marketing programs. Our programs assist our clients effectively and promote their platforms and services directly to retailers and consumers, and are intended to assist our clients to achieve maximum impact and return on their marketing investment. Our activities reinforce brand awareness, provide incentives to retailers to motivate consumers to purchase their products, and are designed to meet the needs of our clients by focusing on the communities who want to engage brands as part of their lifestyles.

Sources of Revenue

Our revenues are generated through the execution of marketing and communications programs derived primarily across the sectors of event management as well as various media, planning and other management programs. The majority of our contracts with our clients are negotiated individually and the terms of engagement with our clients and basis in which we earn fees and commissions will vary significantly. Contracts with our client are multifaceted arrangements that may include incentive compensation provisions and may include vendor credits. Our largest clients are corporations where they may arrange for our services to be provided locally or nationally. Similar to larger marketing communications companies operating in our sector, our revenues are primarily derived from planning and executing marketing and communications programs in various operating sectors. Most of our client contracts are individually negotiated where terms of engagements and consideration in which we earn revenues vary among planning, creation, implementation and executions of marketing and communications programs specific to the sectors of talent management, event management, and commercial rights. Several of our clients have complex contract arrangements; therefore, we provide services to our clients from our own offices as well as onsite where the events are held. In arranging for such services, we may enter into national or local agreements and estimates are involved in determining both amount and timing of revenue recognition under these arrangements.

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Our fees are calculated to reflect our expertise based on monthly rates as well as mark-up percentages and the relative overhead expenses to execute services provided to our clients. Clients may seek to include incentive compensation components for successful execution as part of the total compensation. Commissions earned are based on services provided and are usually calculated on a percentage over the total revenues generated for our clients. Our revenues can also be generated when clients pay gross rates before we pay reduced rates—the difference is commissions earned which is either retained in total or shared with the client depending on the nature of the services agreement. Our generated revenues are dependent upon the marketing and communications requirements of our corporate clients and dependent on the terms of the client contract. The revenues for services performed can be recognized as proportional performance, monthly basis or execution of the completed contracts. For revenues recognized on a completed contract basis, the contract terms are customary in the industry. Our client contracts generally provide terms for termination by either party on 90-day notice.

Competition

In the highly competitive and fragmented marketing and communications industry, our Company competes for business with mid-size marketing firms such as Mktg, Inc. as well as large global holding companies such as International Management Group, Interpublic Group of Companies, Inc., MDC Partners, Inc. and Omnicom. These global companies generally have greater resources than those available to us, and such resources may enable them to aggressively compete with our Company’s marketing communications businesses. We also face competition from numerous independent agencies that operate in multiple markets. Our competitive advantage is to provide clients with marketing strategies that are focused on increasing clients’ revenues and profits.

Industry Trend

Historically, event management and talent management have been primary service provided by global companies in the marketing communications industry. However, as clients aim to establish individual and enhanced relationships with their customers to more accurately measure the effectiveness of their marketing expenditures, specialized and digital communications services are consuming a growing portion of marketing dollars. This increases the demand for a broader range of marketing communications services. The mass market audience is giving way to life-style segments, social events/networks, and online/mobile communities, with each segment requiring a different message and/or different, often non-traditional, channels of communication. Global marketers now seek innovative strategies, concepts and programs for new opportunities for small to mid-sized communications companies.

Clients

The Company serves clients across the marketing communication industry. Marketing agreements for our clients means that the Company handles marketing communications and multiple brands, product lines of the client in every geographical location. We have contracts with many of our clients and the terms of the contracts are customary in the industry. These contracts provide for termination by either party on relatively short notice. “Management’s Discussion and Analysis — Executive Overview” for a further discussion of our arrangements with our clients.

Employees

As of December 31, 2013, the Company and its subsidiary had 18 employees. The personal service character of the marketing communications sector, the quality of personnel and executive management are crucially important to the Company’s continuing success.

Environmental Laws

The Company believes it complies with all regulations concerning the discharge of materials into the environment, and such regulations have not had a material effect on the capital expenditures or operations of the company.

Recent Acquisition of Good Gaming

On March 28, 2014, the Company completed its acquisition of 100% of the equity interests of Good Gaming, Inc. (“GGI”) by entering into a Share Exchange Agreement (the “SEA”) with BMB Financial, Inc. and Jackie Beckford, GGI’s shareholders.  The owner of BMB Financial, Inc. is also the owner of Infinite Alpha, Inc. which provides consulting services to CMG.  Pursuant to the SEA, for 100% of the shares of GGI, CMG paid: 5,000,000 shares of its common stock, par value $0.001 per share (“Common Stock”), $33,000 in equipment and consultant compensation and a commitment to pay $200,000 in development costs, of which $50,000 had been advanced by CMG.  In addition, the SEA calls for CMG to adopt an incentive plan for GGI pursuant to which the GGI’s officers, directors and employees will receive up to 30% of the net profits of GGI and up to 30% of the proceeds of any sale of GGI or its assets.

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The SEA contains representations and warranties from the former GGI shareholders customary for this type of transaction.

GGI is an online gaming portal with a business objective of assisting eSports gamers to hone and elevate their skills so as to enable them to compete at a higher level in amateur through professional gaming tournaments.  GGI plans to provide its targeted market with access to its proprietary membership based eSports web platform.  GGI intends to provide a service with a monthly membership fee to its target market comprised of 16-25 year old, single, high school/college level adults with disposable income and more than 10 hours of invested game play weekly.

GGI plans to offer a multiple array of incentive driven tournaments to meet the needs of a varied gaming community. GGI plans to hold signature level season tournament play on a quarterly basis. GGI intends to offer many regularly scheduled tournaments on a weekly and monthly basis which will offer cash and other incentive based prizes. GGI also intends to offer organizational level tournaments for groups of gamers who organize themselves in guilds/teams/clans/parties etc. As GGI grows, it intends to offer community driven tournaments that are structured by gamers and organized groups in which they will determine the prizes, style and nature of the incentives.

GGI intends to produce gaming content that is regularly updated by experienced gamers. This content will cover hundreds of areas, some of which are: gaming skills, macros, play style, nomenclature, terminology, tricks and tips, items, equipment, survival, balance of power and etiquette. This content will be focused on improving the gaming experience while improving the overall skill level of casual and serious gamers. In addition, the content will provide a teaching base to assist gamers achieve higher levels of competitive play with the intent to develop the right candidates for professional level play.

GGI plans to introduce a proprietary matchmaking system code named “Mercenary” that GGI believes can greatly improve upon the linear “ranking” style currently in place in most eSports and competitive games. Mercenary can enable gamers to locate players that not only play at or near their skill level but also their play style and “comp”. Mercenary can also harness the power of community based knowledge to offer a continuing improved gaming experience. Mercenary, as it grows, will teach players so that their strengths and weaknesses do not need to rely solely upon a dubious quantitative value that is left for the gamer to decipher. GGI is planning to make Mercenary applicable across multiple games and platforms to quickly allow matchmaking to occur in the adoption of new games and new content.

GGI plans to actively pursue game designers, publishers, and content providers seeking partnerships and agreements that can produce a win-win scenario for gamers and providers. These agreements will focus on securing exclusive game content for the purpose of improving the GGI community and offering unique content and experiences. GGI plans to offer providers access to a unique demographic of gamers at their disposal for alpha testing, beta testing, feedback, non-traditional gaming exposure, and test content. GGI plans to attempt to foster a cross platform/game concept to consolidate merchandising, pay to play, aesthetic, and advertising content in a cohesive collective. This collective can create unique and new ways for gamers and providers to achieve goals that currently do not exist or are not robust enough to meet the larger needs of the gaming and advertising community.

GGI’s overall goals are to be the one stop internet presence for serious gamers who wish to move beyond the casual gaming moniker and compete in eSports. GGI plans to improve the overall gamers experience through improving their game etiquette, skill set, and mastery techniques suited to higher professional play. GGI while serving the gaming community has the overall desire to close the gap between gamers, providers, advertisers to foster a gaming community that results in a fun, satisfying experience while serving an economic purpose.

GGI currently has five employees, each of whom is involved in the development of its eSports web portal.

CMG believes that GGI currently does not have any direct competition.  However, GGI has a number of indirect competitors which offer eSports content and information related to competitive gaming focused around specific game titles or consoles.  These indirect competitors include: Skill Capped, Major League Gaming, Curse, MMO Champion, LOL King and MOBAfire.

AudioEye Separation and Spin-off

On March 23, 2010 the Company entered into a share exchange agreement with the former stockholders of AudioEye, Inc. (hereinafter “AE”) whereby AE became a wholly-owned subsidiary of the Company and the former stockholders of AE retained rights (the “Rights”) to receive cash from the exploitation of AE’s technology. These Rights consisted of 50% of any cash received from income earned, settlements or judgments directly resulting from AE’s patent strategy, net of any direct costs or tax implications incurred in payment of the patent strategy. Additionally, the holders of the Rights were entitled to a share of AE’s net income for 2010, 2011, 2012 and 2013 based on a specified formula.  The holders of the Rights have contributed the Rights to AEAC in exchange for shares of AEAC.  The Company also had issued Senior Secured Notes (the “AE Notes”) in an aggregate principal amount of $1,075,000 to such former shareholders of AE.  

On June 22, 2011, the Company entered into a Master Agreement (the “Master Agreement”) with AudioEye Acquisition Corporation (“AEAC”) pursuant to which: (i) the stockholders of AEAC would acquire from the Company 80% of the capital stock of AE (the “Separation”) and (ii) the Company distributed to its stockholders, in the form of a dividend, 5% of the capital stock of AE (the “Spin-off”). Pursuant to the Master Agreement, as amended, AEAC also released the Company from its obligations under the AE Notes.  In connection with the release of the Company under the AE Notes, effective August 15, 2012, the Company completed the Separation.   On February 22, 2013, the Company completed the Spin-off by distributing a total of 1,500,259 shares of AE common stock to its shareholders on the record date of October 26, 2012 on a pro rata basis after the SEC declared the registration statement on Form S-1 filed by AE effective on January 19, 2013.  As a result of the foregoing transactions, the Company retained a total of 4,500,874 shares of AE common stock.

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Also in connection with the Separation, the Company entered into a Royalty Agreement with AE, pursuant to which for a period of five years, AE would pay to the Company 10% of cash received from income earned or settlements on judgments directly resulting from AE’s patent enforcement and licensing strategy, whether received by AE or any of AE’s affiliates, net in either case of any direct costs or tax implications incurred in pursuit of such strategy as they relate to the patents described in the Master Agreement.  Additionally, the Company entered into a Services Agreement with AE whereby, without duplication to the amounts payable under the Royalty Agreement, for a period of 5 years, the Company shall receive a commission of 7.5% of all revenues received by AE after the Separation from all business, clients or other sources of revenue procured by the Company or its employees, officers or subsidiaries and directed to AE and 10% of net revenues obtained from a specified customer.

On August 1, 2013, the Company and AE entered into a Call Option Agreement (“AE Call Option”), where the Company granted AE the rights to purchase from AE up to 4,500,874 shares of AE common stock that the Company held. The AE Call Option was amended later on August 30, 2013, September 14, 2013, November 7, 2013 and November 25, 2013 and December 16, 2013, where the option granted under the AE Call Option was amended to reflect the new exercise price and the extended expiration date of March 31, 2014.

In addition, pursuant to the AE Call Option, on November 12, 2013, the Company agreed to terminate the Royalty Agreement in consideration for cash payment of $85,000 from AE.

On December 30, 2013, AE repurchased from the Company a total of 2,184,583 shares of AE common stock owned by the Company for the following consideration: (i) cash payment of $573,022 and (ii) release of Good Gaming, Inc.’s obligation to AE in connection with a $50,000 accounts payable.

Recent Developments

Alan Morell Separation Agreement and Release Amendment

Alan Morell (“Morell”) served as the Company’s former CEO and Chairman from February 2008 through September 26, 2012. The Company entered into a Separation Agreement and Release with Morell on September 27, 2012, where the Company issued Morell two convertible promissory notes in the respective principal amount of $525,000 and $112,000 (the “Morell Notes”). On June 26, 2013, the Company entered into the Modification Separation Agreement Release with Morell (the “Morell Separation Amendment”), where Morell agreed that the Morell Notes would be converted into a total of 2,800,000 shares of Common Stock and the Company agreed that Morell may remove restrictive legend on his beneficially owned securities subject to a monthly leak-out of 5% of his total ownership. The Company and Morell agreed to mutually release each other and not to sue or prosecute any disagreements that have arisen between the Company and Morell.

Settlement with Ennis et al.

James J. Ennis (“Ennis”) and Michael Vandetty (“Vandetty”) served as the Company’s directors and officers from February 2008 through November 26, 2012 when holders of approximately 55% of the Company’s Common Stock acted by written consent removed Ennis and Vandetty from their positions.

On December 18, 2012, the Company entered into Mutual Separation and Release Agreements (the “Separation Agreements”) with Ennis and Vandetty pursuant to which each of Ennis and Vandetty resigned each of their positions with the Company, agreed to termination of their employment agreements, agreed to lockup provisions as provided in the Lockup Agreements (the “Ennis Lockup Agreements”) with respect to their Company shares and shares of AudioEye, Inc. and each received 45% of the stock of the Company’s former subsidiaries, UsaveNJ, Inc. and UsaveNJ, Inc.

On August 3, 2013, the Company entered into a Settlement Agreement and Releases with Ennis, Vandetty, Scott Baily (“Baily”), Martin Boyle (“Boyle”), Hudson Capital Advisors (“Hudson” together with Ennis, Vandetty, Baily and Boyle, referred to as “Ennis Parties”), where Ennis, Vandetty, Baily, Boyle, Hudson agreed to return to the Company a total of 33,846,000 shares of the Company’s Common Stock (including a total of 2,500,000 shares of Common Stock issued to Connied, Inc. and later assigned to Vandetty) for cancellation without any monetary payment by the Company. Ennis Parties and the Company agreed that the Separation Agreements and the Ennis Lockup Agreements were terminated and be of no further effect. The Company and Ennis Parties agreed to mutually release each other and not to sue or prosecute any disagreements that have arisen between the Company and Ennis Parties.

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Connied Termination and Releases Agreement

On August 3, 2013, the Company entered into a Termination Agreement and Releases with Connied, Inc., a successor in interest to Continental Investment Group, Inc. (collectively referred to as “Connied”), pursuant to which (i) the Sale and Purchase Agreement, dated March 31, 2011, where the Company agreed to issue 50,000 shares of its Series B Preferred Stock in exchange for 20,000 cartoon animated Cels sold by Connied (the “Connied SPA”) was terminated, (ii) a note of the Company in the principal amount of $85,000 issued to Connied was canceled, (iii) Connied agreed to disclaim any right or title to a purportedly owned 2.5 million shares of the Company’s Common Stock. The Company and Connied also agreed to mutually release each other and not to sue or prosecute any disagreements that have arisen between the Company and Connied.

Repayment of Notes

Repayment of Asher Notes

The Company issued and sold to Asher Enterprises, Inc. (“Asher”) a convertible promissory note of principal amount of $32,500 on October 16, 2012 and another convertible promissory note of the principal amount of $53,000 in May 2013. On April 25, 2013, Asher converted $15,000 of the note that was issued in October 2012 into an aggregate of 4,285,714 shares of Common Stock. On November 26, 2013, the Company repaid the above mentioned two notes in the total amount of $71,002.66 as principal and accrued interest.

Repayment of Infinite Alpha Notes

The Company issued and sold to Infinite Alpha Inc. a promissory note of principal amount of $51,500. On December 31, 2013, the Company repaid such note in the total amount of $61,800 as principal and accrued interest.

Repayment of Continental Equities Notes

The Company issued and sold to Continental Equities, LLC. in September 2012  a convertible promissory note of principal amount of $50,000 and another convertible promissory note of the principal amount of $20,000. On November 14, 2013 and December 31, 2013, the Company repaid the referenced two notes in the respective amount of $55,000 and $29,000 as principal and accrued interest.

ITEM 1A: RISK FACTORS

Disclosure in response to this item is not required of a smaller reporting company.

ITEM 1B: UNRESOLVED STAFF COMMENTS

Disclosure in response to this item is not required of a smaller reporting company.

ITEM 2: DESCRIPTION OF PROPERTY

The Company’s headquarter is at XA’s headquarter located at 875 North Michigan Avenue, Suite 2929, Chicago, IL 60611. The Company pays a monthly lease is $12,000. The lease will expire in 2022.

The Company, through XA, also has a main sales and marketing office located at 333 Hudson Street, New York NY 10013, 9070. The Company pays a monthly lease of $10,000 and the lease will expire in 2019.

XA also has a satellite office at 515 South Flower Street, Los Angeles, CA 90071. XA rents such office space on a month-to-month basis at the rent of $129.

ITEM 3. LEGAL PROCEEDINGS

We are subject to certain claims and litigation in the ordinary course of business. It is the opinion of management that the outcome of such matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

On April 21, 2011, the Company was served with a lawsuit that was filed in Clark County, Nevada against the Company by A to Z Holdings, LLC and seven other individuals or entities. The complaint alleges, among other things, that the Company’s Board of Directors did not have the power to designate Series A and B preferred stock without amending the articles of incorporation. The complaint also alleges any such amendment would require shareholder approval and filing of a proxy statement. On April 20, 2012, the Company settled with A to Z Holdings, LLC and seven other individuals or entities for $10,000. Such settlement amount was paid in April 2012.

On July 6, 2011, the Company was served with a lawsuit filed in the Circuit Court for the County of Multnomah, Oregon. The complaint alleges breach of contract and entitlement to consulting fees from the Company. The case was settled in 2012 for $30,000 and the settlement amount has not been paid.

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ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATEDSTOCKHOLDERMATTERS, AND ISSUER PURCHASES OF EQUITYSECURITIES

Our common stock has been quoted on the Over the Counter Markets (OTC) since October 2007 and currently lists on OTCQB which is the middle tier of the OTC Market. OTCQB companies report to the SEC or a U.S. banking regulator, making it easier for investors to identify companies that are current in their reporting obligations.

Our symbol is “CMGO.” For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

	HIGH		LOW
FISCAL YEAR ENDED DECEMBER 31, 2013
First Quarter		0.01		0.01
Second Quarter		0.01		0.01
Third Quarter		0.02		0.01
Fourth Quarter		0.03		0.01
FISCAL YEAR ENDED DECEMBER 31, 2012
First Quarter		0.02		0.0048
Second Quarter		0.04		0.01
Third Quarter		0.04		0.02
Fourth Quarter		0.03		0.0066

Holders of Shares of Common Stock

    The Company has authorized 450,000,000 shares of common stock with a par value of $.001 per share. As of December 31, 2013, the Company had 283,694,364 shares of common stock of the registrant issued and outstanding. As of December 31, 2013, there were approximately 197 stockholders of record of our common stock. This stockholder of record total number does not reflect full amount of shares held beneficially or those shares held in “street” name. It is anticipated that the number of stockholders may increase if the total amount of stockholders that own shares held beneficially or those held in “street” name.

Dividend Policy

We did not pay cash dividends in the past, nor do we expect to pay cash dividends for the foreseeable future. We anticipate that earnings, if any, will be retained for the development of our business.

On February 22, 2013, the Company completed the distribution a total of 1,500,259 shares of AudioEye’s common stock as dividend to the Company shareholders on the record date of October 26, 2012 on a pro rata basis after the SEC declared the registration statement on Form S-1 filed by AudioEye effective on January 19, 2013.  For more details of the referenced distribution, please refer to Item 1, the section under “AudioEye Separation and Spin-off.”

Preferred Stock

The Company has 10,000,000 shares of preferred stock authorized with a par value of $.001. As of December 31, 2013, there was no share of preferred stock issued or outstanding.

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Transfer Agent

The Company’s transfer agent and registrar of the common stock is Corporate Stock Transfer, Inc. 3200 Cherry Creek Dr. South Suite 430 Denver, CO 80209. (303) 282-4800.

Notes and Loans

Asher Notes

The Company issued and sold to Asher Enterprises, Inc. a convertible promissory note of principal amount of $32,500 on October 16, 2012 and another convertible promissory note of the principal amount of $53,000 in May 2013. On April 25, 2013, Asher converted $15,000 of the note issued to it in October 2012 into an aggregate of 4,285,714 shares of Common Stock. On November 25, 2013, the Company repaid the remaining balance of the two notes in the total amount of $71,002.66 as principal and accrued interest.

Infinite Alpha Notes

The Company issued and sold to Infinite Alpha Inc. a promissory note of principal amount of $51,500. On December 31, 2013, the Company repaid such note in the total amount of $61,800 as principal and accrued interest.

Continental Equities Notes

The Company issued and sold to Continental Equities, LLC. in September 2012  a convertible promissory note of principal amount of $50,000 and another convertible promissory note of the principal amount of $20,000. On November 14, 2013 and December 31, 2013, the Company repaid the referenced two notes in the respective amount of $55,000 and $29,000 as principal and accrued interest.

Paul Sherman Note

On May 12, 2012, the Company modified its July 24, 2011 agreement with Paul Sherman into a $9,943 convertible promissory note bearing interest at 2% and due on May 15, 2013. The convertible promissory note is convertible at a price equal to the close price on the day prior to Paul Sherman’s request for conversion, but not to go below $.001. The Company has not yet repaid the Paul Sherman note.

Warrants

As of the date of this Report, the Company had warrants to purchase a total of 1,798,000 shares of the Company’s Common Stock issued and outstanding. Among such outstanding warrants, there are Series A Warrants, Series B Warrants and the AudioEye warrants, the terms of which are set forth as the following:

Series A Warrants

There were Series A Warrants to purchase a total of 774,000 shares of the Company’s Common Stock issued and outstanding. Series A Warrants are exercisable within 3 years from issuance and at the exercise price of $0.25 and $0.10, respectively. The Company has the right to call the exercise of Series A Warrants after 12 months from the issuance if the Company’s Common Stock is traded at 150% of the warrant exercise price for 10 consecutive days.

Series B Warrants

There were Series B Warrants to purchase a total of 774,000 shares of the Company’s Common Stock issued and outstanding. Series B Warrants are exercisable within 3 years from issuance and at the exercise price of $0.50 and $0.20, respectively.  The Company has the right to call the exercise of Series B Warrants after 12 months from the issuance if the Company’s Common Stock is traded at 150% of the warrant exercise price for 10 consecutive days.

AudioEye Warrants

On March 31, 2010, the Company and its former subsidiary, AudioEye, executed the final Stock Purchase Agreement where the Company acquired all outstanding shares of AudioEye in exchange for $30,000 cash, 1.5 million shares and warrants to purchase 250,000 shares of the Company's common stock at an exercise price of $0.07 per share for a term of 5 years plus other contingent consideration.

Penny Stock Considerations

Because our shares trade at less than $5.00 per share, they are “penny stocks” as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Our shares thus will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock. Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer or accredited investor must make a special suitability determination regarding the purchaser and must receive the purchaser’s written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt. Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $100,000 individually or $300,000 together with his or her spouse is considered an accredited investor. In addition, under the penny stock regulations the broker-dealer is required to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt; disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities; Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer’s account, the account’s value and information regarding the limited market in penny stocks; and make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction, prior to conducting any penny stock transaction in the customer’s account. Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded. In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities. Our shares in all probability will be subject to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.

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Unregistered Sales Of Equity Securities and Issuance of Equity Securities And Use Of Proceeds

On April 25, 2013, Asher Enterprises, Inc. (“Asher”) converted $15,000 of the Company’s convertible promissory note that was issued to Asher on October 16, 2012 into a total of 4,285,714 shares of Common Stock.

On June 28, 2013, the Company issued to Alan Morell a total of 2,800,000 shares of Common Stock pursuant to the Modification Separation Agreement Release dated June 26, 2013.

The above issuances of the Company’s securities were not registered under the Securities Act of 1933, as amended (the “1933 Act”), and the Company relied on an exemption from registration provided by Rule 506(b) of Regulation D promulgated under the 1933 Act for such issuance.

Except as disclosed above, all unregistered sales of the Company’s securities have been disclosed on the Company’s current reports on Form 8-K and the Company’s quarterly reports on Form 10-Q.

ITEM 6: SELECTED FINANCIAL DATA

As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information required by this item.

ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion should be read in conjunction with the financial statements for the year ended December 31, 2013 included with this Form 10-K/A. 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, 2013. 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 Annual Report on Form 10-K/A to “CMG Holdings Group,” “CMG,” the “Company,” “we,” “us,” and “our” 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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Recent Developments

XA, The Experiential Agency, Inc.

For 25 years, XA has had a strong presence in the experiential advertising industry.  Having recently added Ronald Burkhardt as its Executive Chairman and with a strong record of success on behalf of Fortune 500 companies - XA already has a long track record winning competitions against far larger firms due to its innovative thinking and highly-regarded production team - XA is seeking to garner new business in the entertainment, automotive, hospitality and aviation categories, and is already in active discussions with key firms.  XA plans to expand by leveraging its blue-chip roster of relationships and adding key staff to grow current business in New York, expand our PR expertise and retainer revenues in our Chicago headquarters office and ramp up and relocate our office in Los Angeles from downtown to West Hollywood, where we will be better positioned to attract TV, entertainment and movie business.  XA also plans to seek to open an office in the social and film hotbed of Atlanta where there are key opportunities and key relationship networks.

Mr. Burkhardt began his work with XA by analyzing its existing systems and reporting and has made changes to allow XA to be more dynamic and proactive in order to win more business and serve its clients better.  Mr. Burkhardt has developed a strategy for XA to enhance its reputation in the market and to become an “Experiential Planet,” a one-world branding entity where clients can realize all their brand marketing/engagement and outreach objectives.

Already, XA’s preliminary un-audited numbers show that its revenues have increased by approximately 66.67% for the three months ended March 31, 2014 as compared to the three months ended March 31, 2013 and its net income have increased by approximately 91.20%.  We believe that this trend can continue through the remainder of this year.

In order to grow XA’s business, it is pursuing a series of acquisitions and strategic alliances and has initiated discussions with smaller experiential branding/events companies and social media and digital marketing firms.  In addition, XA plans to explore the acquisition of a boutique advertising/branding agency to further XA’s reach as a one-stop shop and broaden our engagement umbrella.

XA also plans to add high-gross margin generating corporate training and video mapping divisions and to establish “XA Custom,” where high-profile celebrities and/or high-net worth individuals can access our unique skill sets for private or personal engagements.

In order to provide better client service, XA is seeking to create/identify creative “swat teams” capable of jumping in quickly to handle excess workloads and to increase our response time in pursuing new opportunities as they arise.

XA plans to launch a multi-media branding campaign to broaden awareness of the XA brand and call attention to its creative leadership in the experiential business. XA has already commenced a weekly email outreach campaign to 5,000 key corporate and meeting event planners in New York, Illinois, California, Georgia, Texas and Florida.

The XA website is being re-designed and re-launched to reflect more modern graphics, new client content, and to make it fully responsive on all platforms, including mobile.

XA has purchased state of the art Apple computers and equipment for its New York office enabling even higher quality work produced at a faster rate. In addition, they are used for video editing, which is a billable profit center.

We expect to finish 2014 stronger than ever, and that these trends and foundational initiatives will lay the groundwork for an even more robust 2015.

Good Gaming Acquisition

On March 28, 2014, the Company completed its acquisition of 100% of the equity interests of Good Gaming, Inc. (“GGI”) by entering into a Share Exchange Agreement (the “SEA”) with BMB Financial, Inc. and Jackie Beckford, GGI’s shareholders.  The owner of BMB Financial, Inc. is also the owner of Infinite Alpha, Inc. which provides consulting services to CMG.  Pursuant to the SEA, for 100% of the shares of GGI, CMG paid: 5,000,000 shares of its common stock, par value $0.001 per share, $33,000 in equipment and consultant compensation and a commitment to pay $200,000 in development costs, of which $50,000 had been advanced by CMG.  In addition, the SEA calls for CMG to adopt an incentive plan for GGI pursuant to which the GGI’s officers, directors and employees will receive up to 30% of the net profits of GGI and up to 30% of the proceeds of any sale of GGI or its assets.

GGI’s field team has acquired new independently confirmable research showing eSports and competitive gaming is growing at a much faster pace than anticipated. According to Newwzoo BV games market research, eSports viewership is more than doubling on a year over year basis and we have seen that prize pools are increasing even faster in many cases. With the announcement that Wargaming’s signature title "World of Tanks" will invest $10 million into eSports, GGI believes that other companies aside from industry leaders Riot games, Valve, and Ubisoft, are likely to enter the million dollar investment pool as the stakes for eSports grows. As a result, large advertisers are starting to focus on the eSports industry as it offers a platform for reaching increasing numbers of consumers.

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Some key statistics that drive our growing optimistic outlook are as follows:

- Over 20% of eSports gamers are big spender’s vs 8% for all gamers.

- Over 90% of eSports gamers spend money on games vs 65% for all gamers.

- The global games market is a $74 billion market and eSports is one of the fastest growing segments

- For the first time, in 2013 Chinese giant Tencent surpassed Activision blizzard in gaming revenues solidifying the diminishing need for large box game development and loosening dependence on Christmas holiday sales patterns.

Newzoo BV, Q4 PC Gaming Trend Report 2013 Report and Q2 Sizing Profiling eSports 2014 Report.

GGI is in the process of researching what it is that gamers want - what their goals, aspirations, and ideas of euphoria tend to be. As of the beginning of 2014, according to Newzoo BV, 163.9 million people in the world, 15.38% of them in the United States, are playing video games often enough for it to be a full-time job. We believe that eSports is not just a growing segment within the gaming industry, but within the much larger entertainment industry. It is not restricted by nationality, political affiliation, or socioeconomic status. eSports principal barrier is a simple one – internet access.

Behind the development of GGI’s web platform, GGI is seeking to access the gaming community. GGI has been seeking and has already signed veteran talent in the gaming community and is broadening its network of veteran and pro players.

GGI recently established a partnership with a leading 3rd party provider of an eSports tournament management system. This partnership will provide a crucial backbone infrastructure for GGI’s proprietary tournament design and has done so at less than 1/10th the cost originally expected due to diligent work by GGI’s IT development team and the innovation of its partner.

GGI anticipates that it will be able to announce key publisher partnerships and agreements in the coming months that can place it near the top of eSports entertainment and solidify its projected membership base.

AudioEye Separation and Spin-off

On March 23, 2010 the Company entered into a share exchange agreement with the former stockholders of AudioEye, Inc. (hereinafter “AE”) whereby AE became a wholly-owned subsidiary of the Company and the former stockholders of AE retained rights (the “Rights”) to receive cash from the exploitation of AE’s technology. These Rights consisted of 50% of any cash received from income earned, settlements or judgments directly resulting from AE’s patent strategy, net of any direct costs or tax implications incurred in payment of the patent strategy. Additionally, the holders of the Rights were entitled to a share of AE’s net income for 2010, 2011, 2012 and 2013 based on a specified formula.  The holders of the Rights have contributed the Rights to AEAC in exchange for shares of AEAC.  The Company also had issued Senior Secured Notes (the “AE Notes”) in an aggregate principal amount of $1,075,000 to such former shareholders of AE.  

On June 22, 2011, the Company entered into a Master Agreement (the “Master Agreement”) with AudioEye Acquisition Corporation (“AEAC”) pursuant to which: (i) the stockholders of AEAC would acquire from the Company 80% of the capital stock of AE (the “Separation”) and (ii) the Company distributed to its stockholders, in the form of a dividend, 5% of the capital stock of AE (the “Spin-off”). Pursuant to the Master Agreement, as amended, AEAC also released the Company from its obligations under the AE Notes.  In connection with the release of the Company under the AE Notes, effective August 15, 2012, the Company completed the Separation.   On February 22, 2013, the Company completed the Spin-off by distributing a total of 1,500,259 shares of AE common stock to its shareholders on the record date of October 26, 2012 on a pro rata basis after the SEC declared the registration statement on Form S-1 filed by AE effective on January 19, 2013.  As a result of the foregoing transactions, the Company retained a total of 4,500,874 shares of AE common stock.

Also in connection with the Separation, the Company entered into a Royalty Agreement with AE, pursuant to which for a period of five years, AE would pay to the Company 10% of cash received from income earned or settlements on judgments directly resulting from AE’s patent enforcement and licensing strategy, whether received by AE or any of AE’s affiliates, net in either case of any direct costs or tax implications incurred in pursuit of such strategy as they relate to the patents described in the Master Agreement.  Additionally, the Company entered into a Services Agreement with AE whereby, without duplication to the amounts payable under the Royalty Agreement, for a period of 5 years, the Company shall receive a commission of 7.5% of all revenues received by AE after the Separation from all business, clients or other sources of revenue procured by the Company or its employees, officers or subsidiaries and directed to AE and 10% of net revenues obtained from a specified customer.

On August 1, 2013, the Company and AE entered into a Call Option Agreement (“AE Call Option”), where the Company granted AE the rights to purchase from AE up to 4,500,874 shares of AE common stock that the Company held. The AE Call Option was amended later on August 30, 2013, September 14, 2013, November 7, 2013 and November 25, 2013 and December 16, 2013, where the option granted under the AE Call Option was amended to reflect the new exercise price and the extended expiration date of March 31, 2014.

In addition, pursuant to the AE Call Option, on November 12, 2013, the Company agreed to terminate the Royalty Agreement in consideration for cash payment of $85,000 from AE.

On December 30, 2013, AE repurchased from the Company a total of 2,184,583 shares of AE common stock owned by the Company for the following consideration: (i) cash payment of $573,022 and (ii) release of Good Gaming, Inc.’s obligation to AE in connection with a $50,000 accounts payable.

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Year ended December 31, 2013 compared to the year ended December 31, 2012

Liquidity and capital resources

As at December 31, 2013, the Company had a cash balance of $476,588 and working capital deficit of $206,544 compared with a cash balance of $238,124 and a working capital deficit of $818,455 at December 31, 2012.  The increase in working capital is mainly due to the sale of AudioEye marketable securities and a purchase option for AudioEye shares during the year ended December 31, 2013 for cash totaling $658,022. Additionally, the value of the AudioEye marketable securities increased $489,437 and accrued expenses increased by $268,036 during the year ended December 31, 2013.  Increases were partially offset by the repayment of $207,000 in debt and a reduction of approximately $138,849 in derivative liabilities.

The Company believes that cash on hand and cash generated form operations will be sufficient to fund its operations for the next twelve months.

Cash Flows from Operating Activities

During the year ended December 31, 2013, cash flows used in operating activities was $317,057 compared with use of $569,822 of cash flow during the year ended December 31, 2012.  The increase in cash flow from operating activities is mainly due to the increase in accounts payable and accrued liabilities during the year ended December 31, 2013.

Cash Flows from Investing Activity

During the year ended December 31, 2013, the Company recognized cash proceeds from the sale of trading securities of $658,021, compared to none for the year ended December 31, 2012.

Cash Flows from Financing Activities

During the year ended December 31, 2013, the Company received proceeds of $104,500 from the issuance of convertible promissory notes payable, compared to $485,640 from the issuance of convertible promissory notes payable and other convertible promissory notes payable that were due to related parties in fiscal year 2012. During the year ended December 31, 2013, the Company made payments of $207,000 on convertible promissory notes payable, compared to $37,000 in payments on notes payable and other notes payable due to related parties in fiscal year 2012.

Revenues

The Company had revenues of $7,413,796 in our fiscal year ended December 31, 2013, as compared to $8,125,196 in fiscal year ended December 31, 2012. The decrease in revenues is mainly due to loss of business revenues generated in event marketing operations of XA, The Experiential Agency, Inc.

Cost of Sales

The Company had cost of sales of revenues of $5,296,280 in the year ended December 31, 2013, as compared to $5,792,283 in the year ended December 31, 2012. The decrease in cost of sales is mainly associated to the reduction in event marketing operations of XA, The Experiential Agency, Inc.

Expenses

The Company had total operating expenses of $8,171,643 in the year ended December 31, 2013, as compared to $9,754,802 in the year ended December 31, 2012. The decrease in operating expenses is mainly due to a decrease in General and Administrative Expenses of $1,118,055 during the year ended December 31, 2013 compared to the year ending December 31, 2012.

Income

The Company had a net income of $1,194,051 in the year ended December 31, 2013 as compared to $2,236,317 in the year ended December 31, 2013. The decrease in net income is mainly due to the Company recognizing $4,339,564 income on the sale of discontinued operations in the year ended December 31, 2012 as compared to $0 in the year ended December 31, 2013.  Loss from discontinued operations decreased from ($541,508) for the year ended December 31, 2012 to $0 for the year ended December 31, 2013.  Gain on extinguishment and forgiveness of liability and debt decreased from $1,517,380 for the year ended December 31, 2012 to $797,732 for the year ended December 31, 2013.  Decreases were partially offset by gains on derivative liabilities of $210,180 for the year ended December 31, 2013 compared to losses of $547,318 for the year ended December 31, 2012.  Realized gains on marketable securities were $524,689 for the year ended December 31, 2013 compared to $0 for the year ended December 31, 2012 and unrealized gains on marketable securities were $622,769 for the year ended December 31, 2013 compared to $0 for the year ended December 31, 2012. Additionally, interest expenses decreased to $255,845 for the year ended December 31, 2013, compared $907,916 for the year ended December 31, 2012.

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Capital Resources

At December 31, 2013, we had assets totaling $1,596,248, compared to $838,175 at December 31, 2012. Assets at December 31, 2013 consisted primarily of cash of $476,588, marketable securities of $764,088, accounts receivable of $287,094 and other current assets of $8,400.

Liabilities

Our liabilities at December 31, 2013 totaled $1,742,714, compared to $2,228,058 at December 31, 2012.  Liabilities at December 31, 2013 consisted primarily of $486,875 of deferred compensation, $593,710 in accrued liabilities, $627,695 in accounts payable and $34,434 in other short term liabilities including convertible notes, derivative liabilities and deferred income.

Going Concern

Our independent registered accounting firm has expressed doubt about our ability to continue as a going concern.  Because we have a working capital deficit and recurring net losses, our independent registered accounting firm has included in their report for the years ended December 31, 2013 and 2012, an uncertainty with respect to the Company's ability to continue as a going concern.

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. 33-8040, “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 unbilled 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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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item may be found beginning on page F-1 of this Amendment No.1 to Annual Report on Form 10-K/A.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Previous Independent Accountants

On April 10 2014, Board of Directors of the Company approved to terminate Malone Bailey, LLP (“Malone Bailey”) as the Company’s independent registered public accounting firm.

The Company’s consolidated financial statements of the fiscal years ended December 31, 2004 through 2012 were audited by Malone Bailey’s reports on our financial statements, which did not contain an adverse opinion, a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. Malone Bailey’s reports on our financial statements for the fiscal year ended December 31, 2012, 2009, 2008, 2007 and 2006, however, stated that there is substantial doubt about the Company’s ability to continue as a going concern.

During the fiscal years ended December 31, 2004 and through April 10, 2014, (a) there were no disagreements with Malone Bailey on any matter of accounting principles or practices, financial statement disclosure, auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Malone Bailey, would have caused it to make reference to the subject matter of the disagreement in connection with its report on the financial statements for such years and (b) there were no “reportable events” as described in Item 304(a)(1)(v) of Regulation S-K.

