UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





Form
10-Q





☒
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For
the quarterly period ended August 31, 2016





☐
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





Commission
file number 333-190690


EXEO
ENTERTAINMENT, INC.


(Exact name of
registrant as specified in its charter)Nevada

45-2224704(State or other
jurisdiction of

(I.R.S.
Employerincorporation or
organization)

Identification
No.)4478
Wagon Trail Ave., Las Vegas, NV 89118(Address of
principal executive offices and Zip Code)(702)
361-3188(Registrant's
telephone number, including area code)





Indicate by check
mark whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
☒     No ☐





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 ☒    No ☐





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





Large accelerated
filer
☐
Accelerated
filer
☐Non-accelerated
filer
(Do not check if a
smaller reporting company)
☐
Smaller reporting
company
☒





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





As of the date of
filing of this report, there were outstanding 24,452,415
shares of the issuer’s common stock, par value $0.0001 per
share. There were also outstanding 19,500 Series A,
and 225,390, Series B Preferred Shares of the issuers
preferred stock, par value $0.0001 per share.








1




EXEO
ENTERTAINMENT, INC.


Form
10-Q


Table
of Contents


PagePART
I - FINANCIAL INFORMATION
2Item
1.

Financial
Statements
2Balance
Sheets
3Statements of
Operations
4Statements of Cash
Flows
5Notes to Financial
Statements
6Item
2.

Management's
Discussion and Analysis of Financial Condition and Results of
Operations
15Item
3.

Quantitative and
Qualitative Disclosures About Market Risk
19Item
4.

Controls and
Procedures
19PART
II - OTHER INFORMATION
20Item
1.

Legal
Proceedings
20Item1A.

Risk
Factors
20Item
2.

Unregistered Sales
of Equity Securities
20Item
3.

Defaults Upon
Senior Securities
20Item
4.

Mine Safety
Disclosures
20Item
5.

Other
Information
20Item
6.

Exhibits
21SIGNATURES


22








PART
I – FINANCIAL INFORMATION





ITEM 1. FINANCIAL STATEMENTS





The accompanying
unaudited financial statements have been prepared in accordance
with the instructions to Form 10-Q and Item Regulation S-X, Rule
10-01(c) Interim Financial Statements, and, therefore, do not
include all information and footnotes necessary for a complete
presentation of financial position, results of operations, cash
flows, and stockholders' equity in conformity with generally
accepted accounting principles. In the opinion of management, all
adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included and
all such adjustments are of a normal recurring nature. Operating
results for the nine months ended August 31, 2016 are not
necessarily indicative of the results that can be expected for the
year ending November 30, 2016.





2





EXEO ENTERTAINMENT, INC.BALANCE SHEETS(unaudited)
August 31,
November 30,2016
2015ASSETSCurrent AssetsCash
and cash equivalents
$155,134
$427,663Inventory
218,374
231,610Prepaid
expenses
4,198
1,840Total current assets
377,706
661,113