New Independent Registered Public Accounting Firm

On April 10, 2014, the Board of Directors of the Company ratified and approved the appointment of Anderson Bradshaw PLLC (“Anderson Bradshaw”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2013 and its engagement agreement dated February 17, 2014. Anderson Bradshaw is located at 5296 S. Commerce Drive Suite 300, Salt Lake City, UT 84107.

During the Company's previous fiscal years ended December 31, 2004 through 2012 and through April 10, 2014, neither the Company nor anyone on the Company's behalf consulted with Anderson Bradshaw regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements or (ii) any matter that was either the subject of a disagreement or a reportable event as defined in Item 304(a)(1)(v) of Regulation S-K.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2013. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2013, the Company’s disclosure controls and procedures were not effective due to the identification of a material weakness in our internal control over financial reporting which is identified below, which we view as an integral part of our disclosure controls and procedures. This conclusion by the Company’s Chief Executive Officer and Chief Financial Officer does not relate to reporting periods after December 31, 2013.

16

Management’s Report on Internal Control Over Financial Reporting

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2013 based on the framework stated by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 1992). Furthermore, due to our financial situation, the Company will be implementing further internal controls as the Company becomes operative so as to fully comply with the standards set by the Committee of Sponsoring Organizations of the Treadway Commission.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on its evaluation as of December 31, 2013, our management concluded that our internal controls over financial reporting were not effective as of December 31, 2013 due to the identification of a material weakness. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. As soon as our finances allow, we will hire sufficient accounting staff and implement appropriate procedures for monitoring and review of work performed by our Chief Financial Officer.

In performing this assessment, management has identified the following material weaknesses as of December 31, 2013:

· There is a lack of segregation of duties necessary for a good system of internal control due to insufficient accounting staff due to the size of the Company

· Lack of a formal review process that includes multiple levels of reviews

· Employees and management lack the qualifications and training to fulfill their assigned accounting and reporting functions

· Inadequate design of controls over significant accounts and processes

· Inadequate documentation of the components of internal control in general

· Failure in the operating effectiveness over controls related to valuing and recording equity based payments to employees and non-employees

· Failure in the operating effectiveness over controls related to valuing and recording debt instruments including those with conversion options and the related embedded derivative liabilities

· Failure in the operating effectiveness over controls related to recording revenue and expense transactions in the proper period

· Failure in the operating effectiveness over controls related to evaluating and recording related party transactions

The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

No change in the Company’s internal control over financial reporting occurred during the year ended December 31, 2013, that materially affected, or is reasonably likely to materially affect, the Company s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

17

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth the name and position of each of our current executive officers and directors. All directors hold office until the next annual meeting of stockholders or until their respective successors are elected, except in the case of death, resignation or removal:

Name	Age	With Company Since	Director/Position
Glenn Laken	60	April 7, 2014	CEO and Chairman of the Board of Directors
Jeffery Devlin	65	November 26, 2012	Interim CFO, Vice Chairman of the Board of Directors
David J. Kovacs	30	January 14, 2014	Director
Ronald Burkhardt	65	February 10, 2014	Director

Glenn Laken.  Over the past 30 years, Mr. Laken has held multiple senior executive positions and created successful growth strategies in the financial services sector. His expansive professional experience includes working as an advisor to the 22 billion dollar Ameritech Pension fund, partnership in a Wall Street specialist firm, ownership of a Chicago clearing house with offices nationwide, and the purchase and restructuring of the Cigarette Racing Team Company. He has also enjoyed success in the area of mergers and acquisitions as an accomplished business leader.

A Company shareholder since 2010, Mr. Laken organized a shareholder group that forced changes in Company management in 2012, after careful analysis revealed that the Company was failing to reach its potential due to mismanagement by the original management team. Since orchestrating this change, Mr. Laken has worked as Company consultant, introducing Jeffrey Devlin and David Kovacs to the Board, and bringing Ron Burkhardt on as a board member and executive chairman of XA, The Experiential Agency, Inc. (“XA”). He also introduced a new subsidiary partially owned by his wife, Good Gaming Inc., to the Companies portfolio and arranged the sale of AudioEye, Inc. stock to fund the elimination of the Company’s toxic debt.

 Jeffrey Devlin.  Mr. Devlin has been Executive Producer/Partner of Original Film, a movie production company, since 2002.  He is also currently and since 2003 been the Chief Executive Officer of MediaLogic, an international consultancy and television production company and since November 2011 he has been Chief Marketing Officer and a director of The Broadsmoore Group, an investment advisory and merchant banking firm. Mr. Devlin has over 25 years of production experience in the advertising and entertainment industries. Mr. Devlin is currently a member of the Board of Directors of the United States Equestrian Team, Somerset Hills Handicapped Riders, Board of Advisors of Atari, and Executive Committee for the Association of Independent Commercial Producers (AICP). He is also a senior advisor to Sirius XM Satellite Radio.  Mr. Devlin received a Bachelor’s degree from Bethel University in Nashville, Tennessee and completed graduate courses at Dartmouth College in Hanover, New Hampshire.

David J. Kovacs. A veteran of the investment banking and private equity sectors for over 10 years, Mr. Kovacs is currently the head of Investment Banking and Private Equity for Fitch Learning. Mr. Kovacs is also the Managing Director of Private Equity for Strategic Acquisitions, a $2 billion real estate investment firm. Prior to his current roles, Mr. Kovacs focused on private equity as a Managing Director at The Hinduju Group, one of the largest diversified groups in the world with over $50 billion under management. Mr. Kovacs also worked in various capacities at Citigroup and Blackstone Group in their investment banking and private equity divisions.

With the addition of Mr. Kovacs to the Board, CMG has acquired one of the most respected and brilliant minds in the world of investment and private equity. As a student at Columbia University and City University (NY), Mr. Kovacs completed his undergraduate degree at age 18, finishing the required coursework in two years and earning a triple major in Finance, Economics and Biochemistry.

With his experience in mature and emerging markets as a training specialist in venture capital, investment banking, and private equity, Mr. Kovacs is also a highly coveted speaker. Mr. Kovacs has lectured at over 100 universities, including the majority of Ivy League schools. He was a lead instructor for the Securities & Exchange Commission and has given talks to industry leaders such as Barclays, JP Morgan, RBC, Morgan Stanley, Deutsche Bank and the Abu Dhabi Investment Authority.

The wealth of experience and breadth of knowledge that Mr. Kovacs brings to the Board will be invaluable as the Board seeks to enhance current strategies as well as devise new ones to help the company move forward with its current and future initiatives.

Ronald Burkhardt. Mr. Burkhardt is and has been the CEO and Creative Director of Burkhardt Ltd. since January 2003, a company in the advertising and branding business.  Prior to forming his own agency, Mr. Burkhardt had varied roles as Senior Writer, Creative Supervisor and VP/Creative Group Head for multi-national agencies DDB, Young & Rubicam and Lowe in New York. He began his career at Campbell-Ewald in Detroit and later wrote for Kraft, Dial Soap and the Sears Diehard battery while with Foote-Cone-Belding in Chicago.  Mr. Burkhardt received his Bachelor in Business Administration degree in Advertising from Western Michigan University in Kalamazoo, Michigan and his Associates degree from Jackson Community College in Jackson, Michigan.

Mr. Burkhardt has won over 200 awards for creative and marketing excellence and produced scores of high-profile commercials, including a Super Bowl spot that won acclaim from the Wall Street Journal, Ad Age, and The New York Times. Ron has worked with many successful companies including Merrill Lynch, BellSouth, Kodak, Minolta, Coke, Philips and Olympus.

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As CEO/Creative Director of Burkhardt Ltd., Mr. Burkhardt has created TV, online and brand campaigns for Heineken, Town & Country Real-Estate, Plaza-Athenee, BellSouth, Cohiba, The Mann Group, Vikingfjord Vodka and the Outdoor Life Network. He also conceived and produced a 7-city, national summer beach tour event for Volvo/NA that included 30-foot sand castles, banner planes, seaside DJ’s and new Volvos parked on the sands with Swedish models explaining features and collecting buyers’ data.

Mr. Burkhardt has been featured as an industry expert on CNN, NBC, CBS, Inside Edition, American Journal, WVVH-Hamptons and PBS-TV/Aspen and was Executive-Producer of independent films for the Independent Film Channel and the Palm Springs International Film Festival. He's also a noted abstract artist who originated the Notism and EarthScape genres of contemporary American art.

Mr. Burkhardt also served seven years as Branding and TV Chair on the Board of Directors of the Miss America Organization in Atlantic City and Las Vegas, where he implemented changes and brought in key people that reversed prior Pageant TV rating declines and achieved new rating records.

Mr. Burkhardt’s charitable activities have included Southampton Hospital, CCBF, and the US Marines’ “Toys for Tots.” He sits on several boards, including a stint on the New York City Mayor’s Office advisory board, where he created a powerful branding campaign that raised $2 million and built the Korean War Veterans’ Memorial in Battery Park.

The Board concluded that Mr. Burkhardt should serve as a director of the Company based on his extensive experience and knowledge of the industry of the Company’s business is in.

Board Committees

We do not have a standing nominating, compensation or audit committee. Rather, our full board of directors performs the functions of these committees. Also, we do not have an “audit committee financial expert” on our board of directors as that term is defined by Item 401(d)(5)(ii) of Regulation S-K. We do not believe it is necessary for our board of directors to appoint such committees because the volume of matters that come before our board of directors for consideration permits the directors to give sufficient time and attention to such matters to be involved in all decision making. Additionally, because our Common Stock is not listed for trading or quotation on a national securities exchange, we are not required to have such committees.

Director Independence

Our securities are not listed on a national securities exchange or in an inter-dealer quotation system which has requirements that directors be independent.  We believe that two of our three directors, Jeffrey Devlin and Ronald Burkhardt, would not be considered to be independent, as that term is defined in the listing standards of NASDAQ.

Meetings of the Board of Directors

During its fiscal year ended December 31, 2013, the Board of Directors met three times through teleconferencing. In addition, the Board of Directors had otherwise transacted business by unanimous written consents during the year 2013.

Board Leadership Structure and Role in Risk Oversight

Our Board recognizes that the leadership structure and combination or separation of the Chief Executive Officer and Chairman roles is driven by the needs of the Company at any point in time.  Currently, Mr. Glen Laken serves as Chairman of our Board as well as the CEO of the Company, and Mr. Jeffrey Devlin serves as Vice Chairman of our Board as well as the CFO of the Company.  We have no policy requiring the combination or separation of leadership roles and our governing documents do not mandate a particular structure.  This has allowed, and will continue to allow, our Board the flexibility to establish the most appropriate structure for our company at any given time.

Code of Ethics

Our Board of Directors adopted a code of ethics, which was filed as Exhibit 14.1 to the annual report on Form 10K-SB filed on February 20, 2008, and which is incorporated by reference herein. The Code of Ethics applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. The code of ethics address, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of violations of the code.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, executive officers and persons who own more than 10% of the Company’s Common Stock to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission. Directors, executive officers and greater than 10% stockholders are required by SEC rules to furnish the Company with copies of Section 16(a) forms they file.

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Below is the information with respect to failures of directors, officers and/or beneficial owners of more than ten percent of any class of equity securities of the Company to timely file reports under Section 16(a) during fiscal years 2013 and 2012:

Name	Form Type	Date of Reporting Event	Required Filing Date	Date of Filing
Jeffrey Devlin	Form 3	11/26/2012	11/26/2012	To be filed prior
				to May 1, 2014
Ian Thompson	Form 5	2/6/2014	2/6/2014	To be filed prior
				to May 1, 2014
Declan Keegan	Form 5	2/6/2014	2/6/2014	To be filed prior
				to May 1, 2014
Barry Kernan	Form 5	2/6/2014	2/6/2014	To be filed prior
				to May 1, 2014

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information concerning cash and non-cash compensation paid by the Company to its CEO and CFO and the CEO of XA during the fiscal years ended December 31, 2013 and 2012.

Name and Position(s)	Year	Salary($)		Stock Awards ($)		All other Compensation ($)		Total Compensation ($)
Jeffrey Devlin (1)	2013	$	-	$	-	$	60,000(4)	$	60,000
CEO, CFO and Chairman	2012	$	-		-	$	-	$	-
Joseph Wagner (2)	2013	$	225,000	$	-	$	-	$	-
CEO of XA	2012	$	225,000		-	$	-	$	-
Ronald Burkhardt (3)	2013	$	-	$	-	$	-	$	-
Director and CEO of XA	2012	$	-		-	$	-	$	-

(1)	Mr. Devlin was appointed as our CEO, CFO and Chairman of the Board of Directors since November 26, 2012.
(2)	Mr. Wagner was the CEO of XA, our wholly-owned subsidiary, from 2012 till March 18, 2014.
(3)	Mr. Burkhardt was appointed as our director and the CEO of XA, our wholly-owned subsidiary since February 10, 2014.
(4)	This refers to the payment of consulting fees by the Company to Mr. Devlin in the fiscal year 2013.

Employment Agreements

The Company has not entered into any employment contract with Glenn Laken, the CEO and Chairman of Board of Directors or Jeffrey Devlin, acting CFO and Vice Chairman of the Board of Directors. Mr. Laken was granted options to purchase forty million (40,000,000) shares of Common Stock at an exercise price of $0.0155 with a term of five years. The Company anticipates entering into an employment agreement with Mr. Laken by April 30, 2014.

On February 6, 2014, Mr. Ronald Burkhardt entered into an employment agreement with the Company and its subsidiary, XA to serve as its President and Executive Chairman.  Under the Employment Agreement, Mr. Burkhardt is entitled to a base annual salary of $200,000 as well as a cash bonus of 10% of XA’s net profits (“Net Profits”) as determined in accordance with U.S. Generally Accepted Accounting Principles (after subtraction of all non-cash gains) for any fiscal year during the term that XA has more than $200,000 in Net Profits. In addition, the Company is to grant a total of 10,000,000 shares of the Company’s Common Stock (the “Compensation Shares”) to Mr. Burkhardt to vest in accordance with a three year schedule and associated milestones for net profits of XA.  For 2014, the net profit target is $250,000 and for 2015 and 2016 the net profit targets are to be set by the Board. If any performance milestone in the Employment Agreement is not met, a portion of the Compensation Shares will not vest and will be returned to the Company.

Outstanding Equity Awards at Fiscal Year-End

There were no unexercised options, stock that has not vested or equity incentive plan awards for any named executive officer outstanding as of December 31, 2013.

20

Securities Authorized for Issuance Under Equity Compensation Plan

There were no unexercised options, stock that has not vested or equity incentive plan awards for any named executive officer outstanding as of December 31, 2013. 

Equity Compensation Plan Information

Currently, there is no equity compensation plan in place.

Director Compensation

Members of our Board of Directors do not normally receive cash compensation for their services as Directors, although some Directors are reimbursed for reasonable expenses incurred in attending Board or committee meetings. No directors received any compensation for their services during the fiscal year ended December 31, 2013.

On February 6, 2014, Ian Thompson, Declan Keegan and Barry Kernan resigned as directors from our board of directors. As compensation for their services, the Company agreed to issue to each resigning director 2,000,000 shares of its Common Stock pursuant to the Resignation and Compensation Agreement, dated February 5, 2014. The Company also entered into an Indemnification Agreement with each of Ian Thompson, Declan Keegan and Barry Kernan upon their resignation.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common stock as of April 15, 2014, and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly and the shareholders listed possesses sole voting and investment power with respect to the shares shown.

Name and Address of Beneficial Owner(1)	Title of Class	Amount			Percent of Class(2)
Directors and named Executive Officers
Glenn Laken	Common Stock		40,000,000	(4)		12.10	%
Jeffrey Devlin	Common Stock		0			0	%
David J. Kovacs	Common Stock		0			0	%
Ronald Burkhardt	Common Stock		0			0	%
All Directors and executive officers as a group (3 persons)	Common Stock		0			0	%
5% Security Holders
None.

(1)	Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table. Unless otherwise indicated, the address of the beneficial owner is c/o CMG Holdings Group, Inc. at 875 North Michigan Avenue, Chicago, IL 60611.
(2)	Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Beneficial ownership also includes shares of stock subject to options and warrants currently exercisable or exercisable within 60 days of the date of this table.  In determining the percent of common stock owned by a person or entity as of the date of this Report, (a) the numerator is the number of shares of the class beneficially owned by such person or entity, including shares which may be acquired within 60 days on exercise of warrants or options and conversion of convertible securities, and (b) the denominator is the sum of (i) the total shares of common stock outstanding on as of the date of this Annual Report (290,716,364), and (ii) the total number of shares that the beneficial owner may acquire upon exercise of the derivative securities. Unless otherwise stated, each beneficial owner has sole power to vote and dispose of its shares.
(3)	Based on 290,716,364 shares of the Company’s common stock outstanding on April 15, 2014.
(4)	Such shares include the options to purchase a total of 40,000,000 shares of Common Stock owned by Mr. Laken.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company had outstanding accounts payable to related parties of $19,625 as of December 31, 2012. These payables represent legal and administrative fees paid on behalf of the Company by James Ennis, the former officer of the Company. The Company settled and made the payment of the owed payable to James Ennis pursuant to the Settlement Agreement, dated August 3, 2013, among the Company, James Ennis, Scott Baily, Martin Boyle, Hudson Capital Advisors and Michael Vandetty.

XA has made business reimbursements to LSC Capital Advisor, a consulting firm which is controlled by Joseph Wagner, its former CEO. The payable for $47,912 and $27,280 is included in account payable as of December 31, 2013 and 2012, respectively. Total amount submitted to XA from LSC Capital Advisor for business reimbursement is $142,060 and $151,245 for the years ended 2013 and 2012, respectively.

Except the above transactions, the Company was not a party to any transaction (where the amount involved exceeded the lesser of $120,000 or 1% of the average of our assets for the last two fiscal years) in which a director, executive officer, holder of more than five percent of our common stock, or any member of the immediate family of any such person have or will have a direct or indirect material interest and no such transactions are currently proposed.

The Company’s Board conducts an appropriate review of and oversees all related party transactions on a continuing basis and reviews potential conflict of interest situations where appropriate.  The Board has not adopted formal standards to apply when it reviews, approves or ratifies any related party transaction.  However, the Board believes that the related party transactions are fair and reasonable to the Company and on terms comparable to those reasonably expected to be agreed to with independent third parties for the same goods and/or services at the time they are authorized by the Board. 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth fees billed to us by our auditors during the fiscal years ended December 31, 2013 and December 31, 2012 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services by our auditor that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as Audit Fees, (iii) services rendered in connection with tax compliance, tax advice and tax planning, and (iv) all other fees for services rendered.

Name of Firm	Fiscal Year 2013		Fiscal Year 2012
Malone Bailey – audit and audit related	$	33,000	$	120,000

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements

The following are filed as part of this report:

Financial Statements

The financial statements of CMG Holdings Group, Inc. and Report of Independent Registered Public Accounting Firm are presented in the “F” pages of this Report.

22

(b) Exhibits

The following exhibits are filed or “furnished” herewith:

		Incorporated by
		Reference
			Filing Date/
Exhibit			Period End
Number	Exhibit Description	Form	Date
2.1	Agreement and Plan of Reorganization dated May 27, 2008 between CMG Holding, Inc. and Creative Management Group, Inc.	8-K	May 5, 2008
3.1	Certificate of Incorporation of Pebble Beach Enterprises, Inc. dated July 26, 2004	10-SB	February 1, 2006
3.2	Amendment to Certificate of Incorporation of CMG Holding, Inc., dated February 20, 2008	8-K	February 20, 2008
3.3	Bylaws of CMG Holdings, Inc.	8-K	February 20, 2008
3.4	Certificate of the Designations, Powers Preferences and Rights of the Series A Convertible Preferred Stock dated March 31, 2011	8-K	April 6, 2011
3.6	Certificate of the Designations, Powers Preferences and Rights of the Series B Convertible Preferred Stock dated March 31, 2011	8-K	April 12, 2011
4.1	Form of Convertible Promissory Notes issued to Continental Equities, LLC on September 7, 2012 *
4.2	Form of Convertible Promissory Notes issued to Asher Enterprises, Inc. on May 20, 2013 *
10.1	Stock Purchase Agreement AudioEye date March 31, 2010.	10-K	April 15, 2010
10.2	AudioEye Spinoff Master Agreement dated June 22, 2011	8-K	June 24, 2011
10.3	Revised AudioEye Spinoff Master Agreement dated April 5, 2012	8-K	April 27, 2012
10.4	Royalty Agreement, dated June 22, 2011, by and between the Company and AudioEye *
10.5	Services Agreement, dated June 22, 2011, by and between the Company and AudioEye *
10.6	Call Option Agreement, dated August 1, 2013, between the Company and AudioEye *
10.7	Call Option Agreement Second Extension, dated September 14, 2013, between the Company and AudioEye *
10.8	Call Option Agreement Third Extension, dated November 7, 2013, between the Company and AudioEye *
10.9	Call Option Agreement Fifth Extension, dated December 16, 2013, between the Company and AudioEye *
10.10	Modification to Separation Agreement and Release, dated June 26, 2013, between the Company and Alan Morell *
10.11	Settlement Agreement, dated August 3, 2013, among the Company, James Ennis, Scott Baily, Martin Boyle, Hudson Capital Advisors and Michael Vandetty *
10.12	Termination Agreement and Release, dated August 3, 2013, among the Company, Continental Investments Group, Inc. and Connied, Inc. *
10.13	Form Resignation and Compensation Agreement, dated February 5, 2014, between the Company and Barry Kernan, Ian Thompson and Declan Keegan*
10.14	Form Indemnification Agreement, dated February 5, 2014, between the Company and Barry Kernan, Ian Thompson and Declan Keegan *
14.1	Code of Ethics	10-KSB	February 20, 2008
21.1	Subsidiaries of Registrant *
31.1	CMG Holdings Group, Inc. Certification of Chief Executive Officer pursuant to Section 302 *
31.2	CMG Holdings Group, Inc. Certification of Chief Financial Officer pursuant to Section 302 *
32.1	CMG Holdings Group, Inc. Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002 *
32.2	CMG Holdings Group, Inc. Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002 *
101**	Interactive Data Files for CMG Holdings Group, Inc. 10K for the Year Ended December 31, 2012
101 INS**	XBRL Instance Document
101 SCH**	XBRL Taxonomy Extension Schema Document
101 CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101 DEF**	XBRL Taxonomy Extension Definition Linkbase Document
101LAB**	XBRL Taxonomy Extension Label Linkbase Document
101 PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

** Users of this data are advised pursuant to Rule 406T of Regulation S-X that this interactive data file is deemed not filed or part of a registration statement or prospectus for the purpose of section 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections

23

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	CMG HOLDINGS GROUP, INC.
Dated: April 15, 2014	By:	/s/ Glenn Laken
		Glenn Laken Chief Executive Officer
Dated: April 15, 2014	By:	/s/ Jeffrey Devlin
		Jeffrey Devlin Chief Financial Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Dated: April 15, 2014	By:	/s/ Glenn Laken
		Glenn Laken Chairman
Dated: April 15, 2014	By:	/s/ Jeffrey Devlin
		Jeffrey Devlin Vice Chairman
Dated: April 15, 2014	By:	/s/ David J. Kovacs
		David J. Kovacs Director
Dated: April 15, 2014	By:	/s/ Ronald Burkhardt
		Ronald Burkhardt Director

24

CMG HOLDINGS GROUP, INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

CONTENTS

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets	F-4
Consolidated Statements of Operations	F-5
Consolidated Statements of Stockholders’ Deficit	F-6
Consolidated Statements of Cash Flows	F-7

Notes to the Consolidated Financial Statements F-8

F-1

	REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Russell E. Anderson, CPA	To The Board of Directors and Stockholders
Russ Bradshaw, CPA	CMG Holdings Group, Inc.
William R. Denney, CPA	333 Hudson Street, Suite 303
Sandra Chen, CPA	New York, New York 10013
5296 S. Commerce Dr Suite 300 Salt Lake City, Utah 84107 USA (T) 801.281.4700 (F) 801.281.4701 abcpas.net	We have audited the accompanying balance sheet of CMG Holding Group, Inc.   (the “Company”) as of December 31, 2013, and the related statements of operations, changes in stockholders' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CMG Holdings Group, Inc. as of December 31, 2013, and the results of its operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 11 to the financial statements, the Company has negative working capital and has suffered recurring losses from operations. These factors raise substantial doubt that the Company will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Anderson Bradshaw PLLC Certified Public Accountants Salt Lake City, Utah April 14, 2014

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

CMG Holdings Group, Inc.

Dear Board of Directors:

We have audited the accompanying consolidated balance sheet of CMG Holdings Group, Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2012 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2012  and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 11 to the financial statements, the Company has negative working capital and suffered recurring losses from operations, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

April 18, 2013

F-3

CMG HOLDINGS GROUP, INC.

CONSOLIDATED BALANCE SHEET

	December 31,
	2013			2012
ASSETS
CURRENT ASSETS:
Cash	$	476,588		$	238,124
Marketable securities		764,088			274,651
Accounts receivable, net of allowance of $0 and $0, respectively		287,094			252,567
Other current assets		8,400			15,000
Total Current Assets		1,536,170			780,342
Other noncurrent assets		60,078			57,833
TOTAL ASSETS	$	1,596,248		$	838,175
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	627,695		$	546,852
Accounts payable – related party		-			19,625
Deferred compensation		486,875			396,875
Accrued liabilities		593,710			325,674
Deferred income		13,370			13,370
Derivative liabilities		11,121			145,970
Short term debt, net of unamortized discount of $0 and $0, respectively		9,943			150,431
Total Current Liabilities		1,742,714			1,598,797
COMMITMENTS AND CONTINGENCIES
Notes Payable, net of debt discount of $0 and $7,739, respectively		-			629,261
TOTAL LIABILITIES		1,742,714			2,228,058
STOCKHOLDERS’ DEFICIT
Preferred stock:
Series A Convertible Preferred Stock; 5,000,000 shares authorized; par value $0.001 per share; no shares issued and outstanding as of December 31, 2013 and 2012		-			-
Series B Convertible Preferred Stock; 5,000,000 shares authorized; par value $0.001 per share; 0 and 50,000 shares issued and outstanding as of December 31, 2013 and 2012		-			50
Common Stock:
450,000,000 shares authorized, par value $.001 per share; 283,657,190 and 294,650,743 shares issued and outstanding as of December 31, 2013 and 2012		283,657			294,614
Additional paid in capital		14,529,751			14,469,341
Treasury Stock, 37,174 and 37,174 shares held, respectively, at cost of -0-, as of December 31, 2013 and 2012.		-0-			37
Accumulated deficit		(14,959,874	)		(16,153,925	)
TOTAL STOCKHOLDERS’ DEFICIT		(146,466	)		(1,389,883	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	1,596,248		$	838,175

The accompanying notes are an integral part of these consolidated financial statements.

F-4

CMG HOLDINGS GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Year Ended December 31,
	2013			2012
Revenues	$	7,413,796		$	8,125,196
Operating Expenses:
Cost of revenues		5,296,280			5,792,283
Depreciation and amortization expense		-			74,850
Gain on bad debt recovery		-			(36,250	)
General and administrative expenses		2,875,363			3,923,919
Total Operating Expenses		8,171,643			9,754,802
Operating Loss		(757,847	)		(1,629,606	)
Other Income (Expense):
Gain on extinguishment and forgiveness of liability		793,732			1,441,762
Gain (loss) on derivative liability		210,180			(547,318	)
Gain (loss) on extinguishment of debt		-			75,618
Realized gain on marketable securities		524,668			-
Unrealized gain on marketable securities		622,769			-
Other income		56,394			5,721
Interest expense		(255,845	)		(907,916	)
Total Other Income (Expense)		1,951,898			67,867
Income (loss) from continuing operations		1,194,051			(1,561,739	)
Discontinued Operations:
Loss from discontinued operations		-			(541,508	)
Gain on sale of discontinued operations		-			4,339,564
Total income (loss) discontinued operations		-			3,798,056
Net Income	$	1,194,051		$	2,236,317
Basic income (loss) per common share for continuing operations	$	0.00		$	(0.01	)
Basic income per common share for discontinued operations	$	0.00		$	0.02
Total basic income per common share	$	0.00		$	0.01
Diluted loss per share for continued operations	$	0.00		$	(0.01	)
Diluted income (loss) per common share for discontinued operations	$	0.00		$	0.01
Total diluted income per common share	$	0.00		$	0.00
Basic weighted average common shares outstanding		289,674,514			237,199,982
Diluted weighted average common shares outstanding		290,668,814			237,199,982

The accompanying notes are an integral part of these consolidated financial statements.

F-5

CMG HOLDINGS GROUP, INC.

CONSOLIDATED STATEMENT OF CHANGE IN STOCKHOLDERS’ DEFICIT

	Preferred Stock						Treasury Stock					Common Stock						Additional Paid		Accumulated			Total Shareholders'
	Shares			Par			Shares		Cost			Shares			Par			in Capital		Deficit			Deficit
Balance, December 31, 2011		50,000		$	50			37,174	$	37			124,811,383		$	124,812		$	12,254,301	$	(18,390,242	)	$	(6,011,042	)
Shares issued for services		-			-			-		-			14,150,000			14,150			179,950		-			194,100
Shares issued for debt		-			-			-		-			145,989,360			145,952			609,055		-			755,007
Shares issued for debt modification		-			-			-		-			7,100,000			7,100			166,450		-			173,550
Shares issued for debt inducement		-			-			-		-			600,000			600			10,886		-			11,486
Shares issued for debt modification		-			-			-		-			2,000,000			2,000			15,800		-			17,800
Loss on debt settlement of derivative liabilities through conversion of related notes payable		-			-			-		-			-			-			1,211,795		-			1,211,795
Contributed capital		-			-			-		-			-			-			21,104		-			21,104
Net income		-			-			-		-			-			-					2,236,317			2,236,317
Balance, December 31, 2012		50,000		$	50			37,174	$	37			294,650,743		$	294,614		$	14,469,341	$	(16,153,925	)	$	(1,389,883	)
Cancellation of preferred and common stock from settlement agreement with Continental		(50,000	)		(50	)		-		-			(18,079,267	)		(18,079	)		18,129		-			-
Shares issued for debt		-			-			-		-			2,800,000			2,800			23,800		-			26,600
Shares issued for debt conversion		-			-			-		-			4,285,714			4,285			18,481		-			22,766
Reclassification		-			-			-		(37	)		-			37			-		-			-
Net income		-			-			-		-			-			-			-		1,194,051			1,194,051
Balance, December 31, 2013		-		$	-			37,174	$	-			283,657,190		$	283,657		$	14,529,751	$	(14,959,874	)	$	(146,466	)

The accompanying notes are an integral part of these consolidated financial statements.

F-6

CMG HOLDINGS GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Year Ended
	December 31,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations	$	1,194,051		$	2,236,317
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Gain on recovery of bad debt		-			(36,250	)
Amortization of deferred financing costs		-			19,879
Amortization of debt discount		152,848			784,409
Shares issued for services		-			194,100
Gain on sale of subsidiary		-			(4,339,564	)
Gain on forgiveness of accounts payable and accrued liabilities		-			(1,441,762	)
Amortization of intangible assets		-			74,580
(Gain) loss on derivatives		(210,180	)		547,318
(Gain) loss on extinguishment of debt		(793,732	)		(75,618	)
Realized gain on trading securities		(524,668	)
Unrealized gain on trading securities		(622,769	)
Changes in:
Increase in accounts receivable		(34,527	)		(144,698	)
Increase (decrease) in prepaid expense and other current assets		4,334			(18,727	)
Increase in deferred income		-			(202,995	)
Increase in accrued liabilities		456,368			2,031,216
Increase in accounts payable		80,043			(35,102	)
Decrease in accounts payable, related party		(19,625			(162,925
Net cash provided by (used in) operating activities		(317,057	)		(569,822	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of trading securities		658,021			-
Cash paid transferred upon sale of Audio Eye, Inc.		-			(4,841	)
Net cash provided by (used in) investing activities		658,021			(4,841	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on related parties debt		-			(37,000	)
Advances from related parties		-			9,704
Proceeds from issuance of debt		104,500			70,000
Proceeds from related party debt		-			415,640
Capital contributions		-			21,104
Payments on debt		(207,000	)		-
Net change in line of credit		-			(4,440	)
Net cash (used in) provided by financing activities		(102,500	)		475,008
Net increase in cash		238,124			(99,655	)
Cash, beginning of period		168,624			337,779
Cash, end of period		476,588		$	238,124
Supplemental cash flow information:
Interest paid	$	87,273		$	4,675
Non-cash investing and financing activity:
Discount on shares issued with notes payable	$	98,097		$	11,486
Reclassification of accrued liabilities into debt	$	-		$	545,000
Reclassification of accounts payable to short term debt	$	-		$	522,943
Reclassification of short term debt to accounts payable	$	-		$	13,000
Discount on notes payable from derivative liability	$	-		$	636,902
Reclassification of derivative liabilities to additional paid-in capital	$			$	1,211,795
Conversion of debt to equity	$			$	755,007

The accompanying notes are an integral part of these consolidated financial statements.

F-7

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activity

Creative Management Group, Inc. was formed in Delaware on August 13, 2002 as a limited liability company named Creative Management Group, LLC. On August 7, 2007, this entity converted to a corporation and changed its legal name to Creative Management Group Inc.  The Company is a sports, entertainment, marketing and management company providing event management implementation, sponsorships, licensing and broadcast, production and syndication.

On February 20, 2008, Creative Management Group, Inc. formed CMG Acquisitions, Inc., a Delaware company, for the purpose of acquiring companies and expansion strategies. On February 20, 2008, Creative Management Group, Inc. acquired 92.6% of Pebble Beach Enterprises, Inc. (a publicly traded company) and changed the name to CMG Holdings Group, Inc. (“the Company”). The purpose of the acquisition was to effect a reverse merger with Pebble Beach Enterprises, Inc. at a later date. On May 27, 2008, Pebble Beach entered into an Agreement and Plan of Reorganization with its controlling shareholder, Creative Management Group, Inc., a privately held Delaware corporation. Upon closing the eighty shareholders of Creative Management Group delivered all of their equity interests in Creative Management Group to Pebble Beach in exchange for shares of common stock in Pebble Beach owned by Creative Management Group, as a result of which Creative Management Group became a wholly-owned subsidiary of Pebble Beach. The shareholders of Creative Management Group received one share of Pebble Beach’s common stock previously owned by Creative Management Group for each issued and outstanding common share owned of Creative Management Group. As a result, the 22,135,148 shares of Pebble Beach that were issued and previously owned by Creative Management Group, are now owned directly by its shareholders. The 22,135,148 shares of Creative Management Group previously owned by its shareholders are now owned by Pebble Beach, thereby making Creative Management Group a wholly-owned subsidiary of Pebble Beach. Pebble Beach did not issue any new shares as part of the Reorganization. The transaction was accounted for as a reverse merger and recapitalization whereby Creative Management Group is the accounting acquirer. Pebble Beach was renamed CMG Holdings Group, Inc.

On April 1, 2009, the Company, through a newly formed wholly owned subsidiary CMGO Capital, Inc., a Nevada corporation, completed the acquisition of XA, The Experiential Agency, Inc. On March 31, 2010, the Company and AudioEye, Inc. (“AudioEye”) completed the final Stock Purchase Agreement under which the Company acquired all of the outstanding capital stock of AudioEye. On June 22, 2011 the Company entered into a Master Agreement subject to shareholder approval as may be required under applicable law and subject to closing conditions with AudioEye Acquisition Corp., a Nevada corporation where the shareholders of AudioEye Acquisition Corp. exchanged 100% of the stock in AudioEye Acquisition Corp for 80% of the capital stock of AudioEye. The Company retained 15% of AudioEye subject to transfer restrictions in accordance with the Master Agreement; on October 2012, the Company distributed to its shareholders, in the form of a dividend, 5% of the capital stock of AudioEye in accordance with provisions of the Master Agreement.

Principles of Consolidation

The consolidated financial statements include the accounts of CMG Holdings Group, Inc., CMG Acquisition, Inc., CMGO Capital, Inc., XA, The Experiential Agency, Inc. ("XA"), CMGO Logistics, Inc., USaveCT and USaveNJ, after elimination of all significant inter-company accounts and transactions.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 revenues and expenses during the period reported. Estimates are used when accounting for allowance for doubtful accounts, depreciation, and contingencies. Actual results could differ from those estimates.

Concentrations of Risk

The Company maintains its cash balances at two financial institutions where they are insured by the Federal Deposit Insurance Corporation up to $250,000 each. At December 31, 2013 and 2012, neither of these accounts was in excess of the limit. The Company also maintains a money market investment account at one securities firm where the account is insured by the Securities Investor Protection Corporation up to $500,000 for the bankruptcy, etc., of the securities firm. At December 31, 2013 and 2012, the account had no balance in excess of the limit. For the years ended December 31, 2013 and 2012, one customer exceeds 10% of the Company’s total revenue, representing 72% and 64% of the Company’s total revenues during the year ended December 31, 2013 and 2012, respectively.

F-8

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

Revenue and Cost Recognition

The Company earns revenues by providing event management services under individually negotiated contracts with varying terms, recognizing revenue in accordance with ASC 605, Revenue Recognition, only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the services have been provided and collectability is assured.   In arrangements where key indicators suggest the Company acts as principal, the Company records the gross amount billed to the client as revenue and the related costs incurred as operating expenses as the services are provided.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are amounts due from event management services, are unsecured and are carried at their estimated collectible amounts. Credit is generally extended on a short-term basis and do not bear interest, although a finance charge may be applied to amounts outstanding more than thirty days. Accounts receivable are periodically evaluated for collectability based on past credit history with clients. Provisions for losses on accounts receivable are determined on the basis of loss experience, known and inherent risk in the account balance and current economic conditions.  There were no allowances for doubtful accounts as of December 31, 2013 or 2012.

Share-Based Compensation

The Company accounts for share-based compensation to employees in accordance with Accounting Standards Codification subtopic 718-10, Stock Compensation (“ASC 718-10”) and share-based compensation to non-employees in accordance with ASC 505-50 Accounting for Equity Instruments Issued to Non-Employees for Acquiring, or in Conjunction with Selling, Goods or Services. ASC 718-10 and 505-50 require the measurement and recognition of compensation expense for all share-based payment awards, including stock options based on the estimated fair values.

Derivative Instruments

The Company accounts for derivative instruments in accordance with ASC Topic 815, Derivatives and Hedging, and all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet.

The Company uses estimates of fair value to value its 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, the Company’s 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 the Company’s 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, The Company seeks to validate the model’s output to market transactions. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820, Fair Value Measurements (ASC 820), based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with maturity of three months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the respective assets, which is generally between three and five years. Depreciation expense was $0 and $0 for the years ended December 31, 2013 and December 31, 2012, respectively.

F-9

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

Intangible Assets

Intangible assets are stated at cost, net of accumulated amortization. Amortization is computed using the straight-line method over the estimated useful life of the respective asset, which is three years. Amortization expense was $0 and $74,580 for the years ended December 31, 2013 and December 31, 2012, respectively.

Income Taxes

The Company accounts for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Basic and Diluted Net Loss per Share

The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Fair Value Measurements

ASC 820 and ASC 825, Financial Instruments (ASC 825), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

F-10

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

The Company’s financial instruments consist principally of cash, accounts receivable, accounts payable and accrued liabilities. Pursuant to ASC 820 and 825, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

The following table sets forth by level with the fair value hierarchy the Company’s financial assets and liabilities measured at fair value on December 31, 2013 and 2012:

December 31, 2013	Level 1		Level 2		Level 3		Total
Marketable trading securities	$	764,088	$	-	$	-	$	764,088
Derivative Liabilities	$	-	$	-	$	11,121	$	11,121
December 31, 2012	Level 1		Level 2		Level 3		Total
Marketable trading securities	$	3,000	$	-	$	-	$	3,000
Derivative Liabilities	$	-	$	-	$	444,150	$	444,150

Investments in Debt and Equity Securities

The Company applies the provisions of Accounting Standards Codification 320, Investments – Debt and Equity Securities, regarding marketable securities. The Company invests in securities that are intended to be bought and held principally for the purpose of selling them in the near term, and as a result, classifies such investments as trading securities. Trading securities are recorded at fair value on the balance sheet with changes in fair value being reflected as unrealized gains or losses in the current period. In addition, the Company classifies the cash flows from purchases, sales, and maturities of trading securities as cash flows from operating activities.

Details of the Company's marketable trading securities as of December 31, 2013 and 2012 are as follows:

	2013		2012
Aggregate fair value	$	764,088	$	3,000
Gross unrealized holding gains		622,769		-
Proceeds from sales ($573,022 stocks plus $85,000 options)	$	658,021	$	-
Gross realized gains (stocks and options)		524,668		-
Gross realized losses		-		-
Other than temporary impairment		-		-

Discontinued Operations

In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations, we reported the results of our subsidiary, AudioEye Inc., as a discontinued operation. The application of ASC 205-20 is discussed in Note 2 below.

NOTE 2 - SALE OF AUDIO EYE, INC. AND DISCONTINUED OPERATIONS

On August 17, 2012 the Company sold its subsidiary Audio Eye, Inc.  The Company will retain 15% of AudioEye, Inc. subject to transfer restrictions in accordance with the Agreement. The Company will distribute to its shareholders, in the form of a dividend, 5% of the capital stock of AudioEye, Inc. AudioEye, Inc. has finalized a Royalty Agreement with the Company to pay to the Company 10% of cash received from income earned, settlements or judgments directly resulting from, AudioEye Inc’s patent enforcement and licensing strategy.  Additionally, AudioEye, Inc. has finalized a Consulting Services Agreement with the Company whereby the Company will receive a commission of not less than 7.5% of all revenues received by AudioEye, Inc. after the closing date from all business, clients or other sources of revenue procured by the Company or its employees, officers or subsidiaries and directed to AudioEye, Inc. and 10% of net revenues obtained from a third party described in the agreement.

On August 21, 2012, the board of directors of the Company declared October 26, 2012 as the record date for the dividend of 5% of Audio Eye, Inc. stock.  The dividend was paid to the shareholders of record as of the close of business on October 26, 2012 and issued March 22, 2013, when AudioEye completed its registration process and issued the shares to the Company.

F-11

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

As consideration for the sale, the purchaser repaid $1,075,000 of debt previously owed by CMG to the CMGO Investors group.  As a result of the sale of AudioEye, the net assets of AudioEye and the related accrued interest of $203,590 were written off during the year ended December 31, 2012. In addition, the Company is currently holding AudioEye shares with a fair value of $764,088. A gain of $4,339,654 was recorded for the sale of AudioEye for the year ended December 31, 2012 as follows:

Repayment of CMGO Debt	$	1,075,000
Accrued Interest on CMGO Debt		203,590
Shares of AudioEye, Inc. Retained		268,750
Net Assets of AudioEye, Inc. Sold		2,792,224
	$	4,339,654

As a result of the sale of AudioEye, the Company has segregated its operating results and presented them separately as discontinued operations for all periods presented. The results of operations for the year ended December 31, 2012 only reflect activity of AudioEye until the finalization of the sale on August 17, 2012.

A summarized operating result for discontinued operations is as follows:

	For the Year Ended December 31,
	2013		2012
Revenues	$	-	$	(95,736	)
Cost of revenues		-		198,568
Depreciation and amortization expense		-		2,078
Operating expenses		-		398,825
Operating Loss				503,735
Unrealized gain on marketable securities		-		24,000
Interest Expense		-		(61,733	)
Net Loss from discontinued operations	$	-	$	541,508

Summary of asset and liabilities of discontinued operations is as follows:

	August 17,   2012		December 31, 2012
Cash	$	4,841	$	27,425
Receivables		47,429		10,901
Receivables - related party		15,250		13,125
Investments		42,000		18,000
Property and Equipment		7,688		6,000
Total assets of discontinued operations	$	117,208	$	75,451
Accounts payable and accrued liabilities		1,195,622		828,407
Deferred income		114,378		12,308
Short term debt		24,000		72,900
Long term debt		1,351,640		1,245,843
Total liabilities of discontinued operations	$	2,685,640	$	2,159,458

F-12

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

NOTE 3 - EQUITY

Preferred Stock

Series B Preferred Stock and Inventory Purchase

On March 31, 2011 the Company acquired 20,000 cartoon animated cels (the “Cel Art”) from Continental Investments Group, Inc. (the “Agreement”). The Company issued 50,000 shares of its Series B Convertible Preferred Stock to Continental Investments Group, Inc. as consideration for the Cel Art, such shares of Series B Convertible Preferred Stock having a stated value per share of $100. The Cel Art consists of collectible, hand-painted cartoon animation cels. The shares of Series B Preferred Stock are convertible into common shares of the Company at the stated value of $100 per share divided by the volume weighted average trading price for the 30 days prior to conversion. The preferred shares are non-voting and do not receive dividends. The Company determined the fair value of the preferred stock to be $3,240,502 on the acquisition date based on the number of shares of common stock the preferred shares could be converted into and the market price of the common stock on the agreement date. The cartoon animated cels are valued at the lower of cost or market. As of December 31, 2011, Management wrote down the inventory to zero. The Company also analyzed the embedded conversion option for derivative accounting consideration under ASC 815-15 and determined that the conversion option should be classified as equity.  During the year ended December 31, 2011, the Company determined that due to uncertainties related to future sales of the Cel Art, the entire balance should be reserved as of December 31, 2011.

During August 2013, the Company entered into a Termination Agreement and Release (the “Agreement”) with Continental Investments Group (Continental), the holder of a $85,000 convertible note payable of the Company and the holder of 2,500,000 shares of restricted common stock.  The Agreement calls for the termination and cancellation of a Sale and Purchase agreement, whereby the Company agreed to issue 50,000 shares of Series B Convertible Preferred Stock in exchange for 20,000 cartoon animated Cels. The Agreement also calls for the cancellation of the $85,000 convertible note and related interest and for Continental to return the 2,500,000 shares of restricted common stock.

Series A Preferred Stock Issuance and Rescission

On March 31, 2011 the Company approved the issuance of 51 shares of preferred stock designated as Series A Convertible Preferred Stock (the “Series A Preferred Stock”) to three officers of the Company in consideration for the officers forgiving $300,000 of accrued salaries. Each share of Series A Preferred Stock is convertible into 1% of the Company’s common stock. The number of votes for the Series A Preferred Stock shall be the same number as the amount of shares of Common Stock that would be issued upon conversion. The Series A Preferred Stock is not entitled to dividends or preference upon liquidation. On May 16, 2011 the Company rescinded the above agreement with an effective date of March 31, 2011. There are no shares of Series A Preferred Stock issued or outstanding as December 31, 2013 or 2012.

Common Stock

Shares Issued for Conversion of Debt

During the year ended December 31, 2012 the Company issued 145,989,360 shares of common stock to convert $755,007 of notes payable and accrued interest.  See also Note 4.

On April 25, 2013, the Company issued 4,285,714 shares of common stock to convert $15,000 of the convertible promissory note that was issued to Asher Enterprises, Inc. on October 16, 2012. See also Note 4.

During June 2013, the Company issued 2,800,000 shares of common stock to settle a $637,000 note payable, resulting in a gain on settlement of debt of $610,400.

Shares Issued for Services

During the year ended December 31, 2012, the Company engaged several consultants to perform services and issued 14,150,000 shares as compensation for services, recognizing $194,100 in expense during the year ended December 31, 2012.

Shares Issued Related to Debt

On June 5, 2012, the Company issued 2,000,000 restricted common shares to modify the terms of a convertible note. A fee for debt servicing of $17,800 was recorded for the issuance of these shares during the year ended December 31, 2012.

In August 2012, the Company issued 1,100,000, 1,000,000 and 5,000,000 restricted common shares in exchange for an extension of the maturity date on the note owed to CMGO Investors, LLC. As the note was extinguished on August 17, 2012 as a part of the sale of AudioEye, a loss on debt extinguishment of $173,550 was recorded for the issuance of these shares during the year ended December 31, 2012.

On September 7, 2012, the Company issued 600,000 restricted common shares in conjunction with two convertible notes. A debt discount was recorded of $11,486 for the relative fair value of the shares.  Amortization of the debt discount to interest expense totaled $5,663 during the year ended December 31, 2012.

During August 2013, the Company entered into a Termination Agreement and Release (the “Agreement”) with Continental Investments Group (Continental), the holder of a $85,000 convertible note payable of the Company and the holder of 2,500,000 shares of restricted common stock.  The Agreement called for the termination and cancellation of a Sale and Purchase agreement, whereby the Company agreed to issue 50,000 shares of Series B Convertible Preferred Stock in exchange for 20,000 cartoon animated Cels. The Agreement also called for the cancellation of the $85,000 convertible note and related interest and for Continental to return the 2,500,000 shares of restricted common stock and 50,000 shares of Series B Convertible Preferred Stock, valued at par of $2,550. This resulted in a gain on settlement of debt of $85,000.

F-13

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

Common Stock Warrants

During 2011, eight individuals purchased 3,870,000 shares of common stock, 774,000 A Warrants and 774,000 B Warrants for $217,000.  A total of 574,000 and 200,000 A Warrants are exercisable at a strike price of $0.25 and $0.10, respectively for three years; 574,000 and 200,000 B Warrants are exercisable at a strike price of $0.50 and $0.20, respectively for three years. The Company can call each of the Warrants after twelve months if the price of the Common Shares of the Company in the Market is 150% of the Warrant strike price for 10 consecutive days.

During March 31, 2010, 250,000 shares of warrants issued to AudioEye at an exercise price of $0.07 per share and a term of 5 years. See Note 5 for additional information on the derivative liability.

A summary of warrant activity for year ended December 31, 2013 and 2012 is as follows:

	Outstanding and Exercisable		Weighted average Exercise Price
December 31, 2011		1,798,000	$	0.28
Granted		-		-
Exercised		-		-
December 31, 2012		1,798,000	$	0.28
Granted		-		-
Exercised		-		-
December 31, 2013		1,798,000	$	0.28

As of December 31, 2013, the warrants have a weighted average remaining life of 0.53 years with $0 aggregate intrinsic value.

NOTE 4 - NOTES PAYABLE

Asher Enterprises, Inc.

On October 16, 2012 the Company issued a convertible promissory note for $32,500 to Asher. The convertible promissory note bears interest at 8% and is due on July 18, 2013 and any amount not paid by July 18, 2013 will incur a 22% interest rate. The note is convertible at 50% of the average of the lowest three trading prices for the Company’s common stock during the ten trading day period prior to the conversion date after 180 days. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 and determined that the instrument should be classified as liabilities once the conversion option becomes effective after 180 days due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

In conjunction with the issuance of the promissory note, $2,500 was recorded as debt discount. The discount is being amortized over the term of the note to interest expense. During April 2013, the Company paid off the $32,500 note and accrued interest and penalties of $10,000.  The discount balance was $0 and $1,809 as of December 31, 2013 and 2012, respectively.  Amortization of $34,309 was recognized as interest expense during the year ended December 31, 2013.

On May 20, 2013 the Company issued a convertible promissory note for $53,000 to Asher. The convertible promissory note bears interest at 8% and is due on February 24, 2014 and any amount not paid by the due date will incur a 22% interest rate. The note is convertible at 58% of the average of the lowest trading prices for the Company’s common stock during the ten trading day period prior to the conversion date after 180 days. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

During December 2013, the Company paid off the $53,000 note and accrued interest of $18,023.  

F-14

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

Paul Sherman Agreement

On May 12, 2012, the Company modified its July 24, 2011 agreement with Paul Sherman into a $9,943 convertible promissory note bearing interest at 2% and due on May 15, 2013. The convertible promissory note is convertible at a price equal to the close price on the day prior to Paul Sherman’s request for conversion, but not to go below $.001. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a discount of $8,875 on the date of the note. The discount is being amortized over the term of the note to interest expense. The discount balance was $0 and $3,376 as of December 31, 2013 and 2012, respectively.  Amortization of $3,376 was recognized as interest expense as of December 31, 2013. The convertible promissory note has an outstanding balance of $9,943 and $9,943 as of December 31, 2013 and 2012, respectively.

Continental Equities, LLC

On September 7, 2012 the Company issued a convertible promissory note for $50,000 to Continental Equities, LLC (“Continental”) for the assignment of an equivalent amount of the Company’s account payable to Continental. The convertible promissory note bears interest at 12% and was due on May 15, 2013.  During December 2013, the Company paid off the $50,000 note and accrued interest and penalties of $34,000.  

On September 7, 2012 the Company issued a convertible promissory note for $20,000 to Continental Equities, LLC for the assignment of an equivalent amount of the Company’s accrued interest to Continental. The convertible promissory note bore interest at 12%. During May 2013, a related party entity paid the $20,000 convertible promissory note plus accrued interest in full.

Hudson Capital Advisors, Inc.

On January 5, 2012, the Company modified its July 11, 2011 agreement with Hudson Capital Advisors, Inc. (“Hudson”) into a $100,000 convertible debenture note bearing interest at 2% due on January 5, 2013. The new note was convertible at the lowest trading price in the three days prior to the day that Hudson requests conversion, with a floor of $.01. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a discount of $87,614 on the date of the note. See Note 5 for additional information on the derivative liability. The entire principal balance was converted into common stock and the entire discount of $87,614 was amortized to interest expense during the year ended December 31, 2012.

Braeden Storm Enterprises, Inc.

On January 5, 2012, the Company modified its July 6, 2011 agreement with Braeden Storm Enterprises, Inc. (“Braeden”) into a $90,000 convertible debenture note bearing interest at 2% due on January 6, 2013. The new note was convertible at the lowest trading price in the three days prior to the day that Braeden requests conversion, with a floor of $.01. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a discount of $79,254 on the date of the note. See Note 5 for additional information on the derivative liability. The entire principal balance was converted into common stock and the entire discount of $79,254 was amortized to interest expense during the year ended December 31, 2012.

On February 10, 2012, the Company assigned $56,000 of its accounts payable from a third party to Braeden. The convertible promissory note bears interest at 10% due on April 15, 2013. The new note was convertible at 50% of the lowest trading price in the three days prior to the day that Braeden requests conversion. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a full discount on the date of the note. The entire principal balance was converted into common stock and the entire discount of $56,000 was amortized to interest expense during the year ended December 31, 2012.

Martin Boyle

On January 5, 2012, the Company modified its September 2, 2011 agreement with Martin Boyle into a $35,000 convertible debenture note bearing interest at 2% due on January 8, 2013. The new convertible debenture note was convertible at the lowest trading price in the three days prior to the day Martin Boyle requests conversion, with a floor of $.01. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a discount of $30,667 on the date of the note. The discount will be amortized over the term of the note to interest expense. See note 5 for additional information on the derivative liability. The entire principal balance was converted into common stock and the entire discount of $30,667 was amortized to interest expense during the year ended December 31, 2012.

F-15

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

Scott Baily

On January 8, 2012, the Company modified its October 2, 2011 agreement with Scott Baily into a $60,000 convertible debenture note bearing interest at 2% due on January 5 2013. The new convertible debenture note was convertible at the lowest trading price in the three days prior to the day that Scott Baily requests conversion, with a floor of $.01. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a discount of $52,685 on the date of the note. On April 26, 2012, the entire principal balance was converted into common stock and the entire discount of $52,685 was amortized to interest expense during the year ended December 31, 2012.

Grassy Knolls, LLC

On January 4, 2012, the Company modified its July 5, 2011 agreement with Grassy Knolls, LLC (“Grassy Knolls”) into a $72,000 convertible debenture note bearing interest at 2% due on January 4, 2013. The new convertible debenture note was convertible at the lowest trading price in the three days prior to the day that Grassy Knolls requests conversion, with a floor of $.01. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a discount of $70,375 on the date of the note. The entire principal balance was converted into common stock and the entire discount of $70,375 was amortized to interest expense during the year ended December 31, 2012.

CMGO Investors, LLC

During year ended December 31, 2010, the Company borrowed $1,075,000 under five 13% Senior Secured Convertible Extendible Notes from third parties that originally matured on October 1, 2011. The Company issued 7,100,000 shares of common stock to extend the maturity date of the note on April 13, 2012, resulting in a loss on debt extinguishment of $173,550, and a debt discount of $6,509 which has been amortized into interest expense during the year ended December 31, 2012. As part of the sale of AudioEye on August 17, 2012 described in Note 2, these notes were repaid by AudioEye and the liability was eliminated from the Company.

Aware Capital Consultants Inc.

As of December 31, 2011, the Company had an outstanding balance of notes payable due to Aware Capital Consultants Inc. of $15,000. The entire principal balance was converted into common stock and the remaining discount of $9,136 was amortized to interest expense during the year ended December 31, 2012.

Magna Group LLC.

On October 17, 2011, the Company assigned $148,000 of its accounts payable from a third party to Magna Group, LLC (“Magna”). The convertible promissory note bore interest at 10%, was due on October 17, 2012 and was convertible at 58% of the lowest trading price in the three days prior to the conversion date. The entire principal balance was converted into common stock and the remaining debt discount of $70,470 was amortized to interest expense during the year ended December 31, 2012.

On April 11, 2012, the Company assigned $50,000 of its accounts payable from a third party to Magna. The convertible promissory note bore interest at 10%, was due on April 13, 2013 and was convertible at 58% of the lowest trading price in the three days prior to the conversion date. The entire principal balance was converted into common stock and the Company amortized $50,000 of the related discount to interest expense during the year ended December 31, 2012.

Hanover Holdings, LLC and Seymour Flicks

On October 17, 2011, the Company issued a convertible promissory note for $50,000 to Hanover Holdings, LLC. On June 5, 2012, Hanover assigned $25,000 principal and related interest to Seymour Flicks and modified the terms of the convertible promissory note. The new convertible promissory of $34,040 bore interest at 10%, was due June 5, 2013 and was convertible at a 42% discount of the lowest trading price for the Company’s common stock during the three trading day period prior to the conversion date, with a floor of $0.009. The Company recognized a $7,451 loss on debt extinguishment in relation to the debt modification. The Company analyzed the conversion options for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instruments should be classified as liabilities (see also Note 5). The fair value of the embedded conversion options resulted in debt discounts of $34,375 and $34,040 on the dates of the convertible promissory notes.  During the year ended December 31, 2012, the entire principal balance of both convertible notes was converted into common stock and the Company amortized a total of $68,415 of the related debt discount to interest expense.

F-16

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

Connied, Inc.

On April 11, 2011 the Company assigned $135,000 of its account payable from a third party to Connied, Inc. (“Connied”). On May 3, 2011, the Company amended the assigned account payable to add a conversion feature. The new note was convertible at 50% of the average of the five lowest closing prices for the Company's stock during the previous 30 trading days. The remaining balance of $85,000 was recorded as short term debt. The note bears interest at 20% and is due on May 2, 2013.

The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion feature should be classified as a liability due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The embedded conversion feature was measured at fair value at inception and on the date of conversion with the change in fair value recorded to earnings. The addition of the embedded conversion option resulted in a full discount to the note of $85,000 on May 3, 2011.

During August 2013, the Company entered into a Termination Agreement and Release (the “Agreement”) with Continental Investments Group (Continental), the holder of a $85,000 convertible note payable of the Company and the holder of 2,500,000 shares of restricted common stock.  The Agreement calls for the termination and cancellation of a Sale and Purchase agreement, whereby the Company agreed to issue 50,000 shares of Series B Convertible Preferred Stock in exchange for 20,000 cartoon animated Cels. The Agreement also calls for the cancellation of the $85,000 convertible note and related interest and the Continental to return the 2,500,000 shares of restricted common stock and 50,000 shares of Series B Convertible Preferred Stock, valued at par of $2,550. This resulted in a gain on settlement of debt of $85,000.

The discount was being amortized over the term of the note to interest expense. The discount balance was $0 and $34,170 as of December 31, 2013 and 2012, respectively.  Amortization of $34,170 was recognized as interest expense as of December 31, 2013.  The convertible promissory note has an outstanding balance of $0 and $85,000 as of December 31, 2013 and 2012, respectively.

Alan Morell

On September 26, 2012, the Company issued two convertible promissory notes for $112,000 and $525,000 to Alan Morell for outstanding amounts owed for the Company’s line of credit and accrued salary, respectively. The notes bore interest at 2% and were due on April 4, 2013 and April 26, 2014, respectively. The notes became convertible at $0.04 and $0.06, respectively, as of November 15, 2012. During June 2013, the Company issued 2,800,000 shares of common stock to settle the notes totaling $637,000, resulting in a gain on settlement of debt of $610,400.

The Company analyzed the conversion options for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion feature should be classified as a liability due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The embedded conversion feature was measured at fair value at inception and on the date of conversion with the change in fair value recorded to earnings.  The addition of the embedded conversion options resulted in a discount to the notes of $27,573 on November 15, 2012. The discounts were being amortized over the terms of the notes to interest expense. The discount balances were $0 and $7,739 as of December 31, 2013 and 2012, respectively.  Amortization of $7,739 was recognized as interest expense during the year ended December 31, 2013.  The convertible promissory notes have an outstanding balance of $0 and $637,000 as of December 31, 2013 and 2012, respectively.

Infinite Alpha

On April 29, 2013 the company issued a convertible promissory note for $51,500 to Infinite Alpha with undetermined conversion terms. The promissory note was unsecured, bore interest at 20%, and was due on demand.  During December 2013, the Company paid off the $51,500 note and accrued interest and penalties of $10,250.

During the year ended December 31, 2013, the Company wrote off $98,332 of accrued interest to gain on settlement of debt. The total gain on settlement of debt recorded was $793,732 and total amortization of debt discount was $152,848 as of December 31, 2013.

NOTE 5 - DERIVATIVE LIABILITIES

The Company has various convertible instruments outstanding more fully described in Note 4.  Because the number of shares to be issued upon settlement cannot be determined under these instruments, the Company cannot determine whether it will have sufficient authorized shares at a given date to settle any other of its share-settleable instruments. As a result, under ASC 815-15 “Derivatives and Hedging”, all other share-settleable instruments must be classified as liabilities.

F-17

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

Embedded Derivative Liabilities in Convertible Notes

During the years ended December 31, 2013 and 2012, the Company recognized new derivative liabilities of $98,097 and $721,590, respectively, as a result of new convertible debt issuances.  The fair value of these derivative liabilities exceeded the principal balance of the related notes payable by $0 and $138,820 for the years ended December 31, 2013 and 2012, respectively.  As a result of conversion of notes payable described in Note 4, the Company reclassified $9,240,920 and $0 from equity and $0 and $1,213,271 of derivative liabilities to equity during the years ended December 31, 2013 and 2012, respectively.  The Company recognized ($210,810) and $404,688 as a (gain) loss on derivatives due to change in fair value of the liability during the year ended December 31, 2013 and 2012, respectively. The fair value of the Company’s embedded derivative liabilities was $11,121 and $145,970 at December 31, 2013 and 2012, respectively

Warrants

During 2011, 774,000 A Warrants and 774,000 B warrants were issued to individuals. The Company determined that the instruments embedded in the warrants should be classified as liabilities.  During March 31, 2010, 250,000 shares of warrants issued to AudioEye at an exercise price of $0.07 per share and a term of 5 years.

Under ASC 815-15, the liabilities were subsequently measured at fair value at the end of each reporting period with the change in fair value recorded to earnings. The fair value of all outstanding warrants as of December 31, 2013 and 2012 was $1,811 and $12,007, respectively.  The Company recognized a gain of $10,196 and loss of $333 related to the warrants for the years ended December 31, 2013 and 2012, respectively.

The following table summarizes the derivative liabilities included in the consolidated balance sheet:

Derivative Liabilities
Balance at December 31, 2011	$	444,150
ASC 815-15 additions		721,590
Change in fair value		192,025
ASC 815-15 deletions		(1,211,795	)
Balance at December 30, 2012		145,970
ASC 815-15 additions		98,097
Change in fair value		(210,180	)
ASC 815-15 deletions		(22,766	)
Balance at December 30, 2013	$	11,121

The Company values its warrant derivatives and all other share settable instrument using the Black-Scholes option pricing model. Assumption used include (1) 0.06% to 0.13% risk-free interest rate, (2) life is the remaining contractual life of the instrument (3) expected volatility 55% to 239%, (4) zero expected dividends, (5) exercise price as set forth in the agreements, (6) common stock price of the underlying share on the valuation date, and (7) number of shares to be issued if the instrument is converted.

NOTE 6 - LEGAL PROCEEDINGS

We are subject to certain claims and litigation in the ordinary course of business. It is the opinion of management that the outcome of such matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

On April 21, 2011, the Company was served with a lawsuit that was filed in Clark County, Nevada against the Company by A to Z Holdings, LLC and seven other individuals or entities. The complaint alleges, among other things, that the Company’s Board of Directors did not have the power to designate series A and B preferred stock without amending the articles of incorporation. The complaint also alleges any such amendment would require shareholder approval and filing of a proxy statement. On April 20, 2012, the Company settled with A to Z Holdings, LLC and seven other individuals or entities for $10,000.

On July 6, 2011, the Company was served with a lawsuit filed in the Circuit Court for the County of Multnomah, Oregon. The complaint alleges breach of contract and entitlement to consulting fees from the Company. The Company disagrees with the allegations contained in the Complaint and intends to vigorously defend the matter and otherwise enforce its rights with respect to the matter. The Company has retained counsel and is prepared to defend this lawsuit. The Company believes that the claims are frivolous pursuant to the terms of the contract. The case was settled on September 28, 2012 for $30,000. The Company has accrued for this liability as of December 31, 2013 and 2012.

On March 28, 2014 we received a letter from a former Chief Executive Officer of our subsidiary, XA, claiming unpaid severance and paid- time-off. Total of the contingent claim amounted to $250,661.  We are currently in the process to settle the claim.

F-18

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

NOTE 7 - RELATED PARTY TRANSACTIONS

The Company had outstanding accounts payable to a former officer and director who was a related party at December 31, 2012 of $19,625. The payables represent legal and administrative fees paid on behalf of the Company.  These payables were settled during the year ended December 31, 2013.

During December 2012, the Company entered into a Mutual Separation Agreement and General Release (“Separation Agreements”) with former officers and directors of the Company, James Ennis, CEO and Chairman, and Michael Vandetty, Chief Legal Counsel and Director.  The Separation Agreements provide for the termination of the former officers employment agreements and waiver of the employment agreement severance clauses as well as forgiveness of a total of $39,532 in accrued expenses and $670,730 in accrued salary due the former officers.  The forgiven amounts due were recorded as contributions of capital during the year ended December 31, 2012.

XA has made business reimbursements to a consulting firm which is controlled by its former CEO. The payable for $47,912 and $27,280 is included in account payable as of December 31, 2013 and 2012, respectively.  Total amount submitted to the Company for reimbursement from the consulting firm is $142,060 and $151,245 for the year ended 2013 and 2012, respectively.

NOTE 8 - SEGMENTS

The Company had one reportable segment during the year ended December 31, 2013, event marketing, and three reportable segments during the year ended December 31, 2012, event marketing, talent management and consulting services. During the year ended December 31, 2012, the Company discontinued the talent management and consulting services segments (see Notes 9 and 2, respectively) and has one remaining segment, event marketing, at December 31, 2013 and 2012.

NOTE 9 - SALE OF CREATIVE MANAGEMENT OF DELAWARE, INC.

On June 25, 2012, the Company, as a result of desiring to exit from the talent management business, sold its wholly owned subsidiary Creative Management of Delaware, Inc. (formerly Creative Management Group, Inc.) to Creative Management Global, Inc. pursuant to a Stock Purchase Agreement. The Purchase Price of this Agreement calls for Creative Management Global, Inc. to pay to the Company as consideration for the shares of Creative Management of Delaware, Inc., a royalty payment and deferred payment. The royalty payment is effective as of the closing of this agreement and for a period of nineteen (19) months of 10% of cash or other payment received as gross revenues less direct costs earned. The remainder of the purchase price, following payment of the royalty payments, will consist of a final payment to the Company by Creative Management Global, Inc. in the amount of One Hundred Thirty Three Thousand ($133,000). The final payment will be paid after Creative Management Global, Inc. year-end 2013 financial statements are completed and audited by an independent accounting firm and will reflect the total company gross revenues less direct costs for the years 2012, and 2013. No assets have been sold in this transaction and, as a result, no gain was recorded on the sale of this subsidiary.

NOTE 10 – RESIGNATION OF CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD.

On September 26, 2012, Alan Morell officially resigned as Chief Executive Officer and Director of the Company. In conjunction with the resignation, Mr. Morell was issued a convertible note for $525,000 representing the amount of accrued salary owed to him by the company up to the date of resignation and assumed all obligations related to a Smith Barney Credit Line that was secured by Mr. Morell’s security accounts and issued another convertible note to Morell for $112,000. The notes bore interest at 2% and were due on April 26, 2014. The notes were convertible beginning on November 15, 2012 at a conversion price of $0.06 per share. During June 2013, the Company issued 2,800,000 shares of common stock to settle the notes totaling $637,000, resulting in a gain on settlement of debt of $610,400.

NOTE 11- GOING CONCERN

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.

The Company has a working capital deficit and has generated recurring net losses. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders and the ability of the Company to obtain necessary equity or debt financing to continue and expand operations.

These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These factors raise substantial doubt regarding the ability of the Company to continue as a going concern.

Besides ongoing revenues from continuing operations, the Company may need to raise additional funds to expand operations to the point at which the Company can achieve profitability.

F-19

CMG HOLDINGS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

NOTE 12 - COMMITMENTS AND CONTINGENCIES

The Company subsidiary rents office space for its office at Chicago and New York. The lease expires in March 31, 2021 for its Chicago office.  During 2013, the Company renewed a five year lease expiring May 31, 2018 for its New York office.  Future minimum lease payments under the two operating lease are as follows:

Year ending December 31, 2013
2014	$	191,137
2015		196,805
2016		202,572
2018		208,440
2019		141,784
After		214,205

Except as discussed above in Note 6, The Company is not the subject of any pending legal proceedings and, to the knowledge of management; no proceedings are presently contemplated against the Company by any federal, state or local governmental agency.

NOTE 13 - SUBSEQUENT EVENTS

On March 28, 2014, CMG Holdings, Inc. (the “Company” or “CMG”), completed its acquisition of 100% of the shares of Good Gaming, Inc. (“GGI”) by entering into a Share Exchange Agreement (the “SEA”) with BMB Financial, Inc. and Jackie Beckford, GGI’s shareholders. The owner of BMB Financial, Inc. is also the owner of Infinite Alpha, Inc. which provides consulting services to CMG. Pursuant to the SEA, for 100% of the shares of GGI, CMG paid: 5,000,000 shares of its $0.001 par value per share common stock, $33,000 in equipment and consultant compensation and a commitment to pay $200,000 in development costs, of which $50,000 had been advanced by the Company. In addition, the SEA calls for CMG to adopt an incentive plan for GGI pursuant to which the GGI officers, directors and employees are to receive up to 30% of the net profits of GGI and up to 30% of the proceeds of any sale of GGI or its assets.

On March 28, 2014 we received a letter from a former CEO of our subsidiary, XA, claiming unpaid severance and paid- time- off. Total of the contingent claim amounted to $250, 661. We are currently in the process to settle the claim.

On January 28, 2014, we sold a total of 1,500,000 shares of Common Stock to an investor for gross proceeds of $15,000.

On April 9, 2014, we issued a total of 522,000 shares of Common Stock to a consult for investor relation services to be performed pursuant to a Consulting Agreement, dated June 13, 2012.

F-20

EX-4.1

Exhibit 4.1

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

Principal Amount: $______	Issue Date: September 7, 2012
Purchase Price: $_______

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, CMG HOLDINGS GROUP, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of CONTINENTAL EQUITIES, LLC, a New York limited liability Corporation, or registered assigns (the “Holder”) the sum of _____________ Dollars ($_______) together with any interest as set forth herein, on May 15st, 2013 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of twelve percent (12%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1 Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G there under, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. Notwithstanding the foregoing in the event the Borrower fails to file its Form 10Q for the period ending June 30, 2012 by September 20, 2012 the Holder’s right to convert shall commence on September 21, 2012.

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1.2 Conversion Price.

(a) Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 50% multiplied by the Market Price (as defined herein) (representing a discount rate of 50%). “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

(b) Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

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1.3 Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved four times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Purchase Agreement. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Note shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.4 Method of Conversion.

(a) Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

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(c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.

(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

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(g) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock through willful or deliberate acts on the part of the Borrower. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

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The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6 Effect of Certain Events.

(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

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(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

(d) Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

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Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

(e) Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(f)Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

1.7 Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

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1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

1.9 Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the Issue Date and ending on the date which is sixty (60) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to 130%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

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Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the date which is sixty-one (61) days following the issue date and ending on the date which is eight-nine (89) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Second Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Second Optional Prepayment Amount”) equal to 140%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Second Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the date which is ninety (90) days following the issue date and, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Third Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Third Optional Prepayment Amount”) equal to 150%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Third Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

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After the expiration of one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.

In addition, the prepayment amounts discussed in this Section 1.9 are conditioned upon the Borrower filing its quarterly report on Form 10Q for the period ending June 30, 2012 no later than September 20, 2012. In the event the Borrower fails to file its Form 10Q for the period ending June 30, 2012 by September 20, 2012, the prepayment amount shall be fixed at 150%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

ARTICLE II. CERTAIN COVENANTS

2.1 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

2.2 Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

2.3 Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.

2.4 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

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2.5 Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.

ARTICLE III. EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.

3.2 Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.

3.3 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

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3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6 Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

3.8 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

3.9 Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.10 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.11 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

3.12 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

3.13 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

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3.14 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

3.15 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.16 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

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If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

ARTICLE IV. MISCELLANEOUS

4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Borrower, to:

CMG HOLDINGS GROUP, INC.

5601 Biscayne Blvd Miami, Florida 33137

Attn:  , Chief Executive Officer

Fax:

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With a copy by fax only to (which copy shall not constitute notice):

[enter name of law firm]

Attn: [attorney name]

[enter address line 1]

[enter city, state, zip] facsimile:

[enter fax number]

If to the Holder:

Continental Equities, LLC

888 7th Avenue

New York, NY. 10106

Attn: Alan Masley, Director of Investments

Fax:

With a copy by fax only to (which copy shall not constitute notice):

Sommer & Schneider, LLP

Attn: Joel Schneider

595 Stewart Avenue, Suite 710

Garden City, New York 11530

Fax: 516-228-8211

4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

4.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

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4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8 Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.

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4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

4.11 Use of Proceeds. The Borrower covenants that it shall use the proceeds received by in connection with the issuance of this Note to pay its independent auditors Malone and Bailey, which will enable the Borrower to bring its periodic reports current under the 34’ Act. Furthermore, the Borrower agrees to provide the Holder evidence of such payment within three (3) days of issue date of this Note.

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this September 7, 2012.

CMG HOLDINGS GROUP, INC.
By:
	Chief Executive Officer

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EXHIBIT A

NOTICE OF CONVERSION

The undersigned hereby elects to convert $ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of CMG HOLDINGS GROUP, INC. a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of September 7, 2012 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

[ ] The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

Name of DTC Prime Broker:

Account Number:

[ ] The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

Continental Equities, LLC

888 7th Avenue

New York, NY. 10106

Attention: Certificate Delivery

(212) 292-7455

Date of Conversion:                                                             

Applicable Conversion Price:                                          $

Number of Shares of Common Stock to be Issued

Pursuant to Conversion of the Notes:                       

Amount of Principal Balance Due remaining

Under the Note after this conversion:                        

Continental Equities, LLC

By:  

Name:

Title: President

Date: 

888 7th Avenue

New York, NY. 10106

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EX-4.2

Exhibit 4.2

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

Principal Amount: $53,000.00	Issue Date: May 20, 2013
Purchase Price: $53,000.00

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, CMG HOLDINGS, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of ASHER ENTERPRISES, INC., a Delaware corporation, or registered assigns (the “Holder”) the sum of $53,000.00 together with any interest as set forth herein, on February 24, 2014 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein.Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1           Conversion Right. The Holder shall have the right from time to time, andat any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

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1.2           Conversion Price.

(a)           Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein)(subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 58% multiplied by the Market Price (as defined herein) (representing a discount rate of 42%). “Market Price” means the lowest Trading Price (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to theConversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

(b)           Conversion Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

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1.3           Authorized Shares. The Borrower covenants that during the period theconversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Purchase Agreement. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.4           Method of Conversion.

(a)           Mechanics of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

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(b)           Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall, primafacie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

(c)           Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

(d)           Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (but in any event the fifth (5th) business day being hereinafter referred to as the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.

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(e)           Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein,the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

(f)           Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

(g)           Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

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1.5           Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note, so long as the opinion is delivered one hundred eighty (180) days from the date of the Note.

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1.6           Effect of Certain Events.

(a)           Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b)           Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

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(c)           Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

(d)           Adjustment Due to Dilutive Issuance. If, at any time when anyNotes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

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Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the  “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

The prohibitions contained in this subsection 1.6(d) shall apply only to like transactions (e.g. convertible debentures)

(e)           Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(f)           Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

1.7           Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 9.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

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1.8           Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

1.9           Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the Issue Date and ending on the date which is thirty (30) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to 110%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

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Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the date which is thirty-one (31) days following the issue date and ending on the date which is sixty (60) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Second Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Second Optional Prepayment Amount”) equal to 115%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Second Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the date which is sixty-one (61) days following the issue date and ending on the date which is ninety (90) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Third Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Third Optional Prepayment Amount”) equal to 120%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Third Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

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Notwithstanding any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is ninety-one (91) day from the issue date and ending one hundred twenty (120) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fourth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Fourth Optional Prepayment Amount”) equal to 125%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Fourth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred twenty-one (121) day from the issue date and ending one hundred eighty (180) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fifth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Fifth Optional Prepayment Amount”) equal to 130%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Fifth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

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After the expiration of one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.

ARTICLE II. CERTAIN COVENANTS

2.1           Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

2.2           Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

2.3           Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds of which shall be used to repay this Note.

2.4           Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

2.5           Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.

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ARTICLE III. EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

3.1           Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.

3.2           Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue)(electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion.

3.3           Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

3.4           Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

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3.5           Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6           Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.7           Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

3.8           Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the NasdaqSmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

3.9           Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.10         Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.11         Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

3.12         Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

3.13         Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

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3.14         Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

3.15         Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.16         Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

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If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

ARTICLE IV. MISCELLANEOUS

4.1           Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2           Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Borrower, to:

CMG HOLDINGS, INC.

333 Hudson Street - Suite 303

New York, NY 10013

Attn: JEFFREY DEVLIN, INTERIM CHIEF EXECUTIVE OFFICER

facsimile:

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With a copy by fax only to (which copy shall not constitute notice):

[enter name of law firm]

Attn: [attorney name]

[enter address line 1]

[enter city, state, zip]

facsimile: [enter fax number]

If to the Holder:

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attn: Curt Kramer, President

facsimile: 516-498-9894

With a copy by fax only to (which copy shall not constitute notice):

Naidich Wurman Birnbaum &Maday, LLP

80 Cuttermill Road, Suite 410

Great Neck, NY 11021

Attn: Bernard S. Feldman, Esq.

facsimile: 516-466-3555

4.3           Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4           Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bonafide margin account or other lending arrangement.

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4.5           Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

4.6           Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

4.7           Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8           Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

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4.9           Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.

4.10         Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this May 20, 2013.

CMG HOLDINGS, INC.
By:
	JEFFREY DEVLIN
	INTERIM CHIEF EXECUTIVE OFFICER

21

EXHIBIT A: NOTICE OF CONVERSION

The undersigned hereby elects to convert $               principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of CMG HOLDINGS, INC., a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of May 20, 2013 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

[  ]

The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). Name of DTC Prime Broker: Account Number:

[  ]

The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto: ASHER ENTERPRISES, INC. 1 Linden Pl., Suite 207 Great Neck, NY. 11021 Attention: Certificate Delivery (516) 498-9890 Date of Conversion:                                                                  Applicable Conversion Price:                                               $               Number of Shares of Common Stock to be Issued        Pursuant to Conversion of the Notes:                           Amount of Principal Balance Due remaining Under the Note after this conversion:                            ASHER ENTERPRISES, INC. By:  Name: Curt Kramer Title: President Date:             1 Linden Pl., Suite 207 Great Neck, NY. 11021

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EX-10.4

Exhibit 10.4

ROYALTY AGREEMENT

This Royalty Agreement (the “Agreement”) is made and entered into as of _______, 2011 by and between CMG Holdings Group, Inc., a Nevada corporation (“CMGO”) and Audio Eye, Inc., a Delaware corporation (“AE”) with reference to the following:

A.          Pursuant to a Master Agreement dated as of June 22, 2011 (the “Master Agreement”) between CMGO and Audio Eye Acquisition Corp. (“AEAC”), a newly formed corporation which owns certain rights to the exploitation of AE’s patents, CMGO and AEAC agreed, among other things, that the shareholders of AEAC will exchange all of their shares of the capital stock of AEAC for 80% of the capital stock of AE and CMGO will distribute to its shareholders in the form of a dividend 5% of the capital stock of AE (collectively, the “Separation”).  Pursuant to the Master Agreement, CMGO will retain approximately 15% of the outstanding capital stock of AE as of the closing.

B.          As a condition to the closing of the Separation (the “Closing”), AE and CMGO are required to enter into an agreement pursuant to which AE will pay to CMGO a royalty based on cash received by AE or its affiliates from the exploitation of AE’s technology as described below.

NOW, THEREFORE, in consideration of the mutual covenants and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, CMGO and AE agree as follows:

ARTICLE ONE

PAYMENT OF ROYALTIES

Effective as of the Closing, AE shall pay to CMGO 10% of cash or other forms of payment or compensation received as income earned or settlements on claims, suits or judgments directly resulting from AE’s patent enforcement and licensing strategy, whether received by AE or any of its affiliates, net in either case of any direct costs incurred in pursuit of such strategy as they relate to the following: AudioEye Family of patents including but not limited to (1) United States Patent Number #7,653,544 and all continuations and continuations in-part, (2) Patent Number 7966184 and all continuations and continuations in part, and (3) Patent Number 7653544 and all continuations and continuations in-part. Without limiting the generality of the foregoing, direct costs shall include attorneys’ fees and costs incurred by AE in obtaining or attempting to obtain settlement or judgments as a result of patent enforcement regardless of whether the results therefrom are successful. Said direct costs shall be calculated as to each settlement or judgment obtained and shall be deducted from the gross proceeds obtained from the specific claim, suit or judgment in which they were incurred. Amounts due hereunder shall be payable on a quarterly basis commencing with the calendar quarter in which the Closing occurs with respect to amounts collected, costs incurred or taxes accrued in such quarter.  Payment shall be made within fifteen business days from the end of a calendar quarter and shall be accompanied by a statement from AE stating in reasonable detail the calculation of amounts payable.

ARTICLE TWO

REPORTS, BOOKS AND RECORDS; AUDIT; LATE PAYMENTS AND TAXES

2.1           Reports. Within thirty (30) days after the last day of each quarter subsequent to the Closing Date, AE shall submit to CMGO written statement (the “Quarterly Reporting Statement”) detailing with respect to the preceding quarterly period: (a) all Gross Revenue; and (b) the amount to be paid to CMGO under this Agreement based on such Gross Revenue.

2.2           Adjustments.  If AE has to reverse previously recognized Gross Revenue reported under a previous Quarterly Reporting Statement, AE can claim credit on a subsequent Quarterly Reporting Statement for the same quarter it reverses the previously recognized Gross Revenue in AE’s income statement.  Such credit will not exceed the amount to be paid in the then-current quarter, but the unused credit may be carried over to succeeding quarters within the same contract year.

1

2.3           Payment Timing.  AE shall pay CMGO, on a quarterly basis, the amounts reported in the Quarterly Reporting Statement for such quarter not later than thirty (30) days after the end of such quarter.

2.4           Books and Records. AE shall maintain appropriate books of account and records with respect to Gross Revenue in accordance with generally accepted accounting principles and shall make complete and accurate entries concerning all transactions relevant to this Agreement. All such books of account and records shall be kept available by AE for no less than three (3) years after the end of each calendar year, or, in the event of a dispute between the parties involving in any way those books of accounts and records, until such time as the dispute will have been resolve, whichever is later.

2.5           Audit. CMGO shall have the right during the Term and for a period of three (3) years after the end of the calendar year, or, in the event of a dispute concerning the accuracy and/or correctness of a Quarterly Reporting Statement or any other payment made under this Agreement, until the dispute is resolved, whichever is later, through an independent public accountant or other qualified expert selected by CMGO and reasonably acceptable to AE, in inspect and examine AE’s relevant books of accounts and records, server log files and other documents (including, without limitation, vouchers, records, purchase orders, sales orders, re-orders, agreements and technical information) relating to the subject matter of this Agreement. Such inspection and examination shall be done to confirm that appropriate payments have been under this Agreement. Any such audit shall take place upon reasonable prior written notice to AE and during AE’s regular business hours. Except as set forth in Section 2.6, the cost of such audit shall be borne by CMGO.

2.6           Late Payments. CMGO shall be entitled to charge, and AE shall pay, interest on any overdue amounts under this Agreement at the rate of one percent (1%) per month (or part thereof), or at such lower rate as may be the maximum rate allowed under applicable law. In the event that an audit reveals any undisputed underpayment, AE shall, within thirty (30) days after written notice from CMGO, make up for such underpayment by paying the difference between amounts the audits reveals and the amounts AE actually paid, together with such interest on such difference. If the underpayment is more than five percent (5%), AE shall pay the reasonable cost of the audit.  If any amount is overdue by more than ninety (90) days, in addition to any other remedies CMGO may have under this Agreement, CMGO may turn over the right to collect such overdue amounts to a collection agency. AE shall be responsible for any reasonable costs incurred by CMGO or such collection agency in collecting any amount that is overdue by more than ninety (90) days including, but not limited to, reasonable attorney’s fees.

2.7           Taxes. AE shall pay all taxes, duties and levies imposed by all national, state, province and local authorities (including, without limitation, export, sales, use and excise) based on the transactions or payments under this Agreement. Amounts payable by AE hereunder shall be paid without deduction or withholding for or on account of any present or future tax, levy, impost, fee, assessment, deduction or charge by any taxing authority except the withholding tax deductible on any tax based CMGO income.

ARTICLE THREE

DURATION

This Agreement shall be effective as of the date of this Agreement and remain in force and effect until the fifth anniversary of the Closing.  At the end of such five (5) year period, AE shall have no further obligation to CMGO. For purposes of this section, all income or other compensation from license agreements, claims, suits or actions entered into or initiated during the above described five (5) year period shall be subject to the terms of this agreement notwithstanding the fact that said income or compensation is received by AE after the expiration of the initial five year term hereof.

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ARTICLE FOUR

GOVERNING LAW

This Agreement shall be governed by, and construed and interpreted in all respects in accordance with, the laws of the state of Delaware applicable to agreements made and to be performed entirely within such State, including all matters of construction, validity and performance.

ARTICLE FIVE

NOTICES

All notices pursuant to this Agreement shall be in writing and shall be deemed to have been given ten (10) days after the mailing thereof if sent by overnight courier, or on the day following the day on which it was so sent if sent by facsimile, addressed in the case of AE to its principal office at 9070 S. Rita Road, Suite 1450, Tucson, Arizona 85747 and in the case of CMGO to its principal office at 5601 Biscayne Boulevard, Miami, Florida 33137, or at such subsequent address as either party may designate to the other in writing for such purposes.

ARTICLE SIX

GENERAL

1.           This Agreement shall be binding upon the parties hereto, and their respective successors and assigns.

2.           This Agreement may be modified at any time or from time to time only by the written agreement of both parties.

3.           The failure of either party to require performance by the other party of any provision hereof, or to enforce any remedies it may have against the other party, shall in no way affect the right thereafter to enforce this Agreement and require full performance by the other party.  The waiver by either party of any breach of any provision of this Agreement shall not constitute a waiver of any succeeding breach of that provision or of any other provision.

4.           The parties agree that this is an independent contractor arrangement.  Under no circumstances shall either party be considered to be an agent, employee, partner or representative of the other party or otherwise have the authority or power to bind the other party.

5.           Except as otherwise expressly, provided herein, if any provisions of this Agreement shall be adjudicated to be invalid or unenforceable in any action or proceeding whether in its entirety or in any portion, then such part shall be deemed amended, if possible, or deleted, as the case may be, from the Agreement in order to render the remaining of the Agreement and any provision thereof both valid and enforceable.  Any such deletion or amendment shall apply only where the court rendering the same has jurisdiction.

6.           This Agreement cancels and supersedes all previous agreements, written or oral, between the parties hereto relating to the subject matter hereof and constitutes the entire agreement between the parties hereto, and there are no understandings, representations or warranties expressed or implied not specifically set forth herein.

7.           This Agreement may be executed in any number of counterparts each of which shall be an original and taken together shall constitute one and the same instrument.

[Signature page follows]

3

IN WITNESS WHEREOF, the parties hereto have caused this Royalty Agreement to be executed by their duly authorized officers.

	AUDIO EYE, INC.
	By:
		Name:
		Title:
	CMG HOLDINGS GROUP, INC.
	By:
		Name:
		Title:
(Signature Page of Royalty Agreement)

4

EX-10.5

Exhibit 10.5

SERVICES AGREEMENT

This Services Agreement (the “Agreement”) is made and entered into as of _______, 2011 by and between CMG Holdings Group, Inc., a Nevada corporation (“CMGO”) and Audio Eye, Inc., a Delaware corporation (“AE”) with reference to the following:

A.           Pursuant to a Master Agreement dated as of June 22, 2011 (the “Master Agreement”) between CMGO and Audio Eye Acquisition Corp. (“AEAC”), a newly formed corporation which owns certain rights to the exploitation of AE’s patents, CMGO and AEAC agreed, among other things, that the shareholders of AEAC will exchange all of their shares of the capital stock of AEAC for 80% of the capital stock of AE and CMGO will distribute to its shareholders in the form of a dividend 5% of the capital stock of AE (collectively, the “Separation”).  Pursuant to the Master Agreement, CMGO will retain approximately 15% of the outstanding capital stock of AE as of the closing.

B.           As a condition to the closing of the Separation (the “Closing”), AE and CMGO are required to enter into an agreement pursuant to which AE will pay to CMGO a services fee based on revenues received by AE from CMGO referrals as set forth below.

C.           Concurrently herewith, AE and CMGO are entering into a Royalty Agreement (the “Royalty Agreement”).

NOW, THEREFORE, in consideration of the mutual covenants and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, CMGO and AE agree as follows:

ARTICLE 1

PAYMENT OF SERVICE FEES

Effective as of the Closing, AE shall pay to CMGO 7.5% of revenues received by AE from all business, clients or other sources of net revenue procured by CMGO, its employees, officers or subsidiaries and directed to AE as the principal referral source except that the percentage shall be 10% in the case of revenues received from a company designated by the parties in a separate document.  Net revenue shall mean gross revenue less cost of revenue.  Amounts due hereunder shall be payable on a quarterly basis commencing with the calendar quarter in which the Closing occurs with respect to revenues for such quarter.  Payment shall be made within fifteen business days from the end of a calendar quarter and shall be accompanied by a statement from AE stating in reasonable detail the calculation of amounts payable.  As an additional service fee, within ninety days from the Closing, AE shall deliver to CMGO restricted shares of its common stock representing 0.05% of AE’s issued and outstanding shares of its capital stock as of the Closing.

All amounts payable hereunder shall be without duplication of amounts payable under the Royalty Agreement.

ARTICLE 2

REPORTS, BOOKS AND RECORDS; AUDIT; LATE PAYMENTS AND TAXES

2.1           Reports. Within thirty (30) days after the last day of each quarter subsequent to the Closing Date, AE shall submit to CMGO written statement (the “Quarterly Reporting Statement”) detailing with respect to the preceding quarterly period: (a) all Gross Revenue; and (b) the amount to be paid to CMGO under this Agreement based on such Gross Revenue.

2.2           Adjustments.  If AE has to reverse previously recognized Gross Revenue reported under a previous Quarterly Reporting Statement, AE can claim credit on a subsequent Quarterly Reporting Statement for the same quarter it reverses the previously recognized Gross Revenue in AE’s income statement.  Such credit will not exceed the amount to be paid in the then-current quarter, but the unused credit may be carried over to succeeding quarters within the same contract year.

2.3           Payment Timing.  AE shall pay CMGO, on a quarterly basis, the amounts reported in the Quarterly Reporting Statement for such quarter not later than thirty (30) days after the end of such quarter.

2.4           Books and Records. AE shall maintain appropriate books of account and records with respect to Gross Revenue in accordance with generally accepted accounting principles and shall make complete and accurate entries concerning all transactions relevant to this Agreement. All such books of account and records shall be kept available by AE for no less than three (3) years after the end of each calendar year, or, in the event of a dispute between the parties involving in any way those books of accounts and records, until such time as the dispute will have been resolve, whichever is later.

2.5           Audit. CMGO shall have the right during the Term and for a period of three (3) years after the end of the calendar year, or, in the event of a dispute concerning the accuracy and/or correctness of a Quarterly Reporting Statement or any other payment made under this Agreement, until the dispute is resolved, whichever is later, through an independent public accountant or other qualified expert selected by CMGO and reasonably acceptable to AE, in inspect and examine AE’s relevant books of accounts and records, server log files and other documents (including, without limitation, vouchers, records, purchase orders, sales orders, re-orders, agreements and technical information) relating to the subject matter of this Agreement. Such inspection and examination shall be done to confirm that appropriate payments have been under this Agreement. Any such audit shall take place upon reasonable prior written notice to AE and during AE’s regular business hours. Except as set forth in Section 2.6, the cost of such audit shall be borne by CMGO.

2.6           Late Payments. CMGO shall be entitled to charge, and AE shall pay, interest on any overdue amounts under this Agreement at the rate of one percent (1%) per month (or part thereof), or at such lower rate as may be the maximum rate allowed under applicable law. In the event that an audit reveals any undisputed underpayment, AE shall, within thirty (30) days after written notice from CMGO, make up for such underpayment by paying the difference between amounts the audits reveals and the amounts AE actually paid, together with such interest on such difference. If the underpayment is more than five percent (5%), AE shall pay the reasonable cost of the audit.  If any amount is overdue by more than ninety (90) days, in addition to any other remedies CMGO may have under this Agreement, CMGO may turn over the right to collect such overdue amounts to a collection agency. AE shall be responsible for any reasonable costs incurred by CMGO or such collection agency in collecting any amount that is overdue by more than ninety (90) days including, but not limited to, reasonable attorney’s fees.

2.7           Taxes. AE shall pay all taxes, duties and levies imposed by all national, state, province and local authorities (including, without limitation, export, sales, use and excise) based on the transactions or payments under this Agreement. Amounts payable by AE hereunder shall be paid without deduction or withholding for or on account of any present or future tax, levy, impost, fee, assessment, deduction or charge by any taxing authority except the withholding tax deductible on any tax based CMGO income.

ARTICLE 3

DURATION

This Agreement shall be effective as of the date of this Agreement and remain in force and effect until the fifth anniversary of the Closing.  At the end of such five (5) year period, AE shall have no further obligation to CMGO. . For purposes of this section, all income, revenues or other compensation from agreements, contracts, claims, suits or actions entered into or initiated during the above described five (5) year period shall be subject to the terms of this agreement notwithstanding the fact that said income or compensation is received by AE after the expiration of the initial five year term hereof.

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ARTICLE 4

GOVERNING LAW

This Agreement shall be governed by, and construed and interpreted in all respects in accordance with, the laws of the state of Delaware applicable to agreements made and to be performed entirely within such State, including all matters of construction, validity and performance.

ARTICLE 5

NOTICES

All notices pursuant to this Agreement shall be in writing and shall be deemed to have been given ten (10) days after the mailing thereof if sent by overnight courier, or on the day following the day on which it was so sent if sent by facsimile, addressed in the case of AE to its principal office at 9070 S. Rita Road, Suite 1450, Tucson, Arizona 85747 and in the case of CMGO to its principal office at 5601 Biscayne Boulevard, Miami, Florida 33137, or at such subsequent address as either party may designate to the other in writing for such purposes.

ARTICLE 6

GENERAL

1.           This Agreement shall be binding upon the parties hereto, and their respective successors and assigns.

2.           This Agreement may be modified at any time or from time to time only by the written agreement of both parties.

3.           The failure of either party to require performance by the other party of any provision hereof, or to enforce any remedies it may have against the other party, shall in no way affect the right thereafter to enforce this Agreement and require full performance by the other party.  The waiver by either party of any breach of any provision of this Agreement shall not constitute a waiver of any succeeding breach of that provision or of any other provision.

4.           The parties agree that this is an independent contractor arrangement.  Under no circumstances shall either party be considered to be an agent, employee, partner or representative of the other party or otherwise have the authority or power to bind the other party.

5.           Except as otherwise expressly, provided herein, if any provisions of this Agreement shall be adjudicated to be invalid or unenforceable in any action or proceeding whether in its entirety or in any portion, then such part shall be deemed amended, if possible, or deleted, as the case may be, from the Agreement in order to render the remaining of the Agreement and any provision thereof both valid and enforceable.  Any such deletion or amendment shall apply only where the court rendering the same has jurisdiction.

6.           This Agreement cancels and supersedes all previous agreements, written or oral, between the parties hereto relating to the subject matter hereof and constitutes the entire agreement between the parties hereto, and there are no understandings, representations or warranties expressed or implied not specifically set forth herein.

7.           This Agreement may be executed in any number of counterparts each of which shall be an original and taken together shall constitute one and the same instrument.

[Signature page follows]

3

IN WITNESS WHEREOF, the parties hereto have caused this Services Agreement to be executed by their duly authorized officers.

	AUDIO EYE, INC.
	By:
		Name:
		Title:
	CMG HOLDINGS GROUP, INC.
	By:
		Name:
		Title:
(Signature Page of Services Agreement)

4

EX-10.6

Exhibit 10.6

CALL OPTION AGREEMENT

THIS CALL OPTION AGREEMENT (this Agreement”) is made and entered into as of August 1, 2013 (the “Effective Date”) by and between AudioEye, Inc., a Delaware corporation (“AudioEye”), and CMG Holdings Group Inc., a Nevada corporation (“Seller”).

W I T N E S S E T H:

WHEREAS, Seller is, as of the date hereof, the holder of record of 4,500,874 shares of AudioEye common stock, par value $.00001 per share (the “Option Shares”); and

WHEREAS, Seller hereby irrevocably grants to AudioEye and/or one or more designees of AudioEye (the designees and AudioEye are collectively, “Purchaser”) an option to purchase up to all of the Optioned Shares during the term of this Agreement under the terms and conditions set forth thereafter; and

WHEREAS, Seller and AudioEye are the parties to that certain Royalty Agreement, dated as of August 15, 2012 (the “Royalty Agreement); and

WHEREAS, in exchange for a payment of $85,000 made by AudioEye to Seller during the term of this Agreement, Seller is willing to terminate the Royalty Agreement.

NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1.             Termination of Royalty Agreement

1.1           Seller hereby agrees, irrevocably and without any additional requirement, to grant AudioEye an exclusive option whereby, while this Agreement is in effect and upon the fulfillment of all the conditions stipulated in Section 1.2, AudioEye shall be entitled, at its sole discretion, to terminate the Royalty Agreement, automatically and with no further action required of the parties, upon the payment of $85,000 (the “Termination Payment”) by AudioEye to Seller.

1.2           The parties acknowledge that while this Agreement is in effect, AudioEye shall be entitled but not obligated to make the Termination Payment, and that upon such Termination Payment being made while this Agreement is in effect, the parties agree that Royalty Agreement shall be terminated mutually, automatically and with no further action of the parties required. If AudioEye decides to make the Termination Payment, then, in accordance with the notice provisions of this Agreement, AudioEye shall issue to Seller a notice to that effect accompanied by payment of the Termination Payment. The parties agree that the Termination Payment can only be made in conjunction with the exercise of the option granted pursuant to Section 2.

Call Option Agreement AudioEye, Inc./CMG Holdings Group, Inc.

1.3           Upon such Termination Payment being made while this Agreement is in effect, the parties agree that except for obligations assumed or acknowledged under this Agreement, each of Seller and AudioEye, for itself and its affiliates, subsidiaries, successors and assigns, hereby completely releases and forever discharges the other party, and its representatives, past and present shareholders, officers, directors, agents, employees, attorneys, insurers, successors and assigns, from all claims, rights, demands, actions, obligations, liabilities, and causes of action of any and every kind, nature or character, known or unknown, that they may now have or have ever had arising from, or in any way related to, the Royalty Agreement.

2.             Granting the Call Option

2.1           Seller hereby agrees, irrevocably and without any additional requirement, to grant Purchaser an exclusive call option whereby, while this Agreement is in effect and upon the fulfillment of all the conditions stipulated in Section 2.2, Purchaser shall be entitled to purchase, at its sole discretion, in the manner and at the price prescribed in this Agreement, through a single or multiple transactions, all, but not less than all, of the Option Shares held by Seller; and upon exercise of such call option, Seller shall then transfer the purchased Option Shares to Purchaser in accordance with this Agreement.

2.2           The parties acknowledge that while this Agreement is in effect, Purchaser shall be entitled but not obligated to exercise, at any time (the timing is entirely at the discretion of Purchaser), the call option with Seller. If Purchaser decides to purchase from Seller all of the Option Shares, then, in accordance with the notice provisions of this Agreement, Purchaser shall issue to Seller an exercise notice (“exercise notice”). The exercise notice will include: (a) the number of Option Shares to be acquired by each Purchaser, (b) the option exercise price to be paid for the Option Shares to be acquired by each Purchaser, and (c) the full name (and jurisdiction of organization if other than a natural person), address and tax identification number of each Purchaser.

3.             Exercising the Call Option

3.1           In the event Purchaser chooses to exercise the call option as prescribed in Section 2, Purchaser may, at its sole discretion, exercise the call option in multiple transactions during the term of this Agreement so that all the Option Shares have been obtained.

3.2           When exercising the call option as prescribed in Section 3.1, Purchaser may, at its sole discretion, choose the number of Option Shares that the exercise of the call option shall require of Seller to transfer to each Purchaser; and Seller shall transfer to each Purchaser the number of Option Shares as specified for each Purchaser. In return for the Option Shares transferred upon each exercise of the call option, Purchaser shall pay to Seller the option exercise price as stipulated in Section 4.1 of this Agreement.

Call Option Agreement AudioEye, Inc./CMG Holdings Group, Inc.

2

3.3           Each time it decides to exercise the call option, Purchaser shall issue an exercise notice to Seller; and upon receiving the exercise notice and the attendant option exercise price as prescribed in Section 4.1, and in compliance with the provisions of this Agreement, Seller shall proceed immediately to transfer to Purchaser, all at once and as soon as practically possible, the number of Option Shares specified in the exercise notice.

3.4           Upon Purchaser issuing an exercise notice, Seller hereby undertakes to: (1) take any and all necessary corporate measures to ensure that Seller approves the transfer to Purchaser of the Option Shares specified in the exercise notice; (2) ensure that Seller’s board of directors takes any necessary actions to approve the transfer by Seller to Purchaser of the Option Shares specified in the exercise notice; (3) proceed to promptly instruct AudioEye’s transfer agent to transfer to Purchaser the Option Shares specified in the exercise notice and execute all other relevant legal documents so that the Option Shares specified in the exercise notice are legally and validly transferred to Purchaser.

4.             Share Transfer Price and Payment

4.1           In accordance with this Agreement, to purchase the Option Shares held by Seller, Purchaser shall pay the option exercise price as follows: (a) If Purchaser decides to purchase the Option Shares, then the total option exercise price for purchasing the Option Shares shall be $1,415,000; and (b) the Termination Payment of $85,000 in Section 1.1 above must accompany the option exercise price.   The parties agree that this is an all or none transaction and that the Seller must receive $1,500,000 in aggregate, consisting of the option exercise price and the Termination Payment, from Purchaser in order to terminate the Royalty Agreement and purchase the Option Shares.

5.             Representations and Warranties

5.1           Seller hereby provides the following representations and warranties to Purchaser:

 (a)           Seller is a duly established corporation registered and subsisting under the laws of the State of Nevada with full capacity to enter into and execute this Agreement as well as all other documents to be executed in connection with the transactions contemplated in this Agreement, full legal rights and capacity to undertake the legal obligations and responsibilities as set forth in this Agreement, and full capacity to enter legal proceedings as an independent subject.

 (b)           Seller has legally and duly executed and delivered this Agreement, which constitutes a legal, valid and binding agreement of Seller, enforceable in accordance with the terms hereof.

 (c)           The Option Shares have been fully, timely and legally paid for by Seller.

Call Option Agreement AudioEye, Inc./CMG Holdings Group, Inc.

3

 (d)           Seller is the only person that has the ultimate legal title to the Option Shares free and clear of any trusts, custodies, liens, pledges, claims or other guarantees and third party encumbrances, except for this Agreement and the pledge of Option Shares hereunder; and as set forth in this Agreement, upon exercise of the call option, Purchaser shall have valid and complete title to the Option Shares free and clear of any trusts, custodies, liens, pledges, claims or other guarantees and third party encumbrances.

 (e)           The execution and delivery of this Agreement by Seller and the performance by Seller of the provisions in this Agreement do not violate or contravene any applicable law, any contracts that Seller is party to and that are legally binding on its assets, any court orders, any judgments of arbitration tribunals, or any decisions by administrative authorities.

 (f)           To the best knowledge of Seller, the Option Shares are not a subject of any pending or threatened suit, legal proceeding or claim by any court or arbitration tribunal, or of any administrative proceeding, measure or claim by any government agency; and there is no suit, arbitration, judicial action, administrative measures or other situations that have a material adverse effect on Seller’s capacity to undertake the obligations hereunder such that Seller will be unable to maintain its legal holding of the Option Shares.

5.2           Seller hereby assures Purchaser that the above representations and warranties of Seller are and shall remain all true, complete and accurate, without any omissions, misleading information or errors, as of the date of this Agreement and during the term of this Agreement.

5.3           AudioEye hereby provides the following representations and warranties to Seller:

 (a)           AudioEye is a duly established corporation registered and subsisting under the laws of the State of Delaware with full capacity to enter into and execute this Agreement as well as all other documents to be executed in connection with the transactions contemplated in this Agreement, full legal rights and capacity to undertake the legal obligations and responsibilities as set forth in this Agreement, and full capacity to enter legal proceedings as an independent subject.

 (b)           AudioEye has legally and duly executed and delivered this Agreement, which constitutes a legal, valid and binding agreement of AudioEye, enforceable in accordance with the terms hereof.

5.4           AudioEye hereby assures Seller that the above representations and warranties of AudioEye are and shall remain all true, complete and accurate, without any omissions, misleading information or errors, as of the date of this Agreement and during the term of this Agreement.

Call Option Agreement AudioEye, Inc./CMG Holdings Group, Inc.

4

6.             Covenants

6.1           While this Agreement is in effect, without obtaining in advance the written consent of AudioEye, Seller shall not proceed to dispose in any manner of all or a portion of the Option Shares or to involve any of the Option Shares in any trust, custody, pledge or third party encumbrance.

7.             Confidentiality

7.1           Each party shall keep this Agreement and its terms confidential and shall not disclose to any third party the content herein or make any press release or public disclosure in any form regarding the transactions contemplated herein; provided, however, that the foregoing shall not prohibit any disclosure: (i) required by law or regulations; (ii) of any information that has entered the public domain not as a result of a breach of contract by the party making the disclosure; (iii) to attorneys, accountants, investment consultants or other agents of the parties assisting the parties in connection with the transactions contemplated herein; or (iv) for which a written consent by the other party has been obtained in advance.

7.2           Notwithstanding other provisions herein, the validity of this section shall survive the cessation or termination of this Agreement.

8.             Liability for Breach

8.1           Other than the breach of contract by Seller in the event of default on the covenants, representations, warranties or undertakings as set forth in this Agreement, Seller shall also be deemed in violation of this Agreement if the following occurs:

 (a)           a material adverse change has occurred in the business or assets of Seller such that AudioEye has reason to believe that it constitutes a material adverse effect or a threat thereof on the capacity of Seller to fulfill its obligations under this Agreement; or

 (b)           bankruptcy, dissolution, split-up, reorganization, liquidation, suspension of business license for Seller have been imposed from outside or initiated from within, or there is a material threat thereof.

8.2           Should any party (“the breaching party”) fail to fulfill its obligations under this Agreement, on the condition that the other party’s (“non-defaulting party”) other rights under this Agreement are not affected, the breaching party shall assume the responsibilities for breach of contract in accordance with the provisions of this Agreement and applicable laws, including but not limited to actual performance, providing remedies and compensating the non-defaulting party for damages.

8.3           The termination or dissolution of this Agreement does not absolve any party from the liabilities that were assumed under this Agreement prior to or at the time of the termination or dissolution, nor does it affect the rights of any party to seek compensation from the other party for breach of contract prior thereto.

Call Option Agreement AudioEye, Inc./CMG Holdings Group, Inc.

5

9.             Effectiveness, Term and Termination

9.1           Upon execution by all the parties or their authorized agent, this Agreement shall come into force on the Effective Date.

9.2           Unless otherwise provided herein, this Agreement shall automatically terminate at 5:00 P.M. Tucson time on that date which is thirty (30) calendar days from the Effective Date.

10.           Taxes and Expenses

10.1         The parties hereto shall each bear their respective expenses and costs in connection with the consultation, drafting and finalization of this Agreement as well as all the transactions contemplated herein or any related legal, financial, business or other affairs.

11.           Notification

11.1         Any notice herein required or permitted to be given shall be in writing and shall be deemed effectively given:  (i) upon personal delivery to the party notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (iii) three days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  Notices shall be addressed to the parties as follows:

If to Seller:

CMG Holdings Group, Inc.

333 Hudson Street, Suite 303

New York, NY 10013

Attn: Jeffrey Devlin, CEO

Fax: (___) ___-____

If to AudioEye:

AudioEye, Inc.

9070 S Rita Rd.

Suite 1450

Tucson, AZ 85747

Attn: Nathan Bradley, CEO

Fax: (520) 844-2989

Call Option Agreement AudioEye, Inc./CMG Holdings Group, Inc.

6

12.           Transfer

12.1         Seller hereby acknowledges that AudioEye has the right to transfer, at its sole discretion, all or part of its rights and/or obligations under this Agreement to one or more designees without having to obtain the written consent of Seller.

12.2         Without the written consent in advance from Purchaser, Seller shall not transfer its rights and/or obligations under this Agreement.

13.           Governing Law and Jurisdiction

13.1         This Agreement shall be governed by and interpreted according to the laws of the State of Delaware, without giving effect to the choice of law provisions of such State.  Any actions for enforcement of this Agreement or interpretation of any of the provision of this Agreement or otherwise arising out of or relating to this Agreement shall be brought only in the state courts of or in the federal courts located in Pima County, State of Arizona.  The parties agree to submit to the jurisdiction of such courts. The Parties herein waive trial by jury and agree to submit to the personal jurisdiction and venue of a court of subject matter jurisdiction located in Pima County, State of Arizona. In the event that litigation results from or arises out of this Agreement or the performance thereof, the parties agree to reimburse the prevailing party’s reasonable attorney’s fees, court costs and all other expenses, whether or not taxable by the court as costs, in addition to any other relief to which the prevailing party may be entitled.

14.           General Provisions

14.1         Purchaser and Seller agree to further complete, execute, deliver and perform what is reasonably requested by any party and to ensure that related persons act likewise with regard to additional measures such as taking actions, executing documents or delivering documents, in order that the transactions contemplated in this Agreement may be consummated smoothly.

14.2         The waiver or failure of either party to exercise in any respect any right provided in this Agreement shall not be deemed a waiver of any other right or remedy to which the party may be entitled.

14.3         The terms and conditions set forth herein constitute the entire agreement between the parties and supersede any communications or previous agreements with respect to the subject matter of this Agreement.  There are no written or oral understandings directly or indirectly related to this Agreement that are not set forth herein.  No change can be made to this Agreement other than in writing and signed by both parties.

Call Option Agreement AudioEye, Inc./CMG Holdings Group, Inc.

7

14.4         This Agreement shall be binding upon and inure to the benefit of the parties hereto, their successors and assigns. This Agreement shall also inure to the benefit of the Purchasers, their successors and assigns

14.5         If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable term had never been included.

14.6         All section references refer to the sections of this Agreement.

14.7         In this Agreement, unless expressly defined otherwise, reference to words importing a gender or neutral words include every gender and references to “person”, “third party”, “third person” include natural person, societies corporate or non-corporate (other organizations), including government agencies.

14.8         Headings are for convenience only and shall not affect the interpretation of this Agreement.

14.9         This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

 [Remainder of page intentionally left blank; signature page follows.]

Call Option Agreement AudioEye, Inc./CMG Holdings Group, Inc.

8

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

AUDIOEYE, INC.	CMG HOLDINGS GROUP, INC.
By:	By:

Print Name: Print Name:

Title: Title:

Call Option Agreement AudioEye, Inc./CMG Holdings Group, Inc.

9

EX-10.7

Exhibit 10.7

As of September 14, 2013

CMG Holdings Group, Inc

333 Hudson Street, Suite 303

New York, NY 10013

Attn: Jeffrey Devlin, CEO

Dear Mr. Devlin:

AudioEye, Inc. (“AudioEye”) and CMG Holdings Group, Inc. (“CMG Holdings”) are party to that certain Call Option Agreement (the “Call Option Agreement”), dated as of August 1, 2013, as amended as of August 30, 2013.

In consideration of the mutual promises herein contained, and other good and valuable consideration, and intending to be legally bound, AudioEye and CMG Holdings hereby agree that Section 9.2 of the Call Option Agreement is amended and restated in its entirety as follows:

“9.2           Unless otherwise provided herein, this Agreement shall automatically terminate at 5:00 P.M. Tucson time on that date which is ninety-nine (99) calendar days from the Effective Date.”

This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall be governed by and interpreted according to the laws of the State of Delaware, without giving effect to the choice of law provisions of such State.  Any actions for enforcement of this Agreement or interpretation of any of the provision of this Agreement or otherwise arising out of or relating to this Agreement shall be brought only in the state courts of or in the federal courts located in Pima County, State of Arizona.  The parties agree to submit to the jurisdiction of such courts. The parties herein waive trial by jury and agree to submit to the personal jurisdiction and venue of a court of subject matter jurisdiction located in Pima County, State of Arizona. Each party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order to carry out the provisions and purposes of this Agreement.

[Remainder of page intentionally left blank; signature page follows.]

University of Arizona Science and Technology Park

9070 S Rita Road, Suite 1450

Tucson, AZ 85747

866.331.5324 • Fax 520.844.2989

If you are in agreement with the foregoing, please sign and return one copy of this Agreement to us.

Very truly yours,

AudioEye, Inc.

By:
	Name:
	Title:

Agreed to as of this 14th day of September, 2013:

CMG Holdings Group, Inc.

By:
	Name:
	Title:

University of Arizona Science and Technology Park

9070 S Rita Road, Suite 1450

Tucson, AZ 85747

866.331.5324 • Fax 520.844.2989

2 

EX-10.8

Exhibit 10.8

As of November 7, 2013

CMG Holdings Group, Inc

333 Hudson Street, Suite 303

New York, NY 10013

Attn: Jeffrey Devlin, CEO

Dear Mr. Devlin:

AudioEye, Inc. (“AudioEye”) and CMG Holdings Group, Inc. (“CMG Holdings”) are party to that certain Call Option Agreement (the “Call Option Agreement”), dated as of August 1, 2013, as amended as of August 30, 2013 and as of September 14, 2013.

In consideration of the mutual promises herein contained, and other good and valuable consideration, and intending to be legally bound, AudioEye and CMG Holdings hereby agree that:

(i)           Section 1.2 of the Call Option Agreement is amended and restated in its entirety as follows:

“1.2        The parties acknowledge that while this Agreement is in effect, AudioEye shall be entitled but not obligated to make the Termination Payment, and that upon such Termination Payment being made while this Agreement is in effect, the parties agree that Royalty Agreement shall be terminated mutually, automatically and with no further action of the parties required. If AudioEye decides to make the Termination Payment, then, in accordance with the notice provisions of this Agreement, AudioEye shall issue to Seller a notice to that effect accompanied by payment of the Termination Payment.”

(ii)           Section 4.1 of the Call Option Agreement is amended and restated in its entirety as follows:

“4.1        In accordance with this Agreement, to purchase the Option Shares held by Seller, Purchaser shall pay the option exercise price as follows: If Purchaser decides to purchase the Option Shares, then the total option exercise price for purchasing the Option Shares shall be $1,415,000 and AudioEye must elect to make the Termination Payment of $85,000 in Section 1.1 above, which must accompany the option exercise price; provided, however, that the parties agree that AudioEye may elect to make the Termination Payment of $85,000 in Section 1.1 above in advance of an election by Purchaser to purchase the Option Shares. The parties agree that this is an all or none transaction to purchase the Option Shares and that the Seller must receive $1,500,000 in aggregate, consisting of the option exercise price and the Termination Payment, in order for Purchaser to purchase the Option Shares.”

University of Arizona Science and Technology Park

9070 S Rita Road, Suite 1450

Tucson, AZ 85747

866.331.5324 • Fax 520.844.2989

(iii)         Section 9.2 of the Call Option Agreement is amended and restated in its entirety as follows:

“9.2        Unless otherwise provided herein, this Agreement shall automatically terminate at 5:00 P.M. Tucson time on that date which is one hundred seventeen (117) calendar days from the Effective Date.”

This Agreement also serves as the requisite notice by AudioEye that it is electing, concurrently with execution of this Agreement, to terminate the Royalty Agreement in accordance with Section 1.1 of the Call Option Agreement, thus serving to terminate the Royalty Agreement upon payment of the Termination Payment.

This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall be governed by and interpreted according to the laws of the State of Delaware, without giving effect to the choice of law provisions of such State.  Any actions for enforcement of this Agreement or interpretation of any of the provision of this Agreement or otherwise arising out of or relating to this Agreement shall be brought only in the state courts of or in the federal courts located in Pima County, State of Arizona.  The parties agree to submit to the jurisdiction of such courts. The parties herein waive trial by jury and agree to submit to the personal jurisdiction and venue of a court of subject matter jurisdiction located in Pima County, State of Arizona. Each party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order to carry out the provisions and purposes of this Agreement.

[Remainder of page intentionally left blank; signature page follows.]

University of Arizona Science and Technology Park

9070 S Rita Road, Suite 1450

Tucson, AZ 85747

866.331.5324 • Fax 520.844.2989

2

If you are in agreement with the foregoing, please sign and return one copy of this Agreement to us.

Very truly yours,

AudioEye, Inc.

By:
	Name:
	Title:

Agreed to as of this 7th day of November, 2013:

CMG Holdings Group, Inc.

By:
	Name:
	Title:

University of Arizona Science and Technology Park

9070 S Rita Road, Suite 1450

Tucson, AZ 85747

866.331.5324 • Fax 520.844.2989

3 

EX-10.9

Exhibit 10.9

As of December 16, 2013

CMG Holdings Group, Inc

333 Hudson Street, Suite 303

New York, NY 10013

Attn: Jeffrey Devlin, CEO

Dear Mr. Devlin:

AudioEye, Inc. (“AudioEye”) and CMG Holdings Group, Inc. (“CMG Holdings”) are party to that certain Call Option Agreement (the “Call Option Agreement”), dated as of August 1, 2013, as amended as of August 30, 2013, September 14, 2013, November 7, 2013 and November 25, 2013.

In consideration of the mutual promises herein contained, and other good and valuable consideration, and intending to be legally bound, AudioEye and CMG Holdings hereby agree that:

(i)           Section 2.1 of the Call Option Agreement is amended and restated in its entirety as follows:

“2.1        Seller hereby agrees, irrevocably and without any additional requirement, to grant Purchaser an exclusive call option whereby, while this Agreement is in effect and upon the fulfillment of all the conditions stipulated in Section 2.2, Purchaser shall be entitled to purchase, at its sole discretion, in the manner and at the price prescribed in this Agreement, through a single or multiple transactions, any or all of the Option Shares held by Seller; and upon exercise of such call option, Seller shall then transfer the purchased Option Shares to Purchaser in accordance with this Agreement.”

(ii)          Section 2.2 of the Call Option Agreement is amended and restated in its entirety as follows:

“2.2        The parties acknowledge that while this Agreement is in effect, Purchaser shall be entitled but not obligated to exercise, at any time (the timing is entirely at the discretion of Purchaser), the call option with Seller. If Purchaser decides to purchase from Seller all or a portion of the Option Shares, then, in accordance with the notice provisions of this Agreement, Purchaser shall issue to Seller an exercise notice (“exercise notice”). The exercise notice will include: (a) the number of Option Shares to be acquired by Purchaser, (b) the option exercise price to be paid for the Option Shares to be acquired by Purchaser, and (c) the full name (and jurisdiction of organization if other than a natural person), address and tax identification number of Purchaser.”

University of Arizona Science and Technology Park

9070 S Rita Road, Suite 1450

Tucson, AZ 85747

866.331.5324 • Fax 520.844.2989

 (iii)        Section 3.1 of the Call Option Agreement is amended and restated in its entirety as follows:

“3.1        In the event Purchaser chooses to exercise the call option as prescribed in Section 2, Purchaser may, at its sole discretion, exercise the call option once or in multiple times during the term of this Agreement until all the Option Shares have been obtained.”

 (iv)        Section 4.1 of the Call Option Agreement is amended and restated in its entirety as follows:

“4.1         In accordance with this Agreement, to purchase the Option Shares held by Seller, Purchaser shall pay the option exercise price as follows: (a) if Purchaser decides to purchase all or only a portion of the Option Shares on or before November 25, 2013, then the option exercise price for purchasing the Option Shares each time shall be determined using the following formula: Price for each option exercise = $0.31438 x (the proposed number of Option Shares to be purchased), (b) if Purchaser decides to purchase all or only a portion of the Option Shares after November 25, 2013 and on or before December 31, 2013, then the option exercise price for purchasing the Option Shares each time shall be determined using the following formula: Price for each option exercise = $0.28 x (the proposed number of Option Shares to be purchased), and (c) if Purchaser decides to purchase all or only a portion of the Option Shares after December 31, 2013 and prior to the termination of this Agreement, then the option exercise price for purchasing the Option Shares each time shall be determined using the following formula: Price for each option exercise = (90% of the volume-weighted average price (VWAP) per share of AudioEye common stock for the 10 trading days immediately preceding the date of the exercise notice) x (the proposed number of Option Shares to be purchased); provided, further, that (a) AudioEye shall have the right to purchase 166,667 of the Option Shares in exchange for extinguishing $50,000 of the existing accounts payable owed to AudioEye by Seller subsidiary Good Gaming Inc., an Illinois corporation (“Good Gaming”) and (b) Seller shall have the right until February 28, 2014, by providing written notice to AudioEye in advance, to cause AudioEye to purchase 500,000 of the Option Shares in exchange for extinguishing an additional $150,000 of the existing accounts payable owed to AudioEye by Seller subsidiary Good Gaming.

University of Arizona Science and Technology Park

9070 S Rita Road, Suite 1450

Tucson, AZ 85747

866.331.5324 • Fax 520.844.2989

2

(v)          Section 9.2 of the Call Option Agreement is amended and restated in its entirety as follows:

“9.2        Unless otherwise provided herein, this Agreement shall automatically terminate at 5:00 P.M. Tucson time on March 31, 2014.”

CMG Holdings and AudioEye hereby agree that consistent with Section 2.1 of the Call Option Agreement, as amended hereby, AudioEye is electing effective December 31, 2013, (a) to exercise the call option for 1,785,715 Option Shares (as such term is defined in the Call Option Agreement) for a total option exercise price of $500,000.20, and (b) to purchase an additional 166,667 Option Shares in exchange for extinguishing $50,000 of the existing accounts payable owed to AudioEye by Seller subsidiary Good Gaming Inc., an Illinois corporation. During the remaining term of the Call Option Agreement, AudioEye retains a call option with respect to the remaining 2,316,291 Option Shares. AudioEye, Inc. (tax identification number 20-2939845) is a Delaware corporation with an address at 9070 S Rita Rd., Suite 1450, Tucson, AZ 85747. This Agreement also serves as the requisite exercise notice under Section 2.2 of the Call Option Agreement with respect to the 1,952,382 Option Shares noted above.

This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall be governed by and interpreted according to the laws of the State of Delaware, without giving effect to the choice of law provisions of such State.  Any actions for enforcement of this Agreement or interpretation of any of the provision of this Agreement or otherwise arising out of or relating to this Agreement shall be brought only in the state courts of or in the federal courts located in Pima County, State of Arizona.  The parties agree to submit to the jurisdiction of such courts. The parties herein waive trial by jury and agree to submit to the personal jurisdiction and venue of a court of subject matter jurisdiction located in Pima County, State of Arizona. Each party shall take such further action and execute and deliver such further documents as may be necessary or appropriate in order to carry out the provisions and purposes of this Agreement.

[Remainder of page intentionally left blank; signature page follows.]

University of Arizona Science and Technology Park

9070 S Rita Road, Suite 1450

Tucson, AZ 85747

866.331.5324 • Fax 520.844.2989

3

If you are in agreement with the foregoing, please sign and return one copy of this Agreement to us.

Very truly yours,

AudioEye, Inc.

By:
	Name:
	Title:

Agreed to as of this 16th day of December, 2013:

CMG Holdings Group, Inc.

By:
	Name:
	Title:

University of Arizona Science and Technology Park

9070 S Rita Road, Suite 1450

Tucson, AZ 85747

866.331.5324 • Fax 520.844.2989

4 

EX-10.10

Exhibit 10.10

Modification of Separation Agreement and Release

This Modification Separation Agreement and Release (the “Agreement”), dated June 26, 2013, is between CMG Holdings Group, Inc., a Nevada Corporation (the “Company”) at 333 Hudson Street, Suite 303, New York, New York, and Alan Morell, an individual. (the “Morell”).

WITNESSETH:

WHEREAS, Morell has signed a Separation Agreement on September 27, 2012 with the Company the “Separation Agreement”); and

WHEREAS, the parties acknowledge that there are certain payments due Morell pursuant to the Separation Agreement, a portion of which remain outstanding or unpaid; and

WHEREAS, the parties mutually wish to amend the Separation Agreement and cancel any ongoing or future obligations each to the other as may have been created pursuant to the terms of the Separation Agreement:

NOW THEREFORE, in consideration of the premises and mutual covenants, conditions and agreements contained herein and for such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, each intending to be legally bound hereby, agree as follows:

1.             Compensation. Item 2 of the Separation Agreement titled Compensation is hereby removed and is replaced with the following: The salary due Morell in the total amount of $525,000.00 as evidenced by a convertible promissory note in the principle amount of $525,000.00 and the Smith Barney Credit Line in the amount of $112,000 as evidenced by a convertible promissory note in the principle amount of $112,000.00 is hereby converted and settled for 2,800,000 newly issued unrestricted shares to be paid immediately. Morell hereby holds the Company harmless from any and all future obligations or demands of any kind.

2.             Release of Shares. The Company hereby grants Morell the right subject to a 5% leak out per month of his total shares, to remove the restrictive legend on the following shares in the Company consisting of Share number 3836-4 for 8,455,944 shares in the name of Alan Morell, Share number CS1-2311 for 3,500,000 shares in the name of Alan Morell, Share number 3545-1 for 600,000 shares in the name of Alan and Janet Morell and shares in the name of Commercial Rights international Corp. for 6,607,000 shares.

3.             Mutual Releases.

(a)           The Parties hereto acknowledge a full resolution and satisfaction of, and hereby IRREVOCABLY AND UNCONDITIONALLY RELEASE, REMISE AND FOREVER DISCHARGE each other from any and all liabilities, actions, causes of action, contracts, agreements, promises, claims and demands of any kind whatsoever, in law or equity, whether known or unknown, suspected or unsuspected, fixed or contingent, apparent or concealed, which they, their heirs, executors, administrators, successors or assigns ever had, now have or hereafter can, shall or may have for, upon, or by reason of any matter, cause or thing whatsoever, from the beginning of Employee’s employment with the Company to the day of the date of this Agreement, arising out of or relating to Employee’s employment, compensation and benefits with the Company and/or the termination thereof including, without limitation, contract claims, benefit claims, tort claims, harassment, defamation and other personal injury claims, fraud claims, whistleblower claims, unjust, wrongful or constructive dismissal claims and any claims under any municipal, state or federal wage payment, discrimination or fair employment practices law, statute or regulation, and claims for costs, expenses and attorneys' fees with respect thereto.

(b)           By signing this Agreement, the Parties hereby WAIVE, RELEASE AND COVENANT NOT TO SUE each other with respect to any matter relating to or arising out of Employee’s employment, compensation and benefits with the Company and/or the termination thereof, and agree that neither they nor any person, organization or entity acting on their behalf will (i) file or participate or join in, encourage, assist, facilitate or permit the bringing or maintenance of any claim or cause of action against the other, whether in the form of a federal, state or municipal court lawsuit or administrative agency action or otherwise, on the basis of any claim arising out of or relating to Employee’s employment, compensation, and benefits with the Company and/or the termination thereof or (ii) seek reinstatement, reemployment or any other relief from the Company, however that relief might be called, whether back pay, compensatory damages, punitive damages, claims for pain and suffering, claims for attorneys' fees, reimbursement of expenses or otherwise, on the basis of any such claim, except for claims for a breach of this Agreement and Release. Nothing contained herein shall be deemed to constitute an admission or evidence of any wrongdoing or liability on the part of either Party hereto. It is expressly understood and agreed that this Agreement and Release shall act as a complete bar to any claim, demand or action of any kind whatsoever brought by either Party against the other relating to Employees employment, compensation and benefits with the Company and/or the termination thereof, except for claims for breach of this Agreement and Release.

4.             Confidential Information. Morell acknowledges that, by reason of his position with the Company, he has been given access to confidential or proprietary materials or information respecting the Company's business affairs. Morell represents that he has held all such information confidential and will continue to do so, and that, unless he first secures the Company's written consent, he shall not directly or indirectly publish, market or otherwise disclose, advise, counsel or otherwise procure any other person or entity, directly or indirectly, to publish, disclose, market or use, any such secret, confidential or proprietary information or relationships of the Company ("Trade Secrets"), of which Morell became aware or informed during his employment with the Company, unless the Company shall have first given its express written consent to such publication, disclosure, marketing or use, except to the extent that such Trade Secrets a) were known to Morell at the time of their receipt, b) were in or have become part of the public domain (otherwise than through Employee), c) were known to the recipient prior to the disclosure, or d) are required to be disclosed by a court or governmental agency. Such Trade Secrets are and shall continue to be the exclusive proprietary property of the Company whether or not they were disclosed to or developed in whole or in part by Morell. Such "Trade Secrets" include, without limitation, subscriber lists, marketing plans and programs, studies, and strategies of or about the Company or its business, customers or suppliers, which derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure.

2

5.             Modifications. This Agreement may not be changed orally, and no modification, amendment or waiver of any of the provisions contained in this Agreement nor any future representation, promise or condition in connection with the subject matter of this Agreement, shall be binding upon any party hereto unless made in writing and signed by such party.

6.             Governing Law. This Agreement and Release shall be subject to, governed by and interpreted in accordance with the laws of the State of New York. The Parties agree that venue for any proceeding to enforce or interpret the provisions of this agreement shall be the District Court for the Southern District of New York.

7.             Confidentiality. This Agreement and the terms hereof shall be kept confidential other than as may be required disclosures under applicable securities reporting laws.

8.             Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes and terminates any and all previous agreements of any kind whatsoever between the parties, whether written or oral, relating to Employee’s employment, compensation and benefits with the Company and/or the termination thereof. This is an integrated document.

9.             Enforcement. The parties agree that this Agreement may be specifically enforced in court and may be used as evidence in a subsequent proceeding in which any of the parties allege a breach of this Agreement. In the event of litigation in connection with or concerning the subject matter of this Agreement, the prevailing party shall recover all the Party’s costs, expenses and attorneys' fees incurred in each and every such action, suit or other proceeding, including any and all appeals or petitions therefrom.

10.           Severability. The provisions of this Agreement shall be considered severable in the event that any of such provisions are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable. Such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are valid and enforceable and which are as similar as possible in term and intent to those provisions deemed to be invalid, void or otherwise unenforceable. Notwithstanding the foregoing, the remaining provisions hereof shall remain enforceable to the fullest extent permitted by law.

11.           Assignability. This Agreement shall not be assignable by Morell, but shall be binding upon and shall inure to the benefit of his heirs, executors, administrators and legal representatives. This Agreement shall be assignable by the Company to any affiliate, subsidiary or division thereof and to any successor in interest.

12.           Waiver and Further Agreement. Any waiver of any breach of any terms or conditions of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or any other term or condition hereof nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof. Each of the parties hereto agrees to execute all such further instruments and documents and to take all such further action as the other party may reasonably require in order to effectuate the terms and purposes of this Agreement.

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13.           Headings of No Effect. The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

CMG HOLDINGS GROUP, INC.

By:

Jeffrey Devlin, Director

By:

Alan Morell

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EX-10.11

Exhibit 10.11

SETTLEMENT AGREEMENT AND RELEASES

THIS SETTLEMENT, TOGETHER WITH RELEASES (the "Agreement"), is made between and among James Ennis (“Ennis”), Scott Baily (“Baily”), Martin Boyle (“Boyle”), Hudson Capital Advisors (“Hudson”), Michael Vandetty (“Vandetty”) and CMG Holdings Group, Inc. (the “Company” and, together with Ennis, Baily, Boyle, Hudson, and Vandetty, the “Parties”).

RECITALS

WHEREAS, disagreements have arisen regarding actions taken or not taken on the part of Ennis, Baily, Boyle, Hudson, and/or Vandetty with regard to the Company, on the one hand, and actions taken or not taken by the Company with regard to Ennis, Baily, Boyle, Hudson,  and/or Vandetty, on the other hand; and

WHEREAS, Ennis, Baily, Boyle, Hudson and Vandetty deny having any liability to the Company with respect to any such disagreements; and

WHEREAS, the Company denies having any liability to Ennis, Baily, Boyle, Hudson and/or Vandetty with respect to any such disagreements; and

WHEREAS, the Parties wish to resolve fully and finally any and all issues pertaining to such disagreements in accordance with this Agreement,

NOW, THEREFORE, the Parties hereby agree as follows:

TERMS AND CONDITIONS

1.           On or before August 30, 2013, Ennis, Baily, Boyle, Hudson, and Vandetty shall, collectively, deliver to the Company (without any monetary payment by the Company) Thirty Three Million Eight Hundred Forty Six Thousand (33,846,000) shares of common stock of the Company, and Included in the common stock to be delivered hereunder shall be Two Million Five Hundred Thousand (2,500,000) shares that had been issued to or held by Connied, Inc. and all shares currently owned or controlled by Ennis.

2.           Vandetty represents that 2,500,000 shares that had been issued to or held by Connied, Inc. have been assigned to him, and that, together with the deliveries to be made under paragraph 1 hereof, Vandetty will deliver to the Company copies of the assignments of such shares.

3.           Upon the deliveries and tenders referred to in paragraphs 1 and 2, the General Releases and Promises Not to Sue by the Company provided for in paragraphs 8 and 9 hereof shall become effective.

4.           Upon the deliveries and tenders referred to in paragraphs 1 and 2, the Glenn B. Laken, on the one hand, and  Ennis, Baily, Boyle, Hudson and Vandetty, on the other hand, shall execute a Mutual General Release in the form annexed hereto as Exhibit A.

5.           Upon the execution of this Agreement, the General Releases and Promises Not to Sue by Ennis, Baily, Boyle, Hudson and Vandetty provided for in paragraphs 10 and 11 hereof shall become effective.

6.           Upon the deliveries and tenders referred to in paragraphs 1 and 2, (a) all obligations on the part of Ennis and Vandetty, as provided for in the Mutual Separation and Release Agreements executed by Ennis, Vandetty and the Company, dated December 1, 2013, shall have been satisfied, (b) the Lockup Agreements, referenced in and separately executed and attached to the Mutual Separation and Release Agreements, shall be terminated and shall thereafter have no further force or effect as to any shares in the Company owned by Vandetty or any shares in Audioeye, Inc. owned by either Ennis or Vandetty subsequent thereto, and (c)  the Company shall direct that its transfer agent, Corporate Stock Transfer, take such action as it may take to remove all restrictive legends on any shares in the Company retained by Vandetty  or  to reissue said shares without restrictions, and shall cooperate with Vandetty in providing any documentation or consents required by the transfer agent for such purpose.

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7.           Notwithstanding the above, the General Releases and Covenants Not to Sue contained in the above-referenced Mutual Separation and Release Agreements, other than as specifically modified herein, shall remain in full force and effect.

COMPANY GENERAL RELEASES

8.           In consideration for the deliveries and tenders referred to in paragraphs 1 and 2 and other valuable consideration, and effective upon such deliveries and tenders, the Company unconditionally, irrevocably and absolutely releases and forever discharges Ennis, Baily, Boyle and Vandetty, together with their present and former employees, agents, attorneys, successors and assigns (in their capacities as such), and  Hudson, together with its present and former parents, subsidiaries and related entities, as well as any officers, directors, shareholders, employees, agents, attorneys, successors and assigns (in their capacities as such), from any and all claims from the beginning of the world to the date of this Agreement, and all losses, liabilities, claims, charges, demands and causes of action, known or unknown, accrued or unaccrued which the Company has or may have had against any of them.  These releases are intended to have the broadest possible application and include, but are not limited to, any and all tort, contract, personal injury, defamation, fraud, intentional or otherwise, common law, constitutional or other statutory claims, arising under any state and/or federal laws, and any and all claims for attorneys' fees, costs, and expenses.

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The Company executes these releases with the full knowledge that the releases cover all possible claims that it may have or may have had against the parties covered thereby to the fullest extent permitted by law.

 COMPANY PROMISES NOT TO PROSECUTE

9.             In consideration for the deliveries and tenders referred to in paragraphs 1 and 2, and other valuable consideration, and effective upon such deliveries and tenders, the Company agrees that it will not prosecute or allow to be prosecuted on its behalf, in any administrative agency or court, whether state or federal, or in any arbitration proceeding, any claim or demand of any type related to the Parties’ disagreements.

OTHER PARTIES’ GENERAL RELEASES

10.             In consideration for the Company’s Agreements herein, and other good and valuable consideration, and effective upon the execution of this Agreement, Ennis, Baily, Boyle, Vandetty and Hudson unconditionally, irrevocably and absolutely release and forever discharge the Company, together with its present and former parents, subsidiaries and related entities, as well as any officers, directors, shareholders, employees, agents, attorneys, successors and assigns (in their capacities as such), from any and all claims from the beginning of the world to the date of this Agreement, and all losses, liabilities, claims, charges, demands and causes of action, known or unknown, accrued or unaccrued which Ennis, Baily, Boyle, Vandetty or Hudson has or may have had against any of them.  These releases are intended to have the broadest possible application and include, but are not limited to, any and all tort, contract, personal injury, defamation, fraud, intentional or otherwise, common law, constitutional or other statutory claims, arising under any state and/or federal laws, and any and all claims for attorneys' fees, costs, and expenses.

4

Ennis, Baily, Boyle, Vandetty and Hudson execute these releases with the full knowledge that the releases cover all possible claims that they may have or may have had against the parties covered thereby to the fullest extent permitted by law.

 OTHER PARTIES’ PROMISES NOT TO PROSECUTE

11.               In consideration for the Company’s Agreements herein, and other good and valuable consideration, and effective upon the execution of this Agreement, Ennis, Baily, Boyle, Vandetty and Hudson agree that they will not prosecute or allow to be prosecuted on their behalf, in any administrative agency or court, whether state or federal, or in any arbitration proceeding, any claim or demand of any type related to the Parties’ disagreements.

NO ADMISSIONS

12.           By entering into this Agreement, the Parties make no admission of any wrongdoing or that they have engaged, or are now engaging, in any unlawful conduct, and dispute any wrongdoing and/or that any unlawful conduct occurred.  It is understood that this settlement is not an admission of liability, but is in compromise of a dispute; that there has been no trial, arbitration or adjudication of any issue of law or fact herein, and that the parties deny liability and intend merely to avoid further expense of litigation or arbitration by entering into this Agreement.

NON-DISCLOSURE

13.           The Parties covenant and agree not to disclose the subject matter of the disagreements resulting in this Agreement unless required to do so by court order, subpoena or the directive of any governmental agency or authority, and that any party receiving such an order, an application for such an order, such a subpoena or such a directive shall promptly notify the other Parties to which the application, order, directive or subpoena relates.  No party will respond to, participate in or contribute to any public discussion or other publicity concerning the subject matter of the disagreements resulting in this Argeement.

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Any violation of this provision shall be remediable by injunctive relief or specific performance in addition to any other remedies that are available to a party claiming such a violation.

14.           Each Party covenants and represents, to the best of their knowledge, that they presently are not plaintiffs, participants or parties to any suit, action, investigation or proceeding in which any of the Parties or related entities is a party or a target.

ENTIRE AGREEMENT

15.           This Agreement contains the entire agreement between the Parties with respect to the subject matter hereof.  It is agreed that there are no collateral agreements or representations, written or oral that are not contained in this Agreement.

SEVERABILITY

16.           Should it be determined by a court of competent jurisdiction that any term of this Agreement is unenforceable, then that term shall be deemed to be deleted.  The validity and enforceability of the remaining terms, however, shall not be affected by the deletion of the unenforceable term or terms.

APPLICABLE LAW

17.           The validity, interpretation and performance of this Agreement shall be construed and interpreted according to the laws of the State of New York, and each Party waives trial by jury of any issue triable hereunder.

ATTORNEYS' FEES

18.           All parties to this Agreement agree that they will bear their own costs and attorneys' fees, if any.

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MODIFICATIONS

19.           This Agreement may be amended only by a written instrument signed by all parties to this Agreement.

BINDING ON SUCCESSORS

 20.           The Parties agree that this Agreement shall be binding on, and inure to the benefit of, their successors, heirs and/or assigns.

NO ASSIGNMENT

21.           The Parties warrant and represent that they have not assigned or transferred to any person not a party to this Agreement any released matter or any right to any payment or other consideration provided pursuant to this Agreement.

COUNTERPARTS

22.           This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and will become effective and binding upon the parties at such time as all the signatories hereto have signed a counterpart of this Agreement.  All counterparts so executed shall constitute one Agreement binding on the parties hereto, and the parties hereto shall sign a sufficient number of counterparts so that each party will receive a fully executed original of this Agreement.

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SURVIVAL

23.           The parties understand that the terms of this Agreement are contractual, shall survive the execution of the Releases contained herein, and shall continue in full force and effect thereafter.

The Parties to this Agreement, with the opportunity to obtain representation and advice of counsel, have read the foregoing Agreement and fully understand each and every provision contained herein.

James Ennis

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

8

Scott Baily

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

9

Martin Boyle

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

10

Hudson Capital Advisors

By:___________________________

Name:_________________________

Its:____________________________

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

11

Michael Vandetty

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

12

CMG Holdings Group, Inc.

By:___________________________

Name:_________________________

Its:____________________________

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

13

EXHIBIT A

MUTUAL GENERAL RELEASES

In consideration for the releases of each party hereunder and other valuable consideration, Glenn B. Laken (as one party) and  James Ennis, Scott Baily, Martin Boyle, Hudson Capital Advisors and Michael Vandetty (collectively as another party) hereby unconditionally, irrevocably and absolutely release and discharge the other party, any and all parents, subsidiaries and related entities of the other party, as well as any present and former employees, officers, members, directors, partners, shareholders, agents, successors and assigns of the other party (in their capacities as such), from any and all claims, from the beginning of the world to the date of this Agreement, and all losses, liabilities, claims, charges, demands and causes of action, known or unknown, accrued or unaccrued which any party has or may have had against the other.  This release is intended to have the broadest possible application and includes, but is not limited to, any and all tort, contract, personal injury, defamation, fraud, intentional or otherwise, common law, constitutional or other statutory claims, arising under any state and/or federal laws, and any and all claims for attorneys' fees, costs, and expenses.

The parties execute these releases with the full knowledge that the releases cover all possible claims that one party may have or may have had against the other, to the fullest extent permitted by law.

Glenn B. Laken

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

14

James Ennis

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

Scott Baily

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

15

Martin Boyle

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

16

Hudson Capital Advisors

By:___________________________

Name:_________________________

Its:____________________________

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

17

Michael Vandetty

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

18

CMG Holdings Group, Inc.

By:___________________________

Name:_________________________

Its:____________________________

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one) [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

19

EX-10.12

Exhibit 10.12

TERMINATION AGREEMENT AND RELEASES

THIS TERMINATION AGREEMENT, TOGETHER WITH RELEASES (the "Agreement"), is made between Connied, Inc. ("Connied"), as successor in interest to Continental Investments Group, Inc. ("Continental"), and CMG Holdings Group, Inc. (the "Company") (the "Company, on the one hand, and "Continental" and "Connied'', on the other hand, hereinafter the "Parties") .

RECITALS

WHEREAS, on March 31 , 2011 the Parties entered into a Sale and Purchase Agreement wherein the Company agreed to issue 50,000 shares of its Series B Convertible Preferred Stock to Continental Investments Group, Inc. in exchange for 20,000 cartoon animated Cels (the "Cel Art) and Continental agreed to deliver the Cel Art to the Company; and

WHEREAS, Connied is the successor in interest to Continental; and

WHEREAS, neither of the transactions contemplated by the Sale and Purchase Agreement took place, in that no Ce! Art was delivered to the Company and no Preferred Stock in the Company was issued or delivered to Continental ; and

WHEREAS, Connied or Continental hold a note from the Company which purports to have a cash value of $85,000 (the "Note"), and received 2.5 million shares of restricted stock of the Company; and

WHEREAS, the Parties wish to terminate the Sale and Purchase agreement, release any claims either may for performance of the Agreement, resolve fully and finally any and all issues or claims pertaining to the Sale and Purchase Agreement, cancel the Note and effect a disclaimer by Connied and Continental of any right, title or interest in 2.5 million shares of restricted stock of the Company, all in accordance with this Agreement,

NOW, THEREFORE, the Parties hereby agree as follows:

TERMS AND CONDITIONS

1.The Sale and Purchase Agreement entered into on March 3 1, 201 1 between the Company and Continental is hereby terminated and shall have no further force or effect.

2.Connied and Continental hereby disclaim any right, title or interest in 2.5 million shares of restricted stock of the Company, and affirmatively represent that they are not holders of said 2.5 million shares of restricted stock of the Company or of any claims in respect of such stock.

3.The Parties agree that the Note is hereby cancelled in consideration for releases contained herein and Connied or Continental shall tender to the Note to the Company, as satisfied (without any monetary payment by the Company).

4.The Parties agree that, as of the date of this Agreement, each Party releases any and all claims it may have or have had, respectively, for or in connection with the delivery of Cel Art to the Company, for or in connection with the issuance or delivery of Preferred Stock of the Company to Connied or Continental, for or in connection with the Note, and for or in connection with 2.5 million shares of restricted stock of the Company that was issued to Connied or Continental.

COMPANY GENERAL RELEASES

5.In consideration for the promises and releases of Connied and Continental in this Agreement and other valuable consideration, and effective upon the execution of this Agreement, the Company unconditionally, irrevocably and absolutely releases and forever discharges Connied and Continental, together with their present and former parents, subsidiaries and related entities, as well as any officers, directors, shareholders, employees, agents, attorneys, successors and assigns, from any and all claims from the beginning of the world to the date of this Agreement, and all losses, liabilities, claims, charges, demands and causes of action, known or unknown, accrued or unaccrued which the Company has or may have had against any of them. These releases are intended to have the broadest possible application and include, but are not limited to, any and all tort, contract, personal injury, defamation, fraud, intentional or otherwise, common law, constitutional or other statutory claims, arising under any state and/or federal laws, and any and all claims for attorneys' fees, costs, and expenses.

2

The Company executes these releases with the full knowledge that the releases cover all possible claims that it may have or may have had against the parties covered thereby to the fullest extent permitted by law.

COMPANY PROMISES NOT TO PROSECUTE

6.In consideration for the promises and releases of Connied and Continental in this agreement, the Company agrees that it will not prosecute or allow to be prosecuted on its behalf, in any administrative agency or court, whether state or federal, or in any arbitration proceeding, any claim or demand of any type related to the released matters.

OTHER PARTIES' GENERAL RELEASES

7.In consideration for the promises and releases of the Company in this Agreement and other valuable consideration, and effective upon the execution of this Agreement, Connied and Continental unconditionally, irrevocably and absolutely release and forever discharge the Company, together with its present and former parents, subsidiaries and related entities, as well as any officers, directors, shareholders, employees, agents, attorneys, successors and assigns of the Company, from any and all claims from the beginning of the world to the date of this Agreement, and all losses, liabilities, claims, charges, demands and causes of action, known or unknown, accrued or unaccrued which Connied or Continental has or may have had against any of them. These releases are intended to have the broadest possible application and include, but are not limited to, any and all tort, contract, personal injury, defamation, fraud, intentional or otherwise, common law, constitutional or other statutory claims, arising under any state and/or federal laws, and any and all claims for attorneys' fees, costs, and expenses.

3

Connied and Continental execute these releases with the full knowledge that the releases cover all possible claims that they may have or may have had against the parties covered thereby to the fullest extent permitted by law.

OTHER PARTIES' PROMISES NOT TO PROSECUTE

8.In consideration for the Company's Agreements herein, and other good and valuable consideration, and effective upon the execution of this Agreement, Connied and Continental agree that they will not prosecute or allow to be prosecuted on their behalf, in any administrative agency or court, whether state or federal, or in any arbitration proceeding, any claim or demand of any type related to the release matters contained herein.

9.Each Party covenants and represents, to the best of their knowledge, that they presently are not plaintiffs, participants or parties to any suit, action, investigation or proceeding in which any of the Parties or related entities is a party or a target.

ENTIRE AGREEMENT

10.This Agreement contains the entire agreement between the Parties with respect to the subject matter hereof. It is agreed that there are no collateral agreements or representations, written or oral that are not contained in this Agreement.

4

SEVERABILITY

11.Should it be determined by a court of competent jurisdiction that any term of this Agreement is unenforceable, then that term shall be deemed to be deleted. The validity and enforceability of the remaining terms, however, shall not be affected by the deletion of the unenforceable term or terms.

APPLICABLE LAW

12.The validity , interpretation and performance of this Agreement shall be construed and interpreted according to the laws of the State of New York, and each Party waives trial by jury of any issue triable hereunder.

ATTORNEYS' FEES

13.All parties to this Agreement agree that they will bear their own costs and attorneys' fees, if any.

MODIFICATIONS

14.This Agreement may be amended only by a written instrument signed by all parties to this Agreement.

BINDING ON SUCCESSORS

15.The Parties agree that this Agreement shall be binding on, and inure to the benefit of, their successors, heirs and/or assigns.

NO ASSIGNMENT

16.The Parties warrant and represent that they have not assigned or transferred to any person not a party lo this Agreement any released matter or any right to any payment or other consideration provided pursuant to this Agreement (except that 2.5 million shares of stock of the Company once held by Connied or Continental have been transferred to one Michael Vandetty).

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COUNTERPARTS

17.This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and will become effective and binding upon the parties at such time as all the signatories hereto have signed a counterpart of this Agreement. All counterparts so executed shall constitute one Agreement binding on the parties hereto, and the parties hereto shall sign a sufficient number of counterparts so that each party will receive a fully executed original of this Agreement.

SURVIVAL

18.         The parties understand that the terms of this Agreement are contractual, shall survive the execution of the Releases contained herein , and shall continue in full force and effect thereafter .

The Parties to this Agreement, with the opportunity to obtain representation and advice of counsel, have read the foregoing Agreement and fully understand each and every provision contained herein.

Continental Investments Group, Inc.

By:___________________________

Name:_________________________

Its:____________________________

STATE OF )

COUNTY OF )

The foregoing instrument was acknowledged before me this ____ day of March, 2013, by ________________.  He or she is (check one)   [   ] personally known to me or [   ] has produced __________________________ as identification.

WITNESS my hand and official seal in the county and state named above this ___ day of ____________________, A.D., 2013.

NOTARY PUBLIC, State of

Print Name:___________________________

Commission No.:______________________

Commission Expires:___________________

6

EX-10.13

Exhibit 10.13

AGREEMENT

This AGREEMENT (the “Agreement”) is made and entered into as of the 5th day of February, 2014 (the “Effective Date”), by and between CMG Holdings, Inc., a Nevada corporation (the “Company”), having its offices at principal place of business at 333 Hudson Street, Suite 303, New York, New York  10013, and _________________ (“Director”), having an address at ______________ (Director and the Company are collectively referred to as the “Parties”).

WITNESSETH:

WHEREAS, Director has advised he is resigning from the Board of Directors of the Company (the “Board”); and

WHEREAS, the Company wishes to compensate Director for his services to the Company and the Board; and

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements herein contained, and other good and valuable consideration, the Parties agree as follows:

1.             RESIGNATION.  As of the calendar day following the Effective Date, the undersigned hereby resigns as a member of the Board and from each and every other position he holds with the Company, its subsidiaries and affiliates.  Director hereby represents and warrants that the foregoing resignation is not the result of any disagreement or dispute with the Company, its Board or management.

2.            COMPENSATION. As consideration for the services provided by Director since his appointment to the Board, the Company hereby agrees to issue to Director 2,000,000 shares of the Company’s common stock (the “Stock”).  The stock shall be free and clear of all liens and encumbrances, with the exception of a restrictive legend required under the Securities Act of 1933, as amended (the “Act”).

2.1      In connection with the issuance of the Stock, the undersigned hereby represents and warrants that he is a non-U.S. Person as defined under Regulation S under the Act.

2.2      In connection with the issuance of the Stock, the Company hereby represents, warrants and covenants that:

2.2.1 neither it, nor any of its officers, directors or affiliates will take any action, or omit to take any action that will interfere in the issuance of the Stock;

2.2.2 within one business day of the receipt of Board approval for the issuance of the Stock, the Company shall submit the Board’s resolutions approving the issuance of the Stock and an instruction letter directing the issuance of the Stock to Director;

2.2.3 in the event that the Company shall fail to issue the stock and a legal action by Director is necessary, the Company shall pay all of Director’s legal fees necessary to recover the Stock.

3.             INDEMNIFICATION/REPRESENTATION. In consideration of Director’s services to the Board, the Company hereby agrees to execute the Indemnification Agreement annexed hereto as Exhibit A.  The Company hereby represents and warrants that to the best of its knowledge, there are no pending or threatened claims against it or its directors.

4.             MISCELLANEOUS.

4.1      Applicable Law.  Except as may be otherwise provided herein, this Agreement shall be governed by and construed in accordance with the laws of the State of New York, applied without reference to principles of conflict of laws.

4.2      Amendments.  This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors or legal representatives.

4.3      Notices.  All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Director: at the address set forth in the first paragraph of this Agreement.

If to the Company:

CMG Holdings, Inc.

333 Hudson Street, Suite 303

New York, New York  10013

With a copy to (which shall not constitute notice):

Ofsink, PLLC

900 Third Avenue, 5th Floor

New York, New York 10022

Attn: Darren Ofsink

Facsimile: 646-224-9844

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notices and communications shall be effective when actually received by the addressee.

4.4      Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and any such provision which is not valid or enforceable in whole shall be enforced to the maximum extent permitted by law.

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4.5      Captions. The captions of this Agreement are not part of the provisions and shall have no force or effect.

4.6      Entire Agreement.  This Agreement contains the entire agreement among the parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect thereto.

4.7      Survivorship.  The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement hereunder to the extent necessary to the intended preservation of such rights and obligations.

4.8      Waiver.  Either Party's failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, or prevent that party thereafter from enforcing each and every other provision of this Agreement.

4.9      Joint Efforts/Counterparts.  Preparation of this Agreement shall be deemed to be the joint effort of the parties hereto and shall not be construed more severely against any party.  This Agreement may be signed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

4.10    Representation by Counsel.   Each Party hereby represents that it has had the opportunity to be represented by legal counsel of its choice in connection with the negotiation and execution of this Agreement.

-- Signature page follows --

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

	CMG Holdings, Inc.
	By:
Name:	Name:
	Title:

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EXHIBIT A

INDEMNIFICATION AGREEMENT

AGREEMENT, dated as of February , 2014, by and between CMG Holdings, Inc.., a Nevada corporation (the “Company”), and [] (the “Indemnitee”).

WHEREAS, the Indemnitee was a director and/or officer of the Company;

WHEREAS, the Indemnitee served as a director and/or officer of the Company, in part, in reliance on indemnity from the Company;

WHEREAS, it is the Company’s intention to provide Indemnitee with not less than the maximum indemnity permissible under Nevada law;

WHEREAS, in consideration of the Indemnitee’s service to the Company, the Company should  assure Indemnitee that  indemnification will be available in the future; and

NOW, THEREFORE, in consideration of the premises and of the Indemnitee continuing to serve the Company directly or, on its behalf or at its request, as an officer, director, manager, member, partner, tax matters partner, fiduciary or trustee of,  or in any other capacity with, another Person (as defined below) or any employee benefit plan, and intending to be legally bound hereby, the parties hereto agree as follows:

1.Certain Definitions. In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement:

(a) Agreement: shall mean this Indemnification Agreement, as amended from time to time hereafter.

(b) Board of Directors: shall mean the Board of Directors of the Company.

(c) Claim: means any threatened, asserted, pending or completed civil, criminal, administrative, investigative or other action, suit or proceeding of any kind whatsoever, including any arbitration or other alternative dispute resolution mechanism, or any appeal of any kind thereof, or any inquiry or investigation, whether instituted by the Company, any governmental agency or any other party, that the Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other, including any arbitration or other alternative dispute resolution mechanism.

(d) Indemnifiable Expenses: means (i) all expenses and liabilities, including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the Company, and counsel fees and disbursements (including, without limitation, experts’ fees, court costs, retainers, transcript fees, duplicating, printing and binding costs, as well as telecommunications, postage and courier charges) paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or participate in, any Claim by reason of the fact that Indemnitee is or was or has agreed to serve as a director, officer, employee or agent of the Company, or while serving as a director or officer of the Company, is or was serving or has agreed to serve on behalf of or at the request of the Company as a director, officer, employee or agent (which, for purposes hereof, shall include a trustee, fiduciary, partner or manager or similar capacity) of another corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in any such capacity, whether occurring before, on or after the date of this Agreement (any such event, an “Indemnifiable Event”), (ii) any liability pursuant to a loan guaranty or otherwise, for any indebtedness of the Company or any subsidiary of the Company, including, without limitation, any indebtedness which the Company or any subsidiary of the Company has assumed or taken subject to, and (iii) any liabilities which an Indemnitee incurs as a result of acting on behalf of the Company (whether as a fiduciary or otherwise) in connection with the operation, administration or maintenance of an employee benefit plan or any related trust or funding mechanism (whether such liabilities are in the form of excise taxes assessed by the United States Internal Revenue Service, penalties assessed by the Department of Labor, restitutions to such a plan or trust or other funding mechanism or to a participant or beneficiary of such plan, trust or other funding mechanism, or otherwise).

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(e) Indemnitee-Related Entities: means any corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise (other than the Company or any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise Indemnitee has agreed, on behalf of the Company or at the Company’s request, to serve as a director, officer, employee or agent and which service is covered by the indemnity described in this Agreement) from whom an Indemnitee may be entitled to indemnification or advancement of expenses with respect to which, in whole or in part, the Company may also have an indemnification or advancement obligation (other than as a result of obligations under an insurance policy).

(f) Jointly Indemnifiable Claim: means any Claim for which the Indemnitee shall be entitled to indemnification from both an Indemnitee-Related Entity and the Company pursuant to applicable law, any indemnification agreement or the certificate of incorporation, by-laws, partnership agreement, operating agreement, certificate of formation, certificate of limited partnership or comparable organizational documents of the Company and an Indemnitee-Related Entity.

(g) Person: means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

2.Basic Indemnification Arrangement; Advancement of Expenses.

(a) In the event that the Indemnitee was, is or becomes subject to, a party to or witness or other participant in, or is threatened to be made subject to, a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify the Indemnitee, or cause such Indemnitee to be indemnified, to the fullest extent permitted by Nevada law in effect on the date hereof and as amended from time to time; provided, however, that no change in Nevada law shall have the effect of reducing the benefits available to the Indemnitee.

(b) If so requested by the Indemnitee, the Company shall advance, or cause to be advanced (within ten business days of such request), any and all Indemnifiable Expenses incurred by the Indemnitee (an “Expense Advance”). The Company shall, in accordance with such request (but without duplication), either (i) pay, or cause to be paid, such Indemnifiable Expenses on behalf of the Indemnitee, or (ii) reimburse, or cause the reimbursement of, the Indemnitee for such Indemnifiable Expenses. The Indemnitee’s right to an Expense Advance is absolute and shall not be subject to any condition that the Board of Directors shall not have determined that the Indemnitee is not entitled to be indemnified under applicable law. However, the obligation of the Company to make an Expense Advance pursuant to this Section 2(b) shall be subject to the condition that, if, when and to the extent that a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that the Indemnitee is not entitled to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by the Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid (it being understood and agreed that the foregoing agreement by the Indemnitee shall be deemed to satisfy any requirement that the Indemnitee provide the Company with an undertaking to repay any Expense Advance if it is ultimately determined that the Indemnitee is not entitled to indemnification under applicable law). The Indemnitee’s undertaking to repay such Expense Advances shall be unsecured and interest-free.

(c) Notwithstanding anything in this Agreement to the contrary, the Indemnitee shall not be entitled to indemnification or advancement of Indemnifiable Expenses pursuant to this Agreement in connection with any Claim initiated by the Indemnitee unless (i) the Company has joined in or the Board of Directors of the Company has authorized or consented to the initiation of such Claim or (ii) the Claim is one to enforce the Indemnitee’s rights under this Agreement (including an action pursued by the Indemnitee to secure a determination that the Indemnitee should be indemnified under applicable law).

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(d) The indemnification obligations of the Company under Section 2(a) shall be subject to the condition that the Board of Directors shall not have determined (by majority vote of directors who are not parties to the applicable Claim) that the indemnification of the Indemnitee is not proper in the circumstances because the Indemnitee is not entitled to be indemnified under applicable law. If the Board of Directors determines that the Indemnitee is not entitled to be indemnified in whole or in part under applicable law, the Indemnitee shall have the right to commence litigation in any court in the States of New York or Nevada having subject matter jurisdiction thereof and in which venue is proper, seeking an initial determination by the court or challenging any such determination by the Board of Directors or any aspect thereof,  including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding. If the Indemnitee commences legal proceedings in a court of competent jurisdiction to secure a determination that the Indemnitee should be indemnified under applicable law, any determination made by the Board of Directors that the Indemnitee is not entitled to be indemnified under applicable law shall not be binding, the Indemnitee shall continue to be entitled to receive Expense Advances, and the Indemnitee shall not be required to reimburse the Company for any Expense Advance, until a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that the Indemnitee is not entitled to be so indemnified under applicable law. Any determination by the Board of Directors otherwise shall be conclusive and binding on the Company and the Indemnitee.

(e) To the extent that the Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, the Indemnitee shall be indemnified against all Indemnifiable Expenses actually and reasonably incurred in connection therewith, notwithstanding an earlier determination by the Board of Directors that the Indemnitee is not entitled to indemnification under applicable law.

3. Indemnification for Additional Expenses. The Company shall indemnify, or cause the indemnification of, the Indemnitee against any and all Indemnifiable Expenses and, if requested by the Indemnitee, shall advance such Indemnifiable Expenses to the Indemnitee subject to and in accordance with Section 2(b) and (d), which are incurred by the Indemnitee in connection with any action brought by the Indemnitee, the Company or any other Person with respect to the Indemnitee’s right to: (i) indemnification or an Expense Advance by the Company under this Agreement or any provision of the Company’s Certificate of Incorporation and/or By-Laws and/or (ii) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether the Indemnitee ultimately is determined to be entitled to such indemnification, Expense Advance or insurance recovery, as the case may be; provided that the Indemnitee shall be required to reimburse such Indemnifiable Expenses in the event that a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that such action brought by the Indemnitee, or the defense by the Indemnitee of an action brought by the Company or any other Person, as applicable, was frivolous or in bad faith.

4. Partial Indemnity, Etc. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Indemnifiable Expenses in respect of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled.

5. Burden of Proof. In connection with any determination by the Board of Directors, any court or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder, the Board of Directors or court shall presume that the Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the burden of proof shall be on the Company or its representative to establish, by clear and convincing evidence, that the Indemnitee is not so entitled.

6. Reliance as Safe Harbor. The Indemnitee shall be entitled to indemnification for any action or omission to act undertaken (a) in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to the Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board of Directors, or by any other Person as to matters the Indemnitee reasonably believes are within such other Person’s professional or expert competence, or (b) on behalf of the Company in furtherance of the interests of the Company in good faith in reliance upon, and in accordance with, the advice of legal counsel or accountants, provided such legal counsel or accountants were selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to the Indemnitee for purposes of determining the right to indemnity hereunder.

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7. No Other Presumptions. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not create a presumption that the Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Board of Directors to have made a determination as to whether the Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Board of Directors that the Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by the Indemnitee to secure a judicial determination that the Indemnitee should be indemnified under applicable law shall be a defense to the Indemnitee’s claim or create a presumption that the Indemnitee has not met any particular standard of conduct or did not have any particular belief.

8. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall be in addition to any other rights the Indemnitee may have under the Company’s Certificate of Incorporation and By-Laws, the laws of the State of Nevada, or otherwise. To the extent that a change in Nevada law or the interpretation thereof (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company’s Certificate of Incorporation and By-Laws, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. To the extent that there is a conflict or inconsistency between the terms of this Agreement and the Company’s Certificate of Incorporation or By-Laws, it is the intent of the parties hereto that the Indemnitee shall enjoy the greater benefits regardless of whether contained herein, in the Company’s Certificate of Incorporation or By-Laws. No amendment or alteration of the Company’s Certificate of Incorporation or By-Laws or any other agreement shall adversely affect the rights provided to Indemnitee under this Agreement.

9. Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against the Indemnitee, the Indemnitee’s spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.

10. Amendments, Etc. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. In the event the Company or any of its subsidiaries enters into an indemnification agreement with another director, officer, agent, fiduciary or manager of the Company or any of its subsidiaries containing a term or terms more favorable to the indemnitee than the terms contained herein (as determined by the Indemnitee), the Indemnitee shall be afforded the benefit of such more favorable term or terms and such more favorable term or terms shall be deemed incorporated by reference herein as if set forth in full herein. As promptly as practicable following the execution by the Company or the relevant subsidiary of each indemnity agreement with any such other director, officer or manager (i) the Company shall send a copy of the indemnity agreement to the Indemnitee, and (ii) if requested by the Indemnitee, the Company shall prepare, execute and deliver to the Indemnitee an amendment to this Agreement containing such more favorable term or terms.

11. Subrogation. Subject to Section 12, in the event of payment by the Company under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee with respect to any insurance policy. Indemnitee shall execute all papers reasonably required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. The Company shall pay or reimburse all expenses actually and reasonably incurred by Indemnitee in connection with such subrogation.

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12. Jointly Indemnifiable Claims. Given that certain Jointly Indemnifiable Claims may arise due to the relationship between the Indemnitee-Related Entities and the Company and the service of the Indemnitee as a director and/or officer of the Company at the request of the Indemnitee-Related Entities, the Company acknowledges and agrees that the Company shall be fully and primarily responsible for the payment to the Indemnitee in respect of indemnification and advancement of expenses in connection with any such Jointly Indemnifiable Claim, pursuant to and in accordance with the terms of this Agreement, irrespective of any right of recovery the Indemnitee may have from the Indemnitee-Related Entities. Under no circumstance shall the Company be entitled to any right of subrogation or contribution by the Indemnitee-Related Entities and no right of recovery the Indemnitee may have from the Indemnitee-Related Entities shall reduce or otherwise alter the rights of the Indemnitee or the obligations of the Company hereunder. In the event that any of the Indemnitee-Related Entities shall make any payment to the Indemnitee in respect of indemnification or advancement of expenses with respect to any Jointly Indemnifiable Claim, the Indemnitee-Related Entity making such payment shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee against the Company, and the Indemnitee shall execute all papers reasonably required and shall do all things that may be reasonably necessary to secure such rights, including the execution of such documents as may be necessary to enable the Indemnitee-Related Entities effectively to bring suit to enforce such rights. Each of the Indemnitee-Related Entities shall be third-party beneficiaries with respect to this Paragraph 13, entitled to enforce this Paragraph 13 against the Company as though each such Indemnitee-Related Entity were a party to this Agreement.

13. No Duplication of Payments. Subject to Paragraph 12 hereof, the Company shall not be liable under this Agreement to make any payment in connection with any Claim made against the Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy, any provision of the Company’s Certificate of Incorporation and By-Laws, or otherwise) of the amounts otherwise indemnifiable hereunder.

14. Defense of Claims. The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event or to assume the defense thereof, with counsel reasonably satisfactory to the Indemnitee; provided that if the Indemnitee believes, after consultation with counsel selected by the Indemnitee, that (i) the use of counsel chosen by the Company to represent the Indemnitee would present such counsel with an actual or potential conflict of interest, (ii) the named parties in any such Claim (including any impleaded parties) include the Company or any subsidiary of the Company and the Indemnitee and the Indemnitee concludes that there may be one or more legal defenses available to him that are different from or in addition to those available to the Company or any subsidiary of the Company or (iii) any such representation by such counsel would be precluded under the applicable standards of professional conduct then prevailing, then the Indemnitee shall be entitled to retain separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any particular Claim) at the Company’s expense. The Company shall not be liable to the Indemnitee under this Agreement for any amounts paid in settlement of any Claim relating to an Indemnifiable Event effected without the Company’s prior written consent. The Company shall not, without the prior written consent of the Indemnitee, effect any settlement of any Claim relating to an Indemnifiable Event which the Indemnitee is or could have been a party unless such settlement solely involves the payment of money and includes a complete and unconditional release of the Indemnitee from all liability on all claims that are the subject matter of such Claim. Neither the Company nor the Indemnitee shall unreasonably withhold its or his consent to any proposed settlement; provided that the Indemnitee may withhold consent to any settlement that does not provide a complete and unconditional release of the Indemnitee. To the fullest extent permitted by Nevada law, the Company’s assumption of the defense of a Claim pursuant to this Section 15 will constitute an irrevocable acknowledgement by the Company that any Indemnifiable Expenses incurred by or for the account of Indemnitee incurred in connection therewith are indemnifiable by the Company under Section 2 of this Agreement.

15. Binding Effect, Etc. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. The Company shall require and cause any successor(s) (whether directly or indirectly, whether in one or a series of transactions, and whether by purchase, merger, consolidation, or otherwise) to all or a significant portion of the business and/or assets of the Company and/or its subsidiaries (on a consolidated basis), by written agreement in form and substance satisfactory to the Indemnitee and his or her counsel, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place; provided that no such assumption shall relieve the Company from its obligations hereunder and any obligations shall thereafter be joint and several. This Agreement shall continue in effect regardless of whether the Indemnitee continues to serve as a director or officer of the Company and/or on behalf of or at the request of the Company as a director, officer, employee or agent (which, for purposes hereof, shall include a trustee, fiduciary, partner or manager or similar capacity) of another corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise. Neither this Agreement nor any duties or responsibilities pursuant hereto may be assigned by the Company to any other person or entity without the prior written consent of the Indemnitee.

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16. Security. To the extent requested by the Indemnitee, the Company shall at any time and from time to time provide security to the Indemnitee for the obligations of the Company hereunder through an irrevocable bank line of credit, funded trust or other collateral or by other means. Any such security, once provided to the Indemnitee, may not be revoked or released without the prior written consent of such Indemnitee.

17. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to the terms of this Agreement.

18. Specific Performance, Etc. The parties recognize that if any provision of this Agreement is violated by the parties hereto, the Indemnitee may be without an adequate remedy at law. Accordingly, in the event of any such violation, the Indemnitee shall be entitled, if the Indemnitee so elects, to institute proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as the Indemnitee may elect to pursue.

19. Notices. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written document delivered in person or sent by telecopy, nationally recognized overnight courier or personal delivery, addressed to such party at the address set forth below or such other address as may hereafter be designated on the signature pages of this Agreement or in writing by such party to the other parties:

(a) If to the Company, to:

with a copy (which shall not constitute notice) to:

(b) If to the Indemnitee, to the address set forth on Annex A hereto.

All such notices, requests, consents and other communications shall be deemed to have been given or made if and when received (including by overnight courier) by the parties at the above addresses or sent by electronic transmission, with confirmation received, to the telecopy numbers specified above (or at such other address or telecopy number for a party as shall be specified by like notice). Any notice delivered by any party hereto to any other party hereto shall also be delivered to each other party hereto simultaneously with delivery to the first party receiving such notice.

20. Counterparts. This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

21. Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.

22. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Nevada applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

CMG HOLDINGS, INC..

By:

Name:

Title:

[Indemnitee]

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Annex A

Name and Business Address.

Attn:

Tel:

Fax:

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EX-10.14

Exhibit 10.14

INDEMNIFICATION AGREEMENT

AGREEMENT, dated as of February 5, 2014, by and between CMG Holdings, Inc., a Nevada corporation (the “Company”), and ______ (the “Indemnitee”).

WHEREAS, the Indemnitee was a director and/or officer of the Company;

WHEREAS, the Indemnitee served as a director and/or officer of the Company, in part, in reliance on indemnity from the Company;

WHEREAS, it is the Company’s intention to provide Indemnitee with not less than the maximum indemnity permissible under Nevada law;

WHEREAS, in consideration of the Indemnitee’s service to the Company, the Company should  assure Indemnitee that  indemnification will be available in the future; and

NOW, THEREFORE, in consideration of the premises and of the Indemnitee continuing to serve the Company directly or, on its behalf or at its request, as an officer, director, manager, member, partner, tax matters partner, fiduciary or trustee of,  or in any other capacity with, another Person (as defined below) or any employee benefit plan, and intending to be legally bound hereby, the parties hereto agree as follows:

1. Certain Definitions. In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement:

(a) Agreement: shall mean this Indemnification Agreement, as amended from time to time hereafter.

(b) Board of Directors: shall mean the Board of Directors of the Company.

(c) Claim: means any threatened, asserted, pending or completed civil, criminal, administrative, investigative or other action, suit or proceeding of any kind whatsoever, including any arbitration or other alternative dispute resolution mechanism, or any appeal of any kind thereof, or any inquiry or investigation, whether instituted by the Company, any governmental agency or any other party, that the Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other, including any arbitration or other alternative dispute resolution mechanism.

(d) Indemnifiable Expenses: means (i) all expenses and liabilities, including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the Company, and counsel fees and disbursements (including, without limitation, experts’ fees, court costs, retainers, transcript fees, duplicating, printing and binding costs, as well as telecommunications, postage and courier charges) paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or participate in, any Claim by reason of the fact that Indemnitee is or was or has agreed to serve as a director, officer, employee or agent of the Company, or while serving as a director or officer of the Company, is or was serving or has agreed to serve on behalf of or at the request of the Company as a director, officer, employee or agent (which, for purposes hereof, shall include a trustee, fiduciary, partner or manager or similar capacity) of another corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in any such capacity, whether occurring before, on or after the date of this Agreement (any such event, an “Indemnifiable Event”), (ii) any liability pursuant to a loan guaranty or otherwise, for any indebtedness of the Company or any subsidiary of the Company, including, without limitation, any indebtedness which the Company or any subsidiary of the Company has assumed or taken subject to, and (iii) any liabilities which an Indemnitee incurs as a result of acting on behalf of the Company (whether as a fiduciary or otherwise) in connection with the operation, administration or maintenance of an employee benefit plan or any related trust or funding mechanism (whether such liabilities are in the form of excise taxes assessed by the United States Internal Revenue Service, penalties assessed by the Department of Labor, restitutions to such a plan or trust or other funding mechanism or to a participant or beneficiary of such plan, trust or other funding mechanism, or otherwise).

(e) Indemnitee-Related Entities: means any corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise (other than the Company or any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise Indemnitee has agreed, on behalf of the Company or at the Company’s request, to serve as a director, officer, employee or agent and which service is covered by the indemnity described in this Agreement) from whom an Indemnitee may be entitled to indemnification or advancement of expenses with respect to which, in whole or in part, the Company may also have an indemnification or advancement obligation (other than as a result of obligations under an insurance policy).

(f) Jointly Indemnifiable Claim: means any Claim for which the Indemnitee shall be entitled to indemnification from both an Indemnitee-Related Entity and the Company pursuant to applicable law, any indemnification agreement or the certificate of incorporation, by-laws, partnership agreement, operating agreement, certificate of formation, certificate of limited partnership or comparable organizational documents of the Company and an Indemnitee-Related Entity.

(g) Person: means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

2. Basic Indemnification Arrangement; Advancement of Expenses.

(a) In the event that the Indemnitee was, is or becomes subject to, a party to or witness or other participant in, or is threatened to be made subject to, a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify the Indemnitee, or cause such Indemnitee to be indemnified, to the fullest extent permitted by Nevada law in effect on the date hereof and as amended from time to time; provided, however, that no change in Nevada law shall have the effect of reducing the benefits available to the Indemnitee.

(b) If so requested by the Indemnitee, the Company shall advance, or cause to be advanced (within ten business days of such request), any and all Indemnifiable Expenses incurred by the Indemnitee (an “Expense Advance”). The Company shall, in accordance with such request (but without duplication), either (i) pay, or cause to be paid, such Indemnifiable Expenses on behalf of the Indemnitee, or (ii) reimburse, or cause the reimbursement of, the Indemnitee for such Indemnifiable Expenses. The Indemnitee’s right to an Expense Advance is absolute and shall not be subject to any condition that the Board of Directors shall not have determined that the Indemnitee is not entitled to be indemnified under applicable law. However, the obligation of the Company to make an Expense Advance pursuant to this Section 2(b) shall be subject to the condition that, if, when and to the extent that a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that the Indemnitee is not entitled to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by the Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid (it being understood and agreed that the foregoing agreement by the Indemnitee shall be deemed to satisfy any requirement that the Indemnitee provide the Company with an undertaking to repay any Expense Advance if it is ultimately determined that the Indemnitee is not entitled to indemnification under applicable law). The Indemnitee’s undertaking to repay such Expense Advances shall be unsecured and interest-free.

(c) Notwithstanding anything in this Agreement to the contrary, the Indemnitee shall not be entitled to indemnification or advancement of Indemnifiable Expenses pursuant to this Agreement in connection with any Claim initiated by the Indemnitee unless (i) the Company has joined in or the Board of Directors of the Company has authorized or consented to the initiation of such Claim or (ii) the Claim is one to enforce the Indemnitee’s rights under this Agreement (including an action pursued by the Indemnitee to secure a determination that the Indemnitee should be indemnified under applicable law).

(d) The indemnification obligations of the Company under Section 2(a) shall be subject to the condition that the Board of Directors shall not have determined (by majority vote of directors who are not parties to the applicable Claim) that the indemnification of the Indemnitee is not proper in the circumstances because the Indemnitee is not entitled to be indemnified under applicable law. If the Board of Directors determines that the Indemnitee is not entitled to be indemnified in whole or in part under applicable law, the Indemnitee shall have the right to commence litigation in any court in the States of New York or Nevada having subject matter jurisdiction thereof and in which venue is proper, seeking an initial determination by the court or challenging any such determination by the Board of Directors or any aspect thereof,  including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding. If the Indemnitee commences legal proceedings in a court of competent jurisdiction to secure a determination that the Indemnitee should be indemnified under applicable law, any determination made by the Board of Directors that the Indemnitee is not entitled to be indemnified under applicable law shall not be binding, the Indemnitee shall continue to be entitled to receive Expense Advances, and the Indemnitee shall not be required to reimburse the Company for any Expense Advance, until a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that the Indemnitee is not entitled to be so indemnified under applicable law. Any determination by the Board of Directors otherwise shall be conclusive and binding on the Company and the Indemnitee.

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(e) To the extent that the Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, the Indemnitee shall be indemnified against all Indemnifiable Expenses actually and reasonably incurred in connection therewith, notwithstanding an earlier determination by the Board of Directors that the Indemnitee is not entitled to indemnification under applicable law.

3. Indemnification for Additional Expenses. The Company shall indemnify, or cause the indemnification of, the Indemnitee against any and all Indemnifiable Expenses and, if requested by the Indemnitee, shall advance such Indemnifiable Expenses to the Indemnitee subject to and in accordance with Section 2(b) and (d), which are incurred by the Indemnitee in connection with any action brought by the Indemnitee, the Company or any other Person with respect to the Indemnitee’s right to: (i) indemnification or an Expense Advance by the Company under this Agreement or any provision of the Company’s Certificate of Incorporation and/or By-Laws and/or (ii) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether the Indemnitee ultimately is determined to be entitled to such indemnification, Expense Advance or insurance recovery, as the case may be; provided that the Indemnitee shall be required to reimburse such Indemnifiable Expenses in the event that a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that such action brought by the Indemnitee, or the defense by the Indemnitee of an action brought by the Company or any other Person, as applicable, was frivolous or in bad faith.

4. Partial Indemnity, Etc. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Indemnifiable Expenses in respect of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled.

5. Burden of Proof. In connection with any determination by the Board of Directors, any court or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder, the Board of Directors or court shall presume that the Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the burden of proof shall be on the Company or its representative to establish, by clear and convincing evidence, that the Indemnitee is not so entitled.

6. Reliance as Safe Harbor. The Indemnitee shall be entitled to indemnification for any action or omission to act undertaken (a) in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to the Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board of Directors, or by any other Person as to matters the Indemnitee reasonably believes are within such other Person’s professional or expert competence, or (b) on behalf of the Company in furtherance of the interests of the Company in good faith in reliance upon, and in accordance with, the advice of legal counsel or accountants, provided such legal counsel or accountants were selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to the Indemnitee for purposes of determining the right to indemnity hereunder.

7. No Other Presumptions. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not create a presumption that the Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Board of Directors to have made a determination as to whether the Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Board of Directors that the Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by the Indemnitee to secure a judicial determination that the Indemnitee should be indemnified under applicable law shall be a defense to the Indemnitee’s claim or create a presumption that the Indemnitee has not met any particular standard of conduct or did not have any particular belief.

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8. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall be in addition to any other rights the Indemnitee may have under the Company’s Certificate of Incorporation and By-Laws, the laws of the State of Nevada, or otherwise. To the extent that a change in Nevada law or the interpretation thereof (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company’s Certificate of Incorporation and By-Laws, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. To the extent that there is a conflict or inconsistency between the terms of this Agreement and the Company’s Certificate of Incorporation or By-Laws, it is the intent of the parties hereto that the Indemnitee shall enjoy the greater benefits regardless of whether contained herein, in the Company’s Certificate of Incorporation or By-Laws. No amendment or alteration of the Company’s Certificate of Incorporation or By-Laws or any other agreement shall adversely affect the rights provided to Indemnitee under this Agreement.

9. Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against the Indemnitee, the Indemnitee’s spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.

10. Amendments, Etc. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. In the event the Company or any of its subsidiaries enters into an indemnification agreement with another director, officer, agent, fiduciary or manager of the Company or any of its subsidiaries containing a term or terms more favorable to the indemnitee than the terms contained herein (as determined by the Indemnitee), the Indemnitee shall be afforded the benefit of such more favorable term or terms and such more favorable term or terms shall be deemed incorporated by reference herein as if set forth in full herein. As promptly as practicable following the execution by the Company or the relevant subsidiary of each indemnity agreement with any such other director, officer or manager (i) the Company shall send a copy of the indemnity agreement to the Indemnitee, and (ii) if requested by the Indemnitee, the Company shall prepare, execute and deliver to the Indemnitee an amendment to this Agreement containing such more favorable term or terms.

11. Subrogation. Subject to Section 12, in the event of payment by the Company under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee with respect to any insurance policy. Indemnitee shall execute all papers reasonably required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. The Company shall pay or reimburse all expenses actually and reasonably incurred by Indemnitee in connection with such subrogation.

12. Jointly Indemnifiable Claims. Given that certain Jointly Indemnifiable Claims may arise due to the relationship between the Indemnitee-Related Entities and the Company and the service of the Indemnitee as a director and/or officer of the Company at the request of the Indemnitee-Related Entities, the Company acknowledges and agrees that the Company shall be fully and primarily responsible for the payment to the Indemnitee in respect of indemnification and advancement of expenses in connection with any such Jointly Indemnifiable Claim, pursuant to and in accordance with the terms of this Agreement, irrespective of any right of recovery the Indemnitee may have from the Indemnitee-Related Entities. Under no circumstance shall the Company be entitled to any right of subrogation or contribution by the Indemnitee-Related Entities and no right of recovery the Indemnitee may have from the Indemnitee-Related Entities shall reduce or otherwise alter the rights of the Indemnitee or the obligations of the Company hereunder. In the event that any of the Indemnitee-Related Entities shall make any payment to the Indemnitee in respect of indemnification or advancement of expenses with respect to any Jointly Indemnifiable Claim, the Indemnitee-Related Entity making such payment shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee against the Company, and the Indemnitee shall execute all papers reasonably required and shall do all things that may be reasonably necessary to secure such rights, including the execution of such documents as may be necessary to enable the Indemnitee-Related Entities effectively to bring suit to enforce such rights. Each of the Indemnitee-Related Entities shall be third-party beneficiaries with respect to this Paragraph 13, entitled to enforce this Paragraph 13 against the Company as though each such Indemnitee-Related Entity were a party to this Agreement.

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13. No Duplication of Payments. Subject to Paragraph 12 hereof, the Company shall not be liable under this Agreement to make any payment in connection with any Claim made against the Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy, any provision of the Company’s Certificate of Incorporation and By-Laws, or otherwise) of the amounts otherwise indemnifiable hereunder.

14. Defense of Claims. The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event or to assume the defense thereof, with counsel reasonably satisfactory to the Indemnitee; provided that if the Indemnitee believes, after consultation with counsel selected by the Indemnitee, that (i) the use of counsel chosen by the Company to represent the Indemnitee would present such counsel with an actual or potential conflict of interest, (ii) the named parties in any such Claim (including any impleaded parties) include the Company or any subsidiary of the Company and the Indemnitee and the Indemnitee concludes that there may be one or more legal defenses available to him that are different from or in addition to those available to the Company or any subsidiary of the Company or (iii) any such representation by such counsel would be precluded under the applicable standards of professional conduct then prevailing, then the Indemnitee shall be entitled to retain separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any particular Claim) at the Company’s expense. The Company shall not be liable to the Indemnitee under this Agreement for any amounts paid in settlement of any Claim relating to an Indemnifiable Event effected without the Company’s prior written consent. The Company shall not, without the prior written consent of the Indemnitee, effect any settlement of any Claim relating to an Indemnifiable Event which the Indemnitee is or could have been a party unless such settlement solely involves the payment of money and includes a complete and unconditional release of the Indemnitee from all liability on all claims that are the subject matter of such Claim. Neither the Company nor the Indemnitee shall unreasonably withhold its or his consent to any proposed settlement; provided that the Indemnitee may withhold consent to any settlement that does not provide a complete and unconditional release of the Indemnitee. To the fullest extent permitted by Nevada law, the Company’s assumption of the defense of a Claim pursuant to this Section 15 will constitute an irrevocable acknowledgement by the Company that any Indemnifiable Expenses incurred by or for the account of Indemnitee incurred in connection therewith are indemnifiable by the Company under Section 2 of this Agreement.

15. Binding Effect, Etc. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. The Company shall require and cause any successor(s) (whether directly or indirectly, whether in one or a series of transactions, and whether by purchase, merger, consolidation, or otherwise) to all or a significant portion of the business and/or assets of the Company and/or its subsidiaries (on a consolidated basis), by written agreement in form and substance satisfactory to the Indemnitee and his or her counsel, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place; provided that no such assumption shall relieve the Company from its obligations hereunder and any obligations shall thereafter be joint and several. This Agreement shall continue in effect regardless of whether the Indemnitee continues to serve as a director or officer of the Company and/or on behalf of or at the request of the Company as a director, officer, employee or agent (which, for purposes hereof, shall include a trustee, fiduciary, partner or manager or similar capacity) of another corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise. Neither this Agreement nor any duties or responsibilities pursuant hereto may be assigned by the Company to any other person or entity without the prior written consent of the Indemnitee.

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16. Security. To the extent requested by the Indemnitee, the Company shall at any time and from time to time provide security to the Indemnitee for the obligations of the Company hereunder through an irrevocable bank line of credit, funded trust or other collateral or by other means. Any such security, once provided to the Indemnitee, may not be revoked or released without the prior written consent of such Indemnitee.

17. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to the terms of this Agreement.

18. Specific Performance, Etc. The parties recognize that if any provision of this Agreement is violated by the parties hereto, the Indemnitee may be without an adequate remedy at law. Accordingly, in the event of any such violation, the Indemnitee shall be entitled, if the Indemnitee so elects, to institute proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as the Indemnitee may elect to pursue.

19. Notices. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written document delivered in person or sent by telecopy, nationally recognized overnight courier or personal delivery, addressed to such party at the address set forth below or such other address as may hereafter be designated on the signature pages of this Agreement or in writing by such party to the other parties:

(a) If to the Company, to:   CMG Holdings, Inc. 333 Hudson Street, Suite 303 New York, New York  10013   With a copy to (which shall not constitute notice): Ofsink, PLLC 900 Third Avenue, 5th Floor New York, New York 10022 Attn: Darren Ofsink Facsimile: 646-224-9844

(b) If to the Indemnitee, to the address set forth on Annex A hereto.

All such notices, requests, consents and other communications shall be deemed to have been given or made if and when received (including by overnight courier) by the parties at the above addresses or sent by electronic transmission, with confirmation received, to the telecopy numbers specified above (or at such other address or telecopy number for a party as shall be specified by like notice). Any notice delivered by any party hereto to any other party hereto shall also be delivered to each other party hereto simultaneously with delivery to the first party receiving such notice.

20. Counterparts. This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

21. Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.

22. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Nevada applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

CMG HOLDINGS, INC..

By:

Name:

Title:

Name

7

Annex A

Name and Business Address.

Attn:

Tel:

Fax:

8

EX-21.1

Exhibit 21.1

As of December 31, 2013, CMG Holdings Group, Inc. (the “Company”) had the following subsidiary:

Name	Jurisdiction	Equity Owners and Percentage of Equity Securities Held
The Experiential Agency, Inc.	Illinois	100% owned by the Company

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Glenn Laken, Chief Executive Officer of CMG Holdings Group, Inc. (the “registrant”), certify that:

1.	I have reviewed this Amendment No.1 to the annual report on Form 10-K/A of the registrant for the period ended December 31, 2013;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  April 15, 2014

/s/ Glenn Laken

Glenn Laken

Chief Executive Officer

(principal executive officer)

EX-31.3

Exhibit 31.3

CERTIFICATION

I, Jeffrey Devlin, Chief Financial Officer of CMG Holdings Group, Inc. (the “registrant”), certify that:

1.	I have reviewed this Amendment No.1 to the annual report on Form 10-K/A of the registrant for the period ended December 31, 2013;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  April 15, 2014

/s/ Jeffrey Devlin

Jeffrey Devlin

Chief Financial Officer

(principal financial officer and accounting officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his capacity as an officer of CMG Holdings Group, Inc. (the “Company”), for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1)    The Company’s Amendment No.1 to the Annual Report on Form 10-K/A for the period ended December 31, 2013  (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  April 15, 2014

/s/ Glenn Laken

Glenn Laken

Chief Executive Officer

(principal executive officer)

/s/ Jeffrey Devlin

Jeffrey Devlin

Chief Financial Officer

(principal financial officer and accounting officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Related Party Transactions (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Related Party Transaction (Textual)
Accounts payable to a former officer and director		$ 19,625
Accrued expenses	593,710	325,674
Service Agreements [Member]
Related Party Transaction (Textual)
Capital contribution as forgiveness of a total amount		39,532
Accrued expenses		670,730
CEO [Member]
Related Party Transaction (Textual)
Accounts payable to a former officer and director	47,912	27,280
Fees of consulting firm	$ 142,060	$ 151,245

XML

Equity (Details) (Warrant [Member], USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding and Exercisable Beginning balance	1,798,000	1,798,000
Granted
Exercised
Outstanding and Exercisable Ending balance	1,798,000	1,798,000
Weighted average Exercise Price Beginning balance	$ 0.28	$ 0.28
Weighted average Exercise Price Granted
Weighted average Exercise Price Exercised
Weighted average Exercise Price Ending balance	$ 0.28	$ 0.28

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies [Abstract]

Schedule of future minimum lease payments

Year ending December 31, 2013
2014	$	191,137
2015		196,805
2016		202,572
2018		208,440
2019		141,784
After		214,205

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Resignation of Chief Executive Officer and Chairman of the Board (Details) (USD $)	12 Months Ended		1 Months Ended				1 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Jun. 30, 2013 Alan Morell [Member]	Sep. 26, 2012 Alan Morell [Member]	Dec. 31, 2013 Alan Morell [Member]	Dec. 31, 2012 Alan Morell [Member]	Sep. 26, 2012 Alan Morrell 2 [Member]
Short-term Debt [Line Items]
Convertible promissory note, value				$ 525,000	$ 0	$ 637,000	$ 112,000
Debt instrument, stated percentage				2.00%			2.00%
Debt instrument, maturity date				Apr. 26, 2014			Apr. 04, 2013
Debt conversion, description				The notes became convertible at $0.04 and $0.06, respectively, as of November 15, 2012.
Share issued for debt conversion			2,800,000
Debt instrument, repayment			637,000
Gain (loss) on extinguishment of debt	$ 793,732	$ 75,618	$ 610,400

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Derivative Liabilities (Details Textual) (USD $)	1 Months Ended	12 Months Ended
	Mar. 31, 2010	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011 Warrant A [Member]	Dec. 31, 2011 Warrant B [Member]
Derrivative Liabilities (Textual)
Derivative Liabilities		$ 98,097	$ 721,590
Notes Payable		0	138,820
(Gain) loss on derivatives		(210,810)	404,688
Fair value of embedded derivative liabilities		11,121	145,970
Number of warrants issued to individuals				774,000	774,000
Fair value all warrants outstanding		1,811	12,007
Gain (loss) related to warrant		10,196	333
Risk free interest rate, minimum		0.06%
Risk free interest rate, maximum		0.13%
Expected dividend		0.00%
Expected volatility rate, maximum		239.00%
Expected volatility rate, minimum		55.00%
Notes payable convertible reclassified from equity		9,240,920	0
Reclassified deivative liabilities to equity		$ 0	$ 1,213,271
Stock Issued During Period, Shares, New Issues	250,000
Warrants exercise price	0.07%
Remaining contractual term of warrants	5 years

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Equity

12 Months Ended

Dec. 31, 2013

Equity [Abstract]

EQUITY

NOTE 3 - EQUITY

Preferred Stock

Series B Preferred Stock and Inventory Purchase

On March 31, 2011 the Company acquired 20,000 cartoon animated cels (the “Cel Art”) from Continental Investments Group, Inc. (the “Agreement”). The Company issued 50,000 shares of its Series B Convertible Preferred Stock to Continental Investments Group, Inc. as consideration for the Cel Art, such shares of Series B Convertible Preferred Stock having a stated value per share of $100. The Cel Art consists of collectible, hand-painted cartoon animation cels. The shares of Series B Preferred Stock are convertible into common shares of the Company at the stated value of $100 per share divided by the volume weighted average trading price for the 30 days prior to conversion. The preferred shares are non-voting and do not receive dividends. The Company determined the fair value of the preferred stock to be $3,240,502 on the acquisition date based on the number of shares of common stock the preferred shares could be converted into and the market price of the common stock on the agreement date. The cartoon animated cels are valued at the lower of cost or market. As of December 31, 2011, Management wrote down the inventory to zero. The Company also analyzed the embedded conversion option for derivative accounting consideration under ASC 815-15 and determined that the conversion option should be classified as equity.  During the year ended December 31, 2011, the Company determined that due to uncertainties related to future sales of the Cel Art, the entire balance should be reserved as of December 31, 2011.

During August 2013, the Company entered into a Termination Agreement and Release (the “Agreement”) with Continental Investments Group (Continental), the holder of a $85,000 convertible note payable of the Company and the holder of 2,500,000 shares of restricted common stock.  The Agreement calls for the termination and cancellation of a Sale and Purchase agreement, whereby the Company agreed to issue 50,000 shares of Series B Convertible Preferred Stock in exchange for 20,000 cartoon animated Cels. The Agreement also calls for the cancellation of the $85,000 convertible note and related interest and for Continental to return the 2,500,000 shares of restricted common stock.

Series A Preferred Stock Issuance and Rescission

On March 31, 2011 the Company approved the issuance of 51 shares of preferred stock designated as Series A Convertible Preferred Stock (the “Series A Preferred Stock”) to three officers of the Company in consideration for the officers forgiving $300,000 of accrued salaries. Each share of Series A Preferred Stock is convertible into 1% of the Company’s common stock. The number of votes for the Series A Preferred Stock shall be the same number as the amount of shares of Common Stock that would be issued upon conversion. The Series A Preferred Stock is not entitled to dividends or preference upon liquidation. On May 16, 2011 the Company rescinded the above agreement with an effective date of March 31, 2011. There are no shares of Series A Preferred Stock issued or outstanding as December 31, 2013 or 2012.

Common Stock

Shares Issued for Conversion of Debt

During the year ended December 31, 2012 the Company issued 145,989,360 shares of common stock to convert $755,007 of notes payable and accrued interest.  See also Note 4.

On April 25, 2013, the Company issued 4,285,714 shares of common stock to convert $15,000 of the convertible promissory note that was issued to Asher Enterprises, Inc. on October 16, 2012. See also Note 4.

During June 2013, the Company issued 2,800,000 shares of common stock to settle a $637,000 note payable, resulting in a gain on settlement of debt of $610,400.

Shares Issued for Services

During the year ended December 31, 2012, the Company engaged several consultants to perform services and issued 14,150,000 shares as compensation for services, recognizing $194,100 in expense during the year ended December 31, 2012.

Shares Issued Related to Debt

On June 5, 2012, the Company issued 2,000,000 restricted common shares to modify the terms of a convertible note. A fee for debt servicing of $17,800 was recorded for the issuance of these shares during the year ended December 31, 2012.

In August 2012, the Company issued 1,100,000, 1,000,000 and 5,000,000 restricted common shares in exchange for an extension of the maturity date on the note owed to CMGO Investors, LLC. As the note was extinguished on August 17, 2012 as a part of the sale of AudioEye, a loss on debt extinguishment of $173,550 was recorded for the issuance of these shares during the year ended December 31, 2012.

On September 7, 2012, the Company issued 600,000 restricted common shares in conjunction with two convertible notes. A debt discount was recorded of $11,486 for the relative fair value of the shares.  Amortization of the debt discount to interest expense totaled $5,663 during the year ended December 31, 2012.

During August 2013, the Company entered into a Termination Agreement and Release (the “Agreement”) with Continental Investments Group (Continental), the holder of a $85,000 convertible note payable of the Company and the holder of 2,500,000 shares of restricted common stock.  The Agreement called for the termination and cancellation of a Sale and Purchase agreement, whereby the Company agreed to issue 50,000 shares of Series B Convertible Preferred Stock in exchange for 20,000 cartoon animated Cels. The Agreement also called for the cancellation of the $85,000 convertible note and related interest and for Continental to return the 2,500,000 shares of restricted common stock and 50,000 shares of Series B Convertible Preferred Stock, valued at par of $2,550. This resulted in a gain on settlement of debt of $85,000.

Common Stock Warrants

During 2011, eight individuals purchased 3,870,000 shares of common stock, 774,000 A Warrants and 774,000 B Warrants for $217,000.  A total of 574,000 and 200,000 A Warrants are exercisable at a strike price of $0.25 and $0.10, respectively for three years; 574,000 and 200,000 B Warrants are exercisable at a strike price of $0.50 and $0.20, respectively for three years. The Company can call each of the Warrants after twelve months if the price of the Common Shares of the Company in the Market is 150% of the Warrant strike price for 10 consecutive days.

During March 31, 2010, 250,000 shares of warrants issued to AudioEye at an exercise price of $0.07 per share and a term of 5 years. See Note 5 for additional information on the derivative liability.

A summary of warrant activity for year ended December 31, 2013 and 2012 is as follows:

	Outstanding and Exercisable		Weighted average Exercise Price
December 31, 2011		1,798,000	$	0.28
Granted		-		-
Exercised		-		-
December 31, 2012		1,798,000	$	0.28
Granted		-		-
Exercised		-		-
December 31, 2013		1,798,000	$	0.28

As of December 31, 2013, the warrants have a weighted average remaining life of 0.53 years with $0 aggregate intrinsic value.

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Commitments and Contingencies (Details) (USD $)	Dec. 31, 2013
Commitments and Contingencies [Abstract]
2014	$ 191,137
2015	196,805
2016	202,572
2018	208,440
2019	141,784
After	$ 214,205

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Sale of Audio Eye, Inc. and Discontinued Operations (Details) (USD $)	12 Months Ended
	Dec. 31, 2012
Summary of gain recorded for sale
Repayment of CMGO Debt	$ 1,075,000
Accrued Interest on CMGO Debt	203,590
Shares of AudioEye, Inc. Retained	268,750
Net Assets of AudioEye, Inc. Sold	2,792,224
Gain on Sale	$ 4,339,654

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Description of Business and Summary of Significant Accounting Policies (Details Textual) (USD $)	0 Months Ended	12 Months Ended				0 Months Ended		0 Months Ended
	Jun. 22, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2013 Sales Revenue, Goods, Net [Member]	Dec. 31, 2012 Sales Revenue, Goods, Net [Member]	May 27, 2008 Pebble Beach Enterprises, Inc [Member]	Feb. 20, 2008 Pebble Beach Enterprises, Inc [Member]	Jun. 22, 2011 Audio Eye Inc [Member]	Jun. 22, 2011 Audio Eye Acquisition Corp [Member]
Percentage of equity interest acquired							92.60%
Number of shares issued to acquire						22,135,148
Percentage of stock issued for exchange of stock								80.00%	100.00%
Retained percentage of transfer restrictions	15.00%
Percentage of dividends distributed	5.00%
Insured amount in each financial institution, Federal Deposit Insurance Corporation		$ 250,000
Insured amount, Securities Investor Protection Corporation		500,000
Concentration risk, percentage		10.00%	10.00%	72.00%	64.00%
Concentration risk, customer		One
Allowance for doubtful accounts receivable		0	0
Depreciation		0	0
Property, plant and equipment, estimated useful lives		Three and five years
Intangible Asset, useful life		3 years
Amortization of Intangible Assets		0	74,580
Proceeds from sale of stocks		573,022
Proceeds from sale of options		$ 85,000

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Commitments and Contingencies (Details Textual)	12 Months Ended
	Dec. 31, 2013
Chicago [Member]
Commitments And Contingencies (Textual)
Lease expiration date	Mar. 31, 2021
New York [Member]
Commitments And Contingencies (Textual)
Lease expiration date	May 31, 2018
Lease renewal term	5 years

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Sale of Audio Eye, Inc. and Discontinued Operations (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Summary of operating result for discontinued operations
Revenues		$ (95,736)
Cost of revenues		198,568
Depreciation and amortization expense		2,078
Operating expenses		398,825
Operating Loss		503,735
Unrealized gain on marketable securities		24,000
Interest Expense		(61,733)
Net Loss from discontinued operations		$ 3,798,056

XML

Sale of Audio Eye, Inc. and Discontinued Operations (Details 2) (USD $)	Dec. 31, 2013	Aug. 17, 2012
Summary of asset and liabilities of discontinued operations
Cash	$ 27,425	$ 4,841
Receivables	10,901	47,429
Receivables - related party	13,125	15,250
Investments	18,000	42,000
Property and Equipment	6,000	7,688
Total assets of discontinued operations	75,451	117,208
Accounts payable and accrued liabilities	828,407	1,195,622
Deferred income	12,308	114,378
Short term debt	72,900	24,000
Long term debt	1,245,843	1,351,640
Total liabilities of discontinued operations	$ 2,159,458	$ 2,685,640

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Sale of Audio Eye, Inc. and Discontinued Operations

12 Months Ended

Dec. 31, 2013

Sale of Audio Eye, Inc. and Discontinued Operations [Abstract]

SALE OF AUDIO EYE, INC. AND DISCONTINUED OPERATIONS

NOTE 2 - SALE OF AUDIO EYE, INC. AND DISCONTINUED OPERATIONS

On August 17, 2012 the Company sold its subsidiary Audio Eye, Inc.  The Company will retain 15% of AudioEye, Inc. subject to transfer restrictions in accordance with the Agreement. The Company will distribute to its shareholders, in the form of a dividend, 5% of the capital stock of AudioEye, Inc. AudioEye, Inc. has finalized a Royalty Agreement with the Company to pay to the Company 10% of cash received from income earned, settlements or judgments directly resulting from, AudioEye Inc’s patent enforcement and licensing strategy.  Additionally, AudioEye, Inc. has finalized a Consulting Services Agreement with the Company whereby the Company will receive a commission of not less than 7.5% of all revenues received by AudioEye, Inc. after the closing date from all business, clients or other sources of revenue procured by the Company or its employees, officers or subsidiaries and directed to AudioEye, Inc. and 10% of net revenues obtained from a third party described in the agreement.

On August 21, 2012, the board of directors of the Company declared October 26, 2012 as the record date for the dividend of 5% of Audio Eye, Inc. stock.  The dividend was paid to the shareholders of record as of the close of business on October 26, 2012 and issued March 22, 2013, when AudioEye completed its registration process and issued the shares to the Company.

As consideration for the sale, the purchaser repaid $1,075,000 of debt previously owed by CMG to the CMGO Investors group.  As a result of the sale of AudioEye, the net assets of AudioEye and the related accrued interest of $203,590 were written off during the year ended December 31, 2012. In addition, the Company is currently holding AudioEye shares with a fair value of $764,088. A gain of $4,339,654 was recorded for the sale of AudioEye for the year ended December 31, 2012 as follows:

Repayment of CMGO Debt	$	1,075,000
Accrued Interest on CMGO Debt		203,590
Shares of AudioEye, Inc. Retained		268,750
Net Assets of AudioEye, Inc. Sold		2,792,224
	$	4,339,654

As a result of the sale of AudioEye, the Company has segregated its operating results and presented them separately as discontinued operations for all periods presented. The results of operations for the year ended December 31, 2012 only reflect activity of AudioEye until the finalization of the sale on August 17, 2012.

A summarized operating result for discontinued operations is as follows:

	For the Year Ended December 31,
	2013		2012
Revenues	$	-	$	(95,736	)
Cost of revenues		-		198,568
Depreciation and amortization expense		-		2,078
Operating expenses		-		398,825
Operating Loss				503,735
Unrealized gain on marketable securities		-		24,000
Interest Expense		-		(61,733	)
Net Loss from discontinued operations	$	-	$	541,508

Summary of asset and liabilities of discontinued operations is as follows:

	August 17,   2012		December 31, 2012
Cash	$	4,841	$	27,425
Receivables		47,429		10,901
Receivables - related party		15,250		13,125
Investments		42,000		18,000
Property and Equipment		7,688		6,000
Total assets of discontinued operations	$	117,208	$	75,451
Accounts payable and accrued liabilities		1,195,622		828,407
Deferred income		114,378		12,308
Short term debt		24,000		72,900
Long term debt		1,351,640		1,245,843
Total liabilities of discontinued operations	$	2,685,640	$	2,159,458

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Sale of Audio Eye, Inc. and Discontinued Operations (Details Textual) (USD $)	1 Months Ended	12 Months Ended
	Aug. 17, 2012	Dec. 31, 2012
Sale of Audio Eye, Inc. and Discontinued Operations [Abstract]
Discontinued operation sales percentage	15.00%
Dividend rate, percentage	5.00%
Percentage of income earned and settlement	10.00%
Percentage of commission received	7.50%
Revenues obtained from third party described in agreement, percentage	10.00%
Repayments of Debt		$ 1,075,000
Debt instrument, accrued interest		203,590
Debt instrument, fair value		764,088
Gain on sale		$ 4,339,654

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Segments (Details)	12 Months Ended
	Dec. 31, 2013 Segment	Dec. 31, 2012 Segment
Segments [Abstract]
Number of Reportable Segments	1	3

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Consolidated Balance Sheets (USD $)	Dec. 31, 2013	Dec. 31, 2012
CURRENT ASSETS:
Cash	$ 476,588	$ 238,124
Marketable securities	764,088	274,651
Accounts receivable, net of allowance of $0 and $0, respectively	287,094	252,567
Other current assets	8,400	15,000
Total Current Assets	1,536,170	780,342
Other noncurrent assets	60,078	57,833
TOTAL ASSETS	1,596,248	838,175
CURRENT LIABILITIES:
Accounts payable	627,695	546,852
Accounts payable - related party		19,625
Deferred compensation	486,875	396,875
Accrued liabilities	593,710	325,674
Deferred income	13,370	13,370
Derivative liabilities	11,121	145,970
Short term debt, net of unamortized discount of $0 and $0, respectively	9,943	150,431
Total Current Liabilities	1,742,714	1,598,797
COMMITMENTS AND CONTINGENCIES
Notes Payable, net of debt discount of $0 and $7,739, respectively		629,261
TOTAL LIABILITIES	1,742,714	2,228,058
STOCKHOLDERS' DEFICIT
Common Stock:450,000,000 shares authorized, par value $.001 per share; 283,657,190 and 294,650,743 shares issued and outstanding	283,657	294,614
Additional paid in capital	14,529,751	14,469,341
Treasury Stock, 37,174 and 37,174 shares held, respectively, at cost of -0-, as of December 31, 2013 and 2012.	0	37
Accumulated deficit	(14,959,874)	(16,153,925)
TOTAL STOCKHOLDERS' DEFICIT	(146,466)	(1,389,883)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	1,596,248	838,175
Series A Preferred Stock [Member]
STOCKHOLDERS' DEFICIT
Preferred stock:
Series B Preferred Stock [Member]
STOCKHOLDERS' DEFICIT
Preferred stock:		$ 50

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Subsequent Events (Details) (USD $)	1 Months Ended			0 Months Ended	1 Months Ended
	Mar. 31, 2010	Dec. 31, 2013	Dec. 31, 2012	Apr. 09, 2014 Subsequent Event [Member]	Mar. 28, 2014 Subsequent Event [Member]	Jan. 28, 2014 Subsequent Event [Member]
Subsequent Event (Textual)
Date of acquisition of Good Gaming Inc					Mar. 28, 2014
Percentage of interest acquired					100.00%
Description of business acqusition					Pursuant to the SEA, for 100% of the shares of GGI, CMG paid: 5,000,000 shares of its $0.001 par value per share common stock, $33,000 in equipment and consultant compensation and a commitment to pay $200,000 in development costs, of which $50,000 had been advanced by the Company.
Shares issued for acquisitions					5,000,000
Shares issued business acquiistions par value		$ 0.001	$ 0.001		$ 0.001
Equipment and consultant compensation expense					$ 33,000
Business davelopment costs					200,000
Business davelopment costs paid in advance					50,000
Net profit sharing percentage					30.00%
Proceeds from sale of GGI or its assets sharing percentage					30.00%
Contingent claim amount					250,661
Sale of common stock	250,000					1,500,000
Proceeds from sale of common stock						$ 15,000
Stock issued to consultant for investor relation services				522,000

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Consolidated Statement of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income from continuing operations	$ 1,194,051	$ 2,236,317
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Gain on recovery of bad debt		(36,250)
Amortization of deferred financing costs		19,879
Amortization of debt discount	152,848	784,409
Shares issued for services		194,100
Gain on sale of subsidiary		(4,339,564)
Gain on forgiveness of accounts payable and accrued liabilities		(1,441,762)
Amortization of intangible assets		74,580
(Gain) loss on derivatives	(210,180)	547,318
Gain (loss) on extinguishment of debt	(793,732)	(75,618)
Realized gain on trading securities	(524,668)
Unrealized gain on trading securities	(622,769)
Changes in:
Increase in accounts receivable	(34,527)	(144,698)
Increase (decrease) in prepaid expense and other current assets	4,334	(18,727)
Increase in deferred income		(202,995)
Increase in accrued liabilities	456,368	2,031,216
Increase in accounts payable	80,043	(35,102)
Decrease in accounts payable, related party	(19,625)	(162,925)
Net cash provided by (used in) operating activities	(317,057)	(569,822)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of trading securities	658,021
Cash paid transferred upon sale of Audio Eye, Inc.		(4,841)
Net cash provided by (used in) investing activities	658,021	(4,841)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on related parties debt		(37,000)
Advances from related parties		9,704
Proceeds from issuance of debt	104,500	70,000
Proceeds from related party debt		415,640
Capital contributions		21,104
Payments on debt	(207,000)
Net change in line of credit		(4,440)
Net cash (used in) provided by financing activities	(102,500)	475,008
Net increase in cash	238,124	(99,655)
Cash, beginning of period	238,124	337,779
Cash, end of period	476,588	238,124
Supplemental cash flow information:
Interest paid	87,273	4,675
Non-cash investing and financing activity:
Discount on shares issued with notes payable	98,097	11,486
Reclassification of accrued liabilities into debt		545,000
Reclassification of accounts payable to short term debt		522,943
Reclassification of short term debt to accounts payable		13,000
Discount on notes payable from derivative liability		636,902
Reclassification of derivative liabilities to additional paid-in capital		1,211,795
Conversion of debt to equity		$ 755,007

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Notes Payable (Details) (USD $)	12 Months Ended		1 Months Ended	0 Months Ended	12 Months Ended		0 Months Ended	12 Months Ended		0 Months Ended	12 Months Ended			0 Months Ended	12 Months Ended	0 Months Ended		12 Months Ended	0 Months Ended	12 Months Ended	0 Months Ended	12 Months Ended	0 Months Ended	12 Months Ended				0 Months Ended	1 Months Ended	12 Months Ended	1 Months Ended	12 Months Ended	1 Months Ended	0 Months Ended		1 Months Ended	12 Months Ended		1 Months Ended		12 Months Ended		1 Months Ended		12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	May 20, 2013 Asher Enterprises, Inc. [Member]	Oct. 16, 2012 Asher Enterprises, Inc. [Member]	Dec. 31, 2013 Asher Enterprises, Inc. [Member]	Dec. 31, 2012 Asher Enterprises, Inc. [Member]	May 12, 2012 Paul Sherman Agreement [Member]	Dec. 31, 2013 Paul Sherman Agreement [Member]	Dec. 31, 2012 Paul Sherman Agreement [Member]	Sep. 07, 2012 Continental Equities, LLC [Member]	Dec. 31, 2013 Continental Equities, LLC [Member]	Dec. 31, 2013 Continental Equities, LLC 2 [Member]	Sep. 07, 2012 Continental Equities, LLC 2 [Member]	Jan. 05, 2012 Hudson Capital Advisors, Inc. [Member]	Dec. 31, 2012 Hudson Capital Advisors, Inc. [Member]	Feb. 10, 2012 Braeden Storm Enterprises, Inc. [Member]	Jan. 05, 2012 Braeden Storm Enterprises, Inc. [Member]	Dec. 31, 2012 Braeden Storm Enterprises, Inc. [Member]	Jan. 05, 2012 Martin Boyle [Member]	Dec. 31, 2012 Martin Boyle [Member]	Jan. 08, 2012 Scott Baily [Member]	Dec. 31, 2012 Scott Baily [Member]	Jan. 04, 2012 Grassy Knolls, LLC [Member]	Dec. 31, 2012 Grassy Knolls, LLC [Member]	Dec. 31, 2010 CMGO Investors, LLC [Member]	Dec. 31, 2012 Aware Capital Consultants Inc. [Member]	Dec. 31, 2011 Aware Capital Consultants Inc. [Member]	Apr. 11, 2012 Magna Group LLC. [Member]	Oct. 17, 2011 Magna Group LLC. [Member]	Dec. 31, 2012 Magna Group LLC. [Member]	Oct. 17, 2011 Hanover Holdings, LLC and Seymour Flicks [Member]	Dec. 31, 2012 Hanover Holdings, LLC and Seymour Flicks [Member]	Oct. 17, 2011 Hanover Holdings, LLC and Seymour Flicks 2 [Member]	May 03, 2011 Connied, Inc. [Member]	Apr. 11, 2011 Connied, Inc. [Member]	Aug. 31, 2013 Connied, Inc. [Member]	Dec. 31, 2013 Connied, Inc. [Member]	Dec. 31, 2012 Connied, Inc. [Member]	Jun. 30, 2013 Alan Morell [Member]	Sep. 26, 2012 Alan Morell [Member]	Dec. 31, 2013 Alan Morell [Member]	Dec. 31, 2012 Alan Morell [Member]	Sep. 26, 2012 Alan Morrell 2 [Member]	Apr. 29, 2013 Infinite Alpha [Member]	Dec. 31, 2013 Infinite Alpha [Member]
Notes Payable (Textual)
Convertible promissory note, value			$ 53,000	$ 32,500			$ 9,943	$ 9,943	$ 9,943	$ 50,000			$ 20,000	$ 100,000		$ 56,000	$ 90,000		$ 35,000		$ 60,000		$ 72,000		$ 1,075,000		$ 15,000	$ 50,000	$ 148,000		$ 50,000		$ 34,040	$ 85,000	$ 135,000		$ 0	$ 85,000		$ 525,000	$ 0	$ 637,000	$ 112,000	$ 51,500
Debt instrument, stated percentage			8.00%	8.00%			2.00%			12.00%			12.00%	2.00%		10.00%	2.00%		2.00%		2.00%		2.00%		13.00%			10.00%	10.00%				10.00%	20.00%	50.00%					2.00%			2.00%	20.00%
Debt instrument, maturity date			Feb. 24, 2014	Jul. 18, 2013			May 15, 2013			May 15, 2013				Jan. 05, 2013		Apr. 15, 2013	Jan. 06, 2013		Jan. 08, 2013		Jan. 05, 2013		Jan. 04, 2013		Oct. 01, 2011			Apr. 13, 2013	Oct. 17, 2012				Jun. 05, 2013	May 02, 2013						Apr. 26, 2014			Apr. 04, 2013
Debt instrument, increased interest rate			22.00%	22.00%
Debt conversion, description			The note is convertible at 58% of the average of the lowest trading prices for the Company's common stock during the ten trading day period prior to the conversion date after 180 days.	The note is convertible at 50% of the average of the lowest three trading prices for the Company's common stock during the ten trading day period prior to the conversion date after 180 days.			The convertible promissory note is convertible at a price equal to the close price on the day prior to Paul Sherman's request for conversion, but not to go below $.001.							The new note was convertible at the lowest trading price in the three days prior to the day that Hudson requests conversion, with a floor of $.01.		The new note was convertible at 50% of the lowest trading price in the three days prior to the day that Braeden requests conversion.	The new note was convertible at the lowest trading price in the three days prior to the day that Braeden requests conversion, with a floor of $.01.		The new convertible debenture note was convertible at the lowest trading price in the three days prior to the day Martin Boyle requests conversion, with a floor of $.01.		The new convertible debenture note was convertible at the lowest trading price in the three days prior to the day that Scott Baily requests conversion, with a floor of $.01.		The new convertible debenture note was convertible at the lowest trading price in the three days prior to the day that Grassy Knolls requests conversion, with a floor of $.01.					The convertible promissory note bore interest at 10%, was due on April 13, 2013 and was convertible at 58% of the lowest trading price in the three days prior to the conversion date.	The convertible promissory note bore interest at 10%, was due on October 17, 2012 and was convertible at 58% of the lowest trading price in the three days prior to the conversion date.				The new convertible promissory of $34,040 bore interest at 10%, was due June 5, 2013 and was convertible at a 42% discount of the lowest trading price for the Company's common stock during the three trading day period prior to the conversion date, with a floor of $0.009.		The new note was convertible at 50% of the average of the five lowest closing prices for the Company's stock during the previous 30 trading days.	The Agreement calls for the termination and cancellation of a Sale and Purchase agreement, whereby the Company agreed to issue 50,000 shares of Series B Convertible Preferred Stock in exchange for 20,000 cartoon animated Cels. The Agreement also calls for the cancellation of the $85,000 convertible note and related interest and the Continental to return the 2,500,000 shares of restricted common stock and 50,000 shares of Series B Convertible Preferred Stock, valued at par of $2,550.				The notes became convertible at $0.04 and $0.06, respectively, as of November 15, 2012.
Debt conversion price																																								$ 0.06			$ 0.04
Debt discount	0	0	58,180	2,500	0	1,809	8,875	0	3,376					87,614			79,254		30,667		52,685		70,375		6,509						34,375		34,040		85,000		0	34,170		27,573	0	7,739
Debt instrument, accrued interest		203,590		32,500	18,023																										25,000													10,250	98,332
Debt interest, penalties		5,663		10,000							34,000
Amortization of interest expense					34,309			3,376							87,614	56,000		79,254		30,667		52,685		70,375		9,136		50,000		70,470		68,415					34,170				7,739				152,848
Debt instrument, repayment					53,000						50,000	20,000																											637,000					51,500
Share issued for debt conversion																									7,100,000											2,500,000			2,800,000
Gain (loss) on extinguishment of debt	$ 793,732	$ 75,618																							$ (173,550)						$ (7,451)					$ 85,000			$ 610,400						$ 793,732

XML

Sale of Audio Eye, Inc. and Discontinued Operations (Tables)

12 Months Ended

Dec. 31, 2013

Sale of Audio Eye, Inc. and Discontinued Operations [Abstract]

Summary of gain recorded for sale

Repayment of CMGO Debt	$	1,075,000
Accrued Interest on CMGO Debt		203,590
Shares of AudioEye, Inc. Retained		268,750
Net Assets of AudioEye, Inc. Sold		2,792,224
	$	4,339,654

Summary of operating result for discontinued operations

	For the Year Ended December 31,
	2013		2012
Revenues	$	-	$	(95,736	)
Cost of revenues		-		198,568
Depreciation and amortization expense		-		2,078
Operating expenses		-		398,825
Operating Loss				503,735
Unrealized gain on marketable securities		-		24,000
Interest Expense		-		(61,733	)
Net Loss from discontinued operations	$	-	$	541,508

Summary of asset and liabilities of discontinued operations

	August 17,   2012		December 31, 2012
Cash	$	4,841	$	27,425
Receivables		47,429		10,901
Receivables - related party		15,250		13,125
Investments		42,000		18,000
Property and Equipment		7,688		6,000
Total assets of discontinued operations	$	117,208	$	75,451
Accounts payable and accrued liabilities		1,195,622		828,407
Deferred income		114,378		12,308
Short term debt		24,000		72,900
Long term debt		1,351,640		1,245,843
Total liabilities of discontinued operations	$	2,685,640	$	2,159,458

XML

Derivative Liabilities (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Derivative Liabilities [Abstract]
Derivative Liabilities, Begining balance	$ 145,970	$ 444,150
ASC 815-15 additions	98,097	721,590
Change in fair value	(210,180)	192,025
ASC 815-15 deletions	(22,766)	(1,211,795)
Derivative Liabilities, Ending balance	$ 11,121	$ 145,970

XML

Derivative Liabilities (Tables)

12 Months Ended

Dec. 31, 2013

Derivative Liabilities [Abstract]

Summary of derivative liabilities included in the consolidated balance sheet

Derivative Liabilities
Balance at December 31, 2011	$	444,150
ASC 815-15 additions		721,590
Change in fair value		192,025
ASC 815-15 deletions		(1,211,795	)
Balance at December 30, 2012		145,970
ASC 815-15 additions		98,097
Change in fair value		(152,720	)
ASC 815-15 deletions		(80,226	)
Balance at December 30, 2013	$	11,121

XML

Description of Business and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Description of Business and Summary of Significant Accounting Policies [Abstract]

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activity

Creative Management Group, Inc. was formed in Delaware on August 13, 2002 as a limited liability company named Creative Management Group, LLC. On August 7, 2007, this entity converted to a corporation and changed its legal name to Creative Management Group Inc.  The Company is a sports, entertainment, marketing and management company providing event management implementation, sponsorships, licensing and broadcast, production and syndication.

On February 20, 2008, Creative Management Group, Inc. formed CMG Acquisitions, Inc., a Delaware company, for the purpose of acquiring companies and expansion strategies. On February 20, 2008, Creative Management Group, Inc. acquired 92.6% of Pebble Beach Enterprises, Inc. (a publicly traded company) and changed the name to CMG Holdings Group, Inc. (“the Company”). The purpose of the acquisition was to effect a reverse merger with Pebble Beach Enterprises, Inc. at a later date. On May 27, 2008, Pebble Beach entered into an Agreement and Plan of Reorganization with its controlling shareholder, Creative Management Group, Inc., a privately held Delaware corporation. Upon closing the eighty shareholders of Creative Management Group delivered all of their equity interests in Creative Management Group to Pebble Beach in exchange for shares of common stock in Pebble Beach owned by Creative Management Group, as a result of which Creative Management Group became a wholly-owned subsidiary of Pebble Beach. The shareholders of Creative Management Group received one share of Pebble Beach’s common stock previously owned by Creative Management Group for each issued and outstanding common share owned of Creative Management Group. As a result, the 22,135,148 shares of Pebble Beach that were issued and previously owned by Creative Management Group, are now owned directly by its shareholders. The 22,135,148 shares of Creative Management Group previously owned by its shareholders are now owned by Pebble Beach, thereby making Creative Management Group a wholly-owned subsidiary of Pebble Beach. Pebble Beach did not issue any new shares as part of the Reorganization. The transaction was accounted for as a reverse merger and recapitalization whereby Creative Management Group is the accounting acquirer. Pebble Beach was renamed CMG Holdings Group, Inc.

On April 1, 2009, the Company, through a newly formed wholly owned subsidiary CMGO Capital, Inc., a Nevada corporation, completed the acquisition of XA The Experiential Agency, Inc. On March 31, 2010, the Company and AudioEye, Inc. (“AudioEye”) completed the final Stock Purchase Agreement under which the Company acquired all of the outstanding capital stock of AudioEye. On June 22, 2011 the Company entered into a Master Agreement subject to shareholder approval as may be required under applicable law and subject to closing conditions with AudioEye Acquisition Corp., a Nevada corporation where the shareholders of AudioEye Acquisition Corp. exchanged 100% of the stock in AudioEye Acquisition Corp for 80% of the capital stock of AudioEye. The Company retained 15% of AudioEye subject to transfer restrictions in accordance with the Master Agreement; on October 2012, the Company distributed to its shareholders, in the form of a dividend, 5% of the capital stock of AudioEye in accordance with provisions of the Master Agreement.

Principles of Consolidation

The consolidated financial statements include the accounts of CMG Holdings Group, Inc., CMG Acquisition, Inc., CMGO Capital, Inc., XA The Experiential Agency, Inc. ("XA"), CMGO Logistics, Inc., USaveCT and USaveNJ, after elimination of all significant inter-company accounts and transactions.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 revenues and expenses during the period reported. Estimates are used when accounting for allowance for doubtful accounts, depreciation, and contingencies. Actual results could differ from those estimates.

Concentrations of Risk

The Company maintains its cash balances at two financial institutions where they are insured by the Federal Deposit Insurance Corporation up to $250,000 each. At December 31, 2013 and 2012, neither of these accounts was in excess of the limit. The Company also maintains a money market investment account at one securities firm where the account is insured by the Securities Investor Protection Corporation up to $500,000 for the bankruptcy, etc., of the securities firm. At December 31, 2013 and 2012, the account had no balance in excess of the limit. For the years ended December 31, 2013 and 2012, one customer exceeds 10% of the Company’s total revenue, representing 72% and 64% of the Company’s total revenues during the year ended December 31, 2013 and 2012, respectively.

Revenue and Cost Recognition

The Company earns revenues by providing event management services under individually negotiated contracts with varying terms, recognizing revenue in accordance with ASC 605, Revenue Recognition, only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the services have been provided and collectability is assured.   In arrangements where key indicators suggest the Company acts as principal, the Company records the gross amount billed to the client as revenue and the related costs incurred as operating expenses as the services are provided.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are amounts due from event management services, are unsecured and are carried at their estimated collectible amounts. Credit is generally extended on a short-term basis and do not bear interest, although a finance charge may be applied to amounts outstanding more than thirty days. Accounts receivable are periodically evaluated for collectability based on past credit history with clients. Provisions for losses on accounts receivable are determined on the basis of loss experience, known and inherent risk in the account balance and current economic conditions.  There were no allowances for doubtful accounts as of December 31, 2013 or 2012.

Share-Based Compensation

The Company accounts for share-based compensation to employees in accordance with Accounting Standards Codification subtopic 718-10, Stock Compensation (“ASC 718-10”) and share-based compensation to non-employees in accordance with ASC 505-50 Accounting for Equity Instruments Issued to Non-Employees for Acquiring, or in Conjunction with Selling, Goods or Services. ASC 718-10 and 505-50 require the measurement and recognition of compensation expense for all share-based payment awards, including stock options based on the estimated fair values.

Derivative Instruments

The Company accounts for derivative instruments in accordance with ASC Topic 815, Derivatives and Hedging, and all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet.

The Company uses estimates of fair value to value its 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, the Company’s 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 the Company’s 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, The Company seeks to validate the model’s output to market transactions. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820, Fair Value Measurements (ASC 820), based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with maturity of three months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the respective assets, which is generally between three and five years. Depreciation expense was $0 and $0 for the years ended December 31, 2013 and December 31, 2012, respectively.

Intangible Assets

Intangible assets are stated at cost, net of accumulated amortization. Amortization is computed using the straight-line method over the estimated useful life of the respective asset, which is three years. Amortization expense was $0 and $74,580 for the years ended December 31, 2013 and December 31, 2012, respectively.

Income Taxes

The Company accounts for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Basic and Diluted Net Loss per Share

The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Fair Value Measurements

ASC 820 and ASC 825, Financial Instruments (ASC 825), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The Company’s financial instruments consist principally of cash, accounts receivable, accounts payable and accrued liabilities. Pursuant to ASC 820 and 825, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

The following table sets forth by level with the fair value hierarchy the Company’s financial assets and liabilities measured at fair value on December 31, 2013 and 2012:

December 31, 2013	Level 1		Level 2		Level 3		Total
Marketable trading securities	$	764,088	$	-	$	-	$	764,088
Derivative Liabilities	$	-	$	-	$	11,121	$	11,121
December 31, 2012	Level 1		Level 2		Level 3		Total
Marketable trading securities	$	3,000	$	-	$	-	$	3,000
Derivative Liabilities	$	-	$	-	$	444,150	$	444,150

Investments in Debt and Equity Securities

The Company applies the provisions of Accounting Standards Codification 320, Investments – Debt and Equity Securities, regarding marketable securities. The Company invests in securities that are intended to be bought and held principally for the purpose of selling them in the near term, and as a result, classifies such investments as trading securities. Trading securities are recorded at fair value on the balance sheet with changes in fair value being reflected as unrealized gains or losses in the current period. In addition, the Company classifies the cash flows from purchases, sales, and maturities of trading securities as cash flows from operating activities.

Details of the Company's marketable trading securities as of December 31, 2013 and 2012 are as follows:

	2013		2012
Aggregate fair value	$	764,088	$	3,000
Gross unrealized holding gains		622,769		-
Proceeds from sales ($573,022 stocks plus $85,000 options)	$	658,021	$	-
Gross realized gains (stocks and options)		524,668		-
Gross realized losses		-		-
Other than temporary impairment		-		-

Discontinued Operations

In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations, we reported the results of our subsidiary, AudioEye Inc., as a discontinued operation. The application of ASC 205-20 is discussed in Note 2 below.

XML

Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Allowance for Doubtful Accounts Receivable	$ 0	$ 0
Debt Instrument, Net of Unamortized Discount	0	0
Notes Payable, Net of Debt Discount	0	7,739
Common Stock, Shares Authorized	450,000,000	450,000,000
Common Stock, Par Value	$ 0.001	$ 0.001
Common Stock, Shares, Issued	283,657,190	294,650,743
Common Stock, Shares, Outstanding	283,657,190	294,650,743
Treasury Stock, Number of Shares Held	37,174	37,174
Treasury Stock, Cost	$ 0	$ 0
Series A Preferred Stock [Member]
Preferred Stock, Shares Authorized	5,000,000	5,000,000
Preferred stock, Par Value	$ 0.001	$ 0.001
Preferred stock, shares issued
Preferred stock, shares outstanding
Series B Preferred Stock [Member]
Preferred Stock, Shares Authorized	5,000,000	5,000,000
Preferred stock, Par Value	$ 0.001	$ 0.001
Preferred stock, shares issued	0	50,000
Preferred stock, shares outstanding	0	50,000

XML

Going Concern

12 Months Ended

Dec. 31, 2013

Going Concern [Abstract]

GOING CONCERN

NOTE 11- GOING CONCERN

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.

The Company has a working capital deficit and has generated recurring net losses. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders and the ability of the Company to obtain necessary equity or debt financing to continue and expand operations.

These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These factors raise substantial doubt regarding the ability of the Company to continue as a going concern.

Besides ongoing revenues from continuing operations, the Company may need to raise additional funds to expand operations to the point at which the Company can achieve profitability.

XML

Document and Entity Information (USD $)

12 Months Ended

Dec. 31, 2013

Apr. 15, 2014

Jun. 30, 2013

Document and Entity Information:

Entity Registrant Name

CMG Holdings Group, Inc.

Document Type

10-K

Document Period End Date

Dec. 31, 2013

Amendment Flag

true

Amendment Description

Explanatory Note

The purpose of this Amendment No. 1 to CMG Holdings Group, Inc. (the “Company”) Annual Report on Form 10-K/A for the year ended December 31, 2013 is to amend and replace the Annual Report on Form 10-K which was submitted by the Company's EDGAR filing service without the Company's knowledge or consent due to an administrative error by such EDGAR filing service.

Entity Central Index Key

0001346655

Current Fiscal Year End Date

--12-31

Entity Filer Category

Smaller Reporting Company

Entity Current Reporting Status

No

Entity Voluntary Filers

No

Entity Well-known Seasoned Issuer

No

Document Fiscal Year Focus

2013

Document Fiscal Period Focus

FY

Entity Common Stock, Shares Outstanding

290,716,364

Entity Public Float

$ 3,756,498

XML

Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 12 - COMMITMENTS AND CONTINGENCIES

The Company subsidiary rents office space for its office at Chicago and New York. The lease expires in March 31, 2021 for its Chicago office.  During 2013, the Company renewed a five year lease expiring May 31, 2018 for its New York office.  Future minimum lease payments under the two operating lease are as follows:

Year ending December 31, 2013
2014	$	191,137
2015		196,805
2016		202,572
2018		208,440
2019		141,784
After		214,205

Except as discussed above in Note 6, The Company is not the subject of any pending legal proceedings and, to the knowledge of management; no proceedings are presently contemplated against the Company by any federal, state or local governmental agency.

XML

Consolidated Statement of Operations (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Consolidated Statement of Operations
Revenues	$ 7,413,796	$ 8,125,196
Operating Expenses:
Cost of revenues	5,296,280	5,792,283
Depreciation and amortization expense		74,850
Gain on bad debt recovery		(36,250)
General and administrative expenses	2,875,363	3,923,919
Total Operating Expenses	8,171,643	9,754,802
Operating Loss	(757,847)	(1,629,606)
Other Income (Expense):
Gain on extinguishment and forgiveness of liability	793,732	1,441,762
Gain (loss) on derivative liability	210,180	(547,318)
Gain (loss) on extinguishment of debt		75,618
Realized gain on marketable securities	524,668
Unrealized gain on marketable securities	622,769
Other income	56,394	5,721
Interest expense	(255,845)	(907,916)
Total Other Income (Expense)	1,951,898	67,867
Income (loss) from continuing operations	1,194,051	(1,561,739)
Discontinued Operations:
Loss from discontinued operations		(541,508)
Gain on sale of discontinued operations		4,339,564
Total income (loss) discontinued operations		3,798,056
Net Income	$ 1,194,051	$ 2,236,317
Basic income (loss) per common share for continuing operations	$ 0.00	$ (0.01)
Basic income per common share for discontinued operations	$ 0.00	$ 0.02
Total basic income per common share	$ 0.00	$ 0.01
Diluted loss per share for continued operations	$ 0.00	$ (0.01)
Diluted income (loss) per common share for discontinued operations	$ 0.00	$ 0.01
Total diluted income per common share	$ 0.00	$ 0.00
Basic weighted average common shares outstanding	289,674,514	237,199,982
Diluted weighted average common shares outstanding	290,668,814	237,199,982

XML

Legal Proceedings

12 Months Ended

Dec. 31, 2013

Legal Proceedings [Abstract]

LEGAL PROCEEDINGS

NOTE 6 - LEGAL PROCEEDINGS

We are subject to certain claims and litigation in the ordinary course of business. It is the opinion of management that the outcome of such matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

On April 21, 2011, the Company was served with a lawsuit that was filed in Clark County, Nevada against the Company by A to Z Holdings, LLC and seven other individuals or entities. The complaint alleges, among other things, that the Company’s Board of Directors did not have the power to designate series A and B preferred stock without amending the articles of incorporation. The complaint also alleges any such amendment would require shareholder approval and filing of a proxy statement. On April 20, 2012, the Company settled with A to Z Holdings, LLC and seven other individuals or entities for $10,000.

On July 6, 2011, the Company was served with a lawsuit filed in the Circuit Court for the County of Multnomah, Oregon. The complaint alleges breach of contract and entitlement to consulting fees from the Company. The Company disagrees with the allegations contained in the Complaint and intends to vigorously defend the matter and otherwise enforce its rights with respect to the matter. The Company has retained counsel and is prepared to defend this lawsuit. The Company believes that the claims are frivolous pursuant to the terms of the contract. The case was settled on September 28, 2012 for $30,000. The Company has accrued for this liability as of December 31, 2013 and 2012.

On March 28, 2014 we received a letter from a former Chief Executive Officer of our subsidiary, XA, claiming unpaid severance and paid- time-off. Total of the contingent claim amounted to $250,661.  We are currently in the process to settle the claim.

XML

Derivative Liabilities

12 Months Ended

Dec. 31, 2013

Derivative Liabilities [Abstract]

DERIVATIVE LIABILITIES

NOTE 5 - DERIVATIVE LIABILITIES

The Company has various convertible instruments outstanding more fully described in Note 4.  Because the number of shares to be issued upon settlement cannot be determined under these instruments, the Company cannot determine whether it will have sufficient authorized shares at a given date to settle any other of its share-settleable instruments. As a result, under ASC 815-15 “Derivatives and Hedging”, all other share-settleable instruments must be classified as liabilities.

Embedded Derivative Liabilities in Convertible Notes

During the years ended December 31, 2013 and 2012, the Company recognized new derivative liabilities of $98,097 and $721,590, respectively, as a result of new convertible debt issuances.  The fair value of these derivative liabilities exceeded the principal balance of the related notes payable by $0 and $138,820 for the years ended December 31, 2013 and 2012, respectively.  As a result of conversion of notes payable described in Note 4, the Company reclassified $9,240,920 and $0 from equity and $0 and $1,213,271 of derivative liabilities to equity during the years ended December 31, 2013 and 2012, respectively.  The Company recognized ($210,810) and $404,688 as a (gain) loss on derivatives due to change in fair value of the liability during the year ended December 31, 2013 and 2012, respectively. The fair value of the Company’s embedded derivative liabilities was $11,121 and $145,970 at December 31, 2013 and 2012, respectively

Warrants

During 2011, 774,000 A Warrants and 774,000 B warrants were issued to individuals. The Company determined that the instruments embedded in the warrants should be classified as liabilities.  During March 31, 2010, 250,000 shares of warrants issued to AudioEye at an exercise price of $0.07 per share and a term of 5 years.

Under ASC 815-15, the liabilities were subsequently measured at fair value at the end of each reporting period with the change in fair value recorded to earnings. The fair value of all outstanding warrants as of December 31, 2013 and 2012 was $1,811 and $12,007, respectively.  The Company recognized a gain of $10,196 and loss of $333 related to the warrants for the years ended December 31, 2013 and 2012, respectively.

The following table summarizes the derivative liabilities included in the consolidated balance sheet:

Derivative Liabilities
Balance at December 31, 2011	$	444,150
ASC 815-15 additions		721,590
Change in fair value		192,025
ASC 815-15 deletions		(1,211,795	)
Balance at December 30, 2012		145,970
ASC 815-15 additions		98,097
Change in fair value		(210,180	)
ASC 815-15 deletions		(22,766	)
Balance at December 30, 2013	$	11,121

The Company values its warrant derivatives and all other share settable instrument using the Black-Scholes option pricing model. Assumption used include (1) 0.06% to 0.13% risk-free interest rate, (2) life is the remaining contractual life of the instrument (3) expected volatility 55% to 239%, (4) zero expected dividends, (5) exercise price as set forth in the agreements, (6) common stock price of the underlying share on the valuation date, and (7) number of shares to be issued if the instrument is converted.

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Equity (Tables)

12 Months Ended

Dec. 31, 2013

Equity [Abstract]

Summary of warrant activity

	Outstanding and Exercisable		Weighted average Exercise Price
December 31, 2011		1,798,000	$	0.28
Granted		-		-
Exercised		-		-
December 31, 2012		1,798,000	$	0.28
Granted		-		-
Exercised		-		-
December 31, 2013		1,798,000	$	0.28

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Subsequent Events

12 Months Ended

Dec. 31, 2013

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 13 - SUBSEQUENT EVENTS

On March 28, 2014, CMG Holdings, Inc. (the “Company” or “CMG”), completed its acquisition of 100% of the shares of Good Gaming, Inc. (“GGI”) by entering into a Share Exchange Agreement (the “SEA”) with BMB Financial, Inc. and Jackie Beckford, GGI’s shareholders. The owner of BMB Financial, Inc. is also the owner of Infinite Alpha, Inc. which provides consulting services to CMG. Pursuant to the SEA, for 100% of the shares of GGI, CMG paid: 5,000,000 shares of its $0.001 par value per share common stock, $33,000 in equipment and consultant compensation and a commitment to pay $200,000 in development costs, of which $50,000 had been advanced by the Company. In addition, the SEA calls for CMG to adopt an incentive plan for GGI pursuant to which the GGI officers, directors and employees are to receive up to 30% of the net profits of GGI and up to 30% of the proceeds of any sale of GGI or its assets.

On March 28, 2014 we received a letter from a former CEO of our subsidiary, XA, claiming unpaid severance and paid- time- off . Total of the contingent claim amounted to $250, 661. We are currently in the process to settle the claim.

On January 28, 2014, we sold a total of 1,500,000 shares of Common Stock to an investor for gross proceeds of $15,000.

On April 9, 2014, we issued a total of 522,000 shares of Common Stock to a consult for investor relation services to be performed pursuant to a Consulting Agreement, dated June 13, 2012.

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Sale of Creative Management of Delaware, Inc.

12 Months Ended

Dec. 31, 2013

Sale Of Creative Management [Abstract]

SALE OF CREATIVE MANAGEMENT OF DELAWARE, INC.

NOTE 9 - SALE OF CREATIVE MANAGEMENT OF DELAWARE, INC.

On June 25, 2012, the Company, as a result of desiring to exit from the talent management business, sold its wholly owned subsidiary Creative Management of Delaware, Inc. (formerly Creative Management Group, Inc.) to Creative Management Global, Inc. pursuant to a Stock Purchase Agreement. The Purchase Price of this Agreement calls for Creative Management Global, Inc. to pay to the Company as consideration for the shares of Creative Management of Delaware, Inc., a royalty payment and deferred payment. The royalty payment is effective as of the closing of this agreement and for a period of nineteen (19) months of 10% of cash or other payment received as gross revenues less direct costs earned. The remainder of the purchase price, following payment of the royalty payments, will consist of a final payment to the Company by Creative Management Global, Inc. in the amount of One Hundred Thirty Three Thousand ($133,000). The final payment will be paid after Creative Management Global, Inc. year-end 2013 financial statements are completed and audited by an independent accounting firm and will reflect the total company gross revenues less direct costs for the years 2012, and 2013. No assets have been sold in this transaction and, as a result, no gain was recorded on the sale of this subsidiary.

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Related Party Transactions

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 7 - RELATED PARTY TRANSACTIONS

The Company had outstanding accounts payable to a former officer and director who was a related party at December 31, 2012 of $19,625. The payables represent legal and administrative fees paid on behalf of the Company.  These payables were settled during the year ended December 31, 2013.

During December 2012, the Company entered into a Mutual Separation Agreement and General Release (“Separation Agreements”) with former officers and directors of the Company, James Ennis, CEO and Chairman, and Michael Vandetty, Chief Legal Counsel and Director.  The Separation Agreements provide for the termination of the former officers employment agreements and waiver of the employment agreement severance clauses as well as forgiveness of a total of $39,532 in accrued expenses and $670,730 in accrued salary due the former officers.  The forgiven amounts due were recorded as contributions of capital during the year ended December 31, 2012.

One of Company’s subsidiaries has business trade payable due to a consulting firm which is controlled by its former CEO. The payable for $47,912 and $27,280 is included in account payable as of December 31, 2013 and 2012, respectively.  Total amount billed to the Company from the consulting firm is $142,060 and $151,245 for the year ended 2013 and 2012, respectively.

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Segments

12 Months Ended

Dec. 31, 2013

Segments [Abstract]

SEGMENTS

NOTE 8 - SEGMENTS

The Company had one reportable segment during the year ended December 31, 2013, event marketing, and three reportable segments during the year ended December 31, 2012, event marketing, talent management and consulting services. During the year ended December 31, 2012, the Company discontinued the talent management and consulting services segments (see Notes 9 and 2, respectively) and has one remaining segment, event marketing, at December 31, 2013 and 2012.

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Resignation of Chief Executive Officer and Chairman of The Board.

12 Months Ended

Dec. 31, 2013

Resignation Of Chief Exective Officer And Chairman Of The Board [Abstract]

RESIGNATION OF CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD

NOTE 10 – RESIGNATION OF CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD.

On September 26, 2012, Alan Morell officially resigned as Chief Executive Officer and Director of the Company. In conjunction with the resignation, Mr. Morell was issued a convertible note for $525,000 representing the amount of accrued salary owed to him by the company up to the date of resignation and assumed all obligations related to a Smith Barney Credit Line that was secured by Mr. Morell’s security accounts and issued another convertible note to Morell for $112,000. The notes bore interest at 2% and were due on April 26, 2014. The notes were convertible beginning on November 15, 2012 at a conversion price of $0.06 per share. During June 2013, the Company issued 2,800,000 shares of common stock to settle the notes totaling $637,000, resulting in a gain on settlement of debt of $610,400.

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Equity (Details Textual) (USD $)	1 Months Ended	12 Months Ended		0 Months Ended		1 Months Ended										1 Months Ended				1 Months Ended	12 Months Ended
	Mar. 31, 2010	Dec. 31, 2013	Dec. 31, 2012	Sep. 07, 2012 Restricted Stock [Member]	Jun. 05, 2012 Restricted Stock [Member]	Aug. 31, 2012 Restricted Stock [Member]	Aug. 31, 2012 Restricted Stock [Member] Restricted Shares Issuance Plan One [Member]	Aug. 31, 2012 Restricted Stock [Member] Restricted Shares Issuance Plan Two [Member]	Aug. 31, 2012 Restricted Stock [Member] Restricted Shares Issuance Plan Three [Member]	Apr. 25, 2013 Asher Enterprises, Inc. [Member]	Aug. 31, 2013 Continental Investments Group, Inc [Member]	Dec. 31, 2011 Continental Investments Group, Inc [Member]	Mar. 31, 2011 Continental Investments Group, Inc [Member] CelArt	Dec. 31, 2013 Series A Preferred Stock [Member]	Dec. 31, 2012 Series A Preferred Stock [Member]	Mar. 31, 2011 Series A Preferred Stock [Member] Three Officers [Member] Officer	Dec. 31, 2013 Series B Preferred Stock [Member]	Aug. 31, 2013 Series B Preferred Stock [Member]	Dec. 31, 2012 Series B Preferred Stock [Member]	Mar. 31, 2011 Series B Preferred Stock [Member] Continental Investments Group, Inc [Member]	Dec. 31, 2013 Common Stock [Member]	Dec. 31, 2012 Common Stock [Member]	Dec. 31, 2011 Common Stock [Member] Individuals [Member] Individuals	Dec. 31, 2013 Warrant [Member]	Dec. 31, 2012 Warrant [Member]	Dec. 31, 2011 Warrant [Member] Individuals [Member]	Dec. 31, 2011 A Warrants [Member] Individuals [Member]	Dec. 31, 2011 B Warrants [Member] Individuals [Member]
Class of Stock [Line Items]
Number of acquired cartoon animated cels													20,000
Stock issued during period of acquisition, shares																				50,000
Preferred stock, Par Value														$ 0.001	$ 0.001		$ 0.001	$ 2,550	$ 0.001	$ 100
Stock issued during period of acquisition																				$ 3,240,502
Preferred stock conversion term																Each share of Series A Preferred Stock is convertible into 1% of the Company's common stock.				The shares of Series B Preferred Stock are convertible into common shares of the Company at the stated value of $100 per share divided by the volume weighted average trading price for the 30 days prior to conversion.
Inventory write down												0
Restricted common stock											2,500,000
Convertible notes payable											85,000
Number of officers																3
Restricted stock cancelled											2,500,000
Convertible note cancellation											85,000
Convertible shares issued																51
Accrued Salaries																300,000
Preferred stock, shares issued																	0		50,000
Preferred stock, shares outstanding																	0		50,000
Debt conversion, converted instrument, amount				11,486	17,800	173,550				15,000											637,000	755,007
Share issued for debt conversion				600,000	2,000,000		1,100,000	1,000,000	5,000,000	4,285,714											2,800,000	145,989,360
Gain on settlement of debt		793,732	75,618
Shares issued for services			(194,100)																			14,150
Shares issued for services, shares																						14,150,000
Debt interest expense			5,663
Stock issued warrants	250,000																				2,800,000	145,989,360	3,870,000				774,000	774,000
Stock issued warrants value		26,600	755,007																		2,800	145,952	217,000
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Exercised																										574,000	200,000	200,000
Exercisable price minimum																											$ 0.10	$ 0.20
Exercisable price maximum																											$ 0.25	$ 0.50
Weighted average remaining contractual term																								6 months 11 days
Warrants aggregate intrinsic value																								$ 0
Warrant exercise price description																							The Company can call each of the Warrants after twelve months if the price of the Common Shares of the Company in the Market is 150% of the Warrant strike price for 10 consecutive days.
Number of individuals																							8
Warrants exercise price	0.07%
Remaining contractual term of warrants	5 years

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Description of Business and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2013

Description of Business and Summary of Significant Accounting Policies [Abstract]

Schedule of fair value hierarchy of financial assets and liabilities

December 31, 2013	Level 1		Level 2		Level 3		Total
Marketable trading securities	$	764,088	$	-	$	-	$	764,088
Derivative Liabilities	$	-	$	-	$	11,121	$	11,121
December 31, 2012	Level 1		Level 2		Level 3		Total
Marketable trading securities	$	3,000	$	-	$	-	$	3,000
Derivative Liabilities	$	-	$	-	$	444,150	$	444,150

Schedule of marketable trading securities

	2013		2012
Aggregate fair value	$	764,088	$	3,000
Gross unrealized holding gains		622,769		-
Proceeds from sales ($573,022 stocks plus $85,000 options)	$	658,021	$	-
Gross realized gains (stocks and options)		524,668		-
Gross realized losses		-		-
Other than temporary impairment		-		-

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Description of Business and Summary of Significant Accounting Policies (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Marketable securities	$ 764,088	$ 3,000
Derivative liabilities	11,121	145,970	444,150
Level 1
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Marketable securities	764,088	3,000
Derivative liabilities
Level 2
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Marketable securities
Derivative liabilities
Level 3
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Marketable securities
Derivative liabilities	$ 11,121	$ 444,150

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Sale of Creative Management of Delaware, Inc. (Details) (USD $)	1 Months Ended
	Jun. 25, 2012
Sale Of Creative Management [Abstract]
Royalty Expense	$ (133,000)
Descriptions of royalty payment	The royalty payment is effective as of the closing of this agreement and for a period of nineteen (19) months of 10% of cash or other payment received as gross revenues less direct costs earned.

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Consolidated Statement of Change in Shareholders' Deficit (USD $)	Total	Preferred Stock	Treasury Stock	Common Stock	Additional Paid in Capital	Accumulated Deficit
Beginning Balance at Dec. 31, 2011	$ (6,011,079)	$ 50	$ 37	$ 124,812	$ 12,254,301	$ (18,390,242)
Beginning Balance, shares at Dec. 31, 2011		50,000	37,174	124,811,383
Shares issued for services	(194,100)			14,150	179,950
Shares issued for services, shares				14,150,000
Shares issued for debt	755,007			145,952	609,055
Shares issued for debt, shares				145,989,360
Shares issued for debt modification	173,550			7,100	166,450
Shares issued for debt modification, shares				7,100,000
Shares issued for debt inducement	11,486			600	10,886
Shares issued for debt inducement, shares				600,000
Shares issued for debt modification	17,800			2,000	15,800
Shares issued for debt modification, shares				2,000,000
Loss on debt settlement of derivative liabilities through conversion of related notes payable	1,211,795				1,211,795
Net income	2,236,317					2,236,317
Ending Balance at Dec. 31, 2012	(1,389,883)	50	37	294,614	14,469,341	(16,281,125)
Ending Balance, shares at Dec. 31, 2012		50,000	37,174	294,650,743
Cancellation of preferred and common stock from settlement agreement with Continental		(50)		(18,079)	18,129
Cancellation of preferred and common stock from settlement agreement with Continental, shares		(50,000)		(18,079,267)
Shares issued for debt	26,600			2,800	23,800
Shares issued for debt, shares				2,800,000
Shares issued for debt modification	22,766			4,285	18,481
Shares issued for debt modification, shares				4,285,714
Net income	1,194,051					1,194,051
Ending Balance at Dec. 31, 2013	$ (146,466)		$ 37	$ 283,620	$ 14,529,751	$ (14,959,874)
Ending Balance, shares at Dec. 31, 2013			37,174	283,657,190

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Notes Payable

12 Months Ended

Dec. 31, 2013

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 4 - NOTES PAYABLE

Asher Enterprises, Inc.

On October 16, 2012 the Company issued a convertible promissory note for $32,500 to Asher. The convertible promissory note bears interest at 8% and is due on July 18, 2013 and any amount not paid by July 18, 2013 will incur a 22% interest rate. The note is convertible at 50% of the average of the lowest three trading prices for the Company’s common stock during the ten trading day period prior to the conversion date after 180 days. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 and determined that the instrument should be classified as liabilities once the conversion option becomes effective after 180 days due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

In conjunction with the issuance of the promissory note, $2,500 was recorded as debt discount. The discount is being amortized over the term of the note to interest expense. During April 2013, the Company paid off the $32,500 note and accrued interest and penalties of $10,000.  The discount balance was $0 and $1,809 as of December 31, 2013 and 2012, respectively.  Amortization of $34,309 was recognized as interest expense during the year ended December 31, 2013.

On May 20, 2013 the Company issued a convertible promissory note for $53,000 to Asher. The convertible promissory note bears interest at 8% and is due on February 24, 2014 and any amount not paid by the due date will incur a 22% interest rate. The note is convertible at 58% of the average of the lowest trading prices for the Company’s common stock during the ten trading day period prior to the conversion date after 180 days. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as liabilities once the conversion option becomes effective after 180 days due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

During December 2013, the Company paid off the $53,000 note and accrued interest of $18,023.  

Paul Sherman Agreement

On May 12, 2012, the Company modified its July 24, 2011 agreement with Paul Sherman into a $9,943 convertible promissory note bearing interest at 2% and due on May 15, 2013. The convertible promissory note is convertible at a price equal to the close price on the day prior to Paul Sherman’s request for conversion, but not to go below $.001. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a discount of $8,875 on the date of the note. The discount is being amortized over the term of the note to interest expense. The discount balance was $0 and $3,376 as of December 31, 2013 and 2012, respectively.  Amortization of $3,376 was recognized as interest expense as of December 31, 2013. The convertible promissory note has an outstanding balance of $9,943 and $9,943 as of December 31, 2013 and 2012, respectively.

Continental Equities, LLC

On September 7, 2012 the Company issued a convertible promissory note for $50,000 to Continental Equities, LLC (“Continental”) for the assignment of an equivalent amount of the Company’s account payable to Continental. The convertible promissory note bears interest at 12% and was due on May 15, 2013.  During December 2013, the Company paid off the $50,000 note and accrued interest and penalties of $34,000.  

On September 7, 2012 the Company issued a convertible promissory note for $20,000 to Continental Equities, LLC for the assignment of an equivalent amount of the Company’s accrued interest to Continental. The convertible promissory note bore interest at 12%. During May 2013, a related party entity paid the $20,000 convertible promissory note plus accrued interest in full.

Hudson Capital Advisors, Inc.

On January 5, 2012, the Company modified its July 11, 2011 agreement with Hudson Capital Advisors, Inc. (“Hudson”) into a $100,000 convertible debenture note bearing interest at 2% due on January 5, 2013. The new note was convertible at the lowest trading price in the three days prior to the day that Hudson requests conversion, with a floor of $.01. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a discount of $87,614 on the date of the note. See Note 5 for additional information on the derivative liability. The entire principal balance was converted into common stock and the entire discount of $87,614 was amortized to interest expense during the year ended December 31, 2012.

Braeden Storm Enterprises, Inc.

On January 5, 2012, the Company modified its July 6, 2011 agreement with Braeden Storm Enterprises, Inc. (“Braeden”) into a $90,000 convertible debenture note bearing interest at 2% due on January 6, 2013. The new note was convertible at the lowest trading price in the three days prior to the day that Braeden requests conversion, with a floor of $.01. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a discount of $79,254 on the date of the note. See Note 5 for additional information on the derivative liability. The entire principal balance was converted into common stock and the entire discount of $79,254 was amortized to interest expense during the year ended December 31, 2012.

On February 10, 2012, the Company assigned $56,000 of its accounts payable from a third party to Braeden. The convertible promissory note bears interest at 10% due on April 15, 2013. The new note was convertible at 50% of the lowest trading price in the three days prior to the day that Braeden requests conversion. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a full discount on the date of the note. The entire principal balance was converted into common stock and the entire discount of $56,000 was amortized to interest expense during the year ended December 31, 2012.

Martin Boyle

On January 5, 2012, the Company modified its September 2, 2011 agreement with Martin Boyle into a $35,000 convertible debenture note bearing interest at 2% due on January 8, 2013. The new convertible debenture note was convertible at the lowest trading price in the three days prior to the day Martin Boyle requests conversion, with a floor of $.01. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a discount of $30,667 on the date of the note. The discount will be amortized over the term of the note to interest expense. See note 5 for additional information on the derivative liability. The entire principal balance was converted into common stock and the entire discount of $30,667 was amortized to interest expense during the year ended December 31, 2012.

Scott Baily

On January 8, 2012, the Company modified its October 2, 2011 agreement with Scott Baily into a $60,000 convertible debenture note bearing interest at 2% due on January 5 2013. The new convertible debenture note was convertible at the lowest trading price in the three days prior to the day that Scott Baily requests conversion, with a floor of $.01. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a discount of $52,685 on the date of the note. On April 26, 2012, the entire principal balance was converted into common stock and the entire discount of $52,685 was amortized to interest expense during the year ended December 31, 2012.

Grassy Knolls, LLC

On January 4, 2012, the Company modified its July 5, 2011 agreement with Grassy Knolls, LLC (“Grassy Knolls”) into a $72,000 convertible debenture note bearing interest at 2% due on January 4, 2013. The new convertible debenture note was convertible at the lowest trading price in the three days prior to the day that Grassy Knolls requests conversion, with a floor of $.01. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instrument should be classified as a liability. The fair value of the embedded conversion option resulted in a discount of $70,375 on the date of the note. The entire principal balance was converted into common stock and the entire discount of $70,375 was amortized to interest expense during the year ended December 31, 2012.

CMGO Investors, LLC

During year ended December 31, 2010, the Company borrowed $1,075,000 under five 13% Senior Secured Convertible Extendible Notes from third parties that originally matured on October 1, 2011. The Company issued 7,100,000 shares of common stock to extend the maturity date of the note on April 13, 2012, resulting in a loss on debt extinguishment of $173,550, and a debt discount of $6,509 which has been amortized into interest expense during the year ended December 31, 2012. As part of the sale of AudioEye on August 17, 2012 described in Note 2, these notes were repaid by AudioEye and the liability was eliminated from the Company.

Aware Capital Consultants Inc.

As of December 31, 2011, the Company had an outstanding balance of notes payable due to Aware Capital Consultants Inc. of $15,000. The entire principal balance was converted into common stock and the remaining discount of $9,136 was amortized to interest expense during the year ended December 31, 2012.

Magna Group LLC.

On October 17, 2011, the Company assigned $148,000 of its accounts payable from a third party to Magna Group, LLC (“Magna”). The convertible promissory note bore interest at 10%, was due on October 17, 2012 and was convertible at 58% of the lowest trading price in the three days prior to the conversion date. The entire principal balance was converted into common stock and the remaining debt discount of $70,470 was amortized to interest expense during the year ended December 31, 2012.

On April 11, 2012, the Company assigned $50,000 of its accounts payable from a third party to Magna. The convertible promissory note bore interest at 10%, was due on April 13, 2013 and was convertible at 58% of the lowest trading price in the three days prior to the conversion date. The entire principal balance was converted into common stock and the Company amortized $50,000 of the related discount to interest expense during the year ended December 31, 2012.

Hanover Holdings, LLC and Seymour Flicks

On October 17, 2011, the Company issued a convertible promissory note for $50,000 to Hanover Holdings, LLC. On June 5, 2012, Hanover assigned $25,000 principal and related interest to Seymour Flicks and modified the terms of the convertible promissory note. The new convertible promissory of $34,040 bore interest at 10%, was due June 5, 2013 and was convertible at a 42% discount of the lowest trading price for the Company’s common stock during the three trading day period prior to the conversion date, with a floor of $0.009. The Company recognized a $7,451 loss on debt extinguishment in relation to the debt modification. The Company analyzed the conversion options for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the instruments should be classified as liabilities (see also Note 5). The fair value of the embedded conversion options resulted in debt discounts of $34,375 and $34,040 on the dates of the convertible promissory notes.  During the year ended December 31, 2012, the entire principal balance of both convertible notes was converted into common stock and the Company amortized a total of $68,415 of the related debt discount to interest expense.

Connied, Inc.

On April 11, 2011 the Company assigned $135,000 of its account payable from a third party to Connied, Inc. (“Connied”). On May 3, 2011, the Company amended the assigned account payable to add a conversion feature. The new note was convertible at 50% of the average of the five lowest closing prices for the Company's stock during the previous 30 trading days. The remaining balance of $85,000 was recorded as short term debt. The note bears interest at 20% and is due on May 2, 2013.

The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion feature should be classified as a liability due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The embedded conversion feature was measured at fair value at inception and on the date of conversion with the change in fair value recorded to earnings. The addition of the embedded conversion option resulted in a full discount to the note of $85,000 on May 3, 2011.

During August 2013, the Company entered into a Termination Agreement and Release (the “Agreement”) with Continental Investments Group (Continental), the holder of a $85,000 convertible note payable of the Company and the holder of 2,500,000 shares of restricted common stock.  The Agreement calls for the termination and cancellation of a Sale and Purchase agreement, whereby the Company agreed to issue 50,000 shares of Series B Convertible Preferred Stock in exchange for 20,000 cartoon animated Cels. The Agreement also calls for the cancellation of the $85,000 convertible note and related interest and the Continental to return the 2,500,000 shares of restricted common stock and 50,000 shares of Series B Convertible Preferred Stock, valued at par of $2,550. This resulted in a gain on settlement of debt of $85,000.

The discount was being amortized over the term of the note to interest expense. The discount balance was $0 and $34,170 as of December 31, 2013 and 2012, respectively.  Amortization of $34,170 was recognized as interest expense as of December 31, 2013.  The convertible promissory note has an outstanding balance of $0 and $85,000 as of December 31, 2013 and 2012, respectively.

Alan Morell

On September 26, 2012, the Company issued two convertible promissory notes for $112,000 and $525,000 to Alan Morell for outstanding amounts owed for the Company’s line of credit and accrued salary, respectively. The notes bore interest at 2% and were due on April 4, 2013 and April 26, 2014, respectively. The notes became convertible at $0.04 and $0.06, respectively, as of November 15, 2012. During June 2013, the Company issued 2,800,000 shares of common stock to settle the notes totaling $637,000, resulting in a gain on settlement of debt of $610,400.

The Company analyzed the conversion options for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion feature should be classified as a liability due to their being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The embedded conversion feature was measured at fair value at inception and on the date of conversion with the change in fair value recorded to earnings.  The addition of the embedded conversion options resulted in a discount to the notes of $27,573 on November 15, 2012. The discounts were being amortized over the terms of the notes to interest expense. The discount balances were $0 and $7,739 as of December 31, 2013 and 2012, respectively.  Amortization of $7,739 was recognized as interest expense during the year ended December 31, 2013.  The convertible promissory notes have an outstanding balance of $0 and $637,000 as of December 31, 2013 and 2012, respectively.

Infinite Alpha

On April 29, 2013 the company issued a convertible promissory note for $51,500 to Infinite Alpha with undetermined conversion terms. The promissory note was unsecured, bore interest at 20%, and was due on demand.  During December 2013, the Company paid off the $51,500 note and accrued interest and penalties of $10,250.

During the year ended December 31, 2013, the Company wrote off $98,332 of accrued interest to gain on settlement of debt. The total gain on settlement of debt recorded was $793,732 and total amortization of debt discount was $152,848 as of December 31, 2013.

XML

Description of Business and Summary of Significant Accounting Policies (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Description of Business and Summary of Significant Accounting Policies [Abstract]
Aggregate fair value	$ 764,088	$ 3,000
Gross unrealized holding gains	622,769
Proceeds from sales ($573,022 stocks plus $85,000 options)	658,021
Gross realized gains (stocks and options)	524,668
Gross realized losses
Other than temporary impairment

XML

Legal Proceedings (Details) (USD $)	0 Months Ended		1 Months Ended
	Sep. 28, 2012	Apr. 20, 2012	Mar. 28, 2014 Subsequent Event [Member]
Legal Proceedings (Textual)
Legal settlements	$ 30,000	$ 10,000
Contingent claim amount			$ 250,661

XML

Description of Business and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2013

Description of Business and Summary of Significant Accounting Policies [Abstract]

Business Activity

Business Activity

Creative Management Group, Inc. was formed in Delaware on August 13, 2002 as a limited liability company named Creative Management Group, LLC. On August 7, 2007, this entity converted to a corporation and changed its legal name to Creative Management Group Inc.  The Company is a sports, entertainment, marketing and management company providing event management implementation, sponsorships, licensing and broadcast, production and syndication.

On February 20, 2008, Creative Management Group, Inc. formed CMG Acquisitions, Inc., a Delaware company, for the purpose of acquiring companies and expansion strategies. On February 20, 2008, Creative Management Group, Inc. acquired 92.6% of Pebble Beach Enterprises, Inc. (a publicly traded company) and changed the name to CMG Holdings Group, Inc. (“the Company”). The purpose of the acquisition was to effect a reverse merger with Pebble Beach Enterprises, Inc. at a later date. On May 27, 2008, Pebble Beach entered into an Agreement and Plan of Reorganization with its controlling shareholder, Creative Management Group, Inc., a privately held Delaware corporation. Upon closing the eighty shareholders of Creative Management Group delivered all of their equity interests in Creative Management Group to Pebble Beach in exchange for shares of common stock in Pebble Beach owned by Creative Management Group, as a result of which Creative Management Group became a wholly-owned subsidiary of Pebble Beach. The shareholders of Creative Management Group received one share of Pebble Beach’s common stock previously owned by Creative Management Group for each issued and outstanding common share owned of Creative Management Group. As a result, the 22,135,148 shares of Pebble Beach that were issued and previously owned by Creative Management Group, are now owned directly by its shareholders. The 22,135,148 shares of Creative Management Group previously owned by its shareholders are now owned by Pebble Beach, thereby making Creative Management Group a wholly-owned subsidiary of Pebble Beach. Pebble Beach did not issue any new shares as part of the Reorganization. The transaction was accounted for as a reverse merger and recapitalization whereby Creative Management Group is the accounting acquirer. Pebble Beach was renamed CMG Holdings Group, Inc.

On April 1, 2009, the Company, through a newly formed wholly owned subsidiary CMGO Capital, Inc., a Nevada corporation, completed the acquisition of XA The Experiential Agency, Inc. On March 31, 2010, the Company and AudioEye, Inc. (“AudioEye”) completed the final Stock Purchase Agreement under which the Company acquired all of the outstanding capital stock of AudioEye. On June 22, 2011 the Company entered into a Master Agreement subject to shareholder approval as may be required under applicable law and subject to closing conditions with AudioEye Acquisition Corp., a Nevada corporation where the shareholders of AudioEye Acquisition Corp. exchanged 100% of the stock in AudioEye Acquisition Corp for 80% of the capital stock of AudioEye. The Company retained 15% of AudioEye subject to transfer restrictions in accordance with the Master Agreement; on October 2012, the Company distributed to its shareholders, in the form of a dividend, 5% of the capital stock of AudioEye in accordance with provisions of the Master Agreement.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of CMG Holdings Group, Inc., CMG Acquisition, Inc., CMGO Capital, Inc., XA The Experiential Agency, Inc. ("XA"), CMGO Logistics, Inc., USaveCT and USaveNJ, after elimination of all significant inter-company accounts and transactions.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 revenues and expenses during the period reported. Estimates are used when accounting for allowance for doubtful accounts, depreciation, and contingencies. Actual results could differ from those estimates.

Concentrations of Risk

Concentrations of Risk

The Company maintains its cash balances at two financial institutions where they are insured by the Federal Deposit Insurance Corporation up to $250,000 each. At December 31, 2013 and 2012, neither of these accounts was in excess of the limit. The Company also maintains a money market investment account at one securities firm where the account is insured by the Securities Investor Protection Corporation up to $500,000 for the bankruptcy, etc., of the securities firm. At December 31, 2013 and 2012, the account had no balance in excess of the limit. For the years ended December 31, 2013 and 2012, one customer exceeds 10% of the Company’s total revenue, representing 72% and 64% of the Company’s total revenues during the year ended December 31, 2013 and 2012, respectively.

Revenue and Cost Recognition

Revenue and Cost Recognition

The Company earns revenues by providing event management services under individually negotiated contracts with varying terms, recognizing revenue in accordance with ASC 605, Revenue Recognition, only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the services have been provided and collectability is assured.   In arrangements where key indicators suggest the Company acts as principal, the Company records the gross amount billed to the client as revenue and the related costs incurred as operating expenses as the services are provided.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are amounts due from event management services, are unsecured and are carried at their estimated collectible amounts. Credit is generally extended on a short-term basis and do not bear interest, although a finance charge may be applied to amounts outstanding more than thirty days. Accounts receivable are periodically evaluated for collectability based on past credit history with clients. Provisions for losses on accounts receivable are determined on the basis of loss experience, known and inherent risk in the account balance and current economic conditions.  There were no allowances for doubtful accounts as of December 31, 2013 or 2012.

Share-Based Compensation

Share-Based Compensation

The Company accounts for share-based compensation to employees in accordance with Accounting Standards Codification subtopic 718-10,  Stock Compensation (“ASC 718-10”) and share-based compensation to non-employees in accordance with ASC 505-50 Accounting for Equity Instruments Issued to Non-Employees for Acquiring, or in Conjunction with Selling, Goods or Services. ASC 718-10 and 505-50 require the measurement and recognition of compensation expense for all share-based payment awards, including stock options based on the estimated fair values.

Derivative Instruments

Derivative Instruments

The Company accounts for derivative instruments in accordance with ASC Topic 815, Derivatives and Hedging, and all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet.

The Company uses estimates of fair value to value its 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, the Company’s 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 the Company’s 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, The Company seeks to validate the model’s output to market transactions. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820, Fair Value Measurements (ASC 820), based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments.

Cash and Cash Equivalents

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with maturity of three months or less to be cash equivalents.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the respective assets, which is generally between three and five years. Depreciation expense was $0 and $0 for the years ended December 31, 2013 and December 31, 2012, respectively.

Intangible Assets

Intangible Assets

Intangible assets are stated at cost, net of accumulated amortization. Amortization is computed using the straight-line method over the estimated useful life of the respective asset, which is three years. Amortization expense was $0 and $74,580 for the years ended December 31, 2013 and December 31, 2012, respectively.

Income Taxes

Income Taxes

The Company accounts for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Basic and Diluted Net Loss per Share

Basic and Diluted Net Loss per Share

The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Fair Value Measurements

Fair Value Measurements

ASC 820 and ASC 825, Financial Instruments (ASC 825), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.

Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The Company’s financial instruments consist principally of cash, accounts receivable, accounts payable and accrued liabilities. Pursuant to ASC 820 and 825, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

The following table sets forth by level with the fair value hierarchy the Company’s financial assets and liabilities measured at fair value on December 31, 2013 and 2012:

December 31, 2013	Level 1		Level 2		Level 3		Total
Marketable trading securities	$	764,088	$	-	$	-	$	764,088
Derivative Liabilities	$	-	$	-	$	11,121	$	11,121
December 31, 2012	Level 1		Level 2		Level 3		Total
Marketable trading securities	$	3,000	$	-	$	-	$	3,000
Derivative Liabilities	$	-	$	-	$	444,150	$	444,150

Investments in Debt and Equity Securities

	2013		2012
Aggregate fair value	$	764,088	$	3,000
Gross unrealized holding gains		622,769		-
Proceeds from sales ($573,022 stocks plus $85,000 options)	$	658,021	$	-
Gross realized gains (stocks and options)		524,668		-
Gross realized losses		-		-
Other than temporary impairment		-		-

Discontinued Operations

Discontinued Operations

In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations, we reported the results of our subsidiary, AudioEye Inc., as a discontinued operation. The application of ASC 205-20 is discussed in Note 2 below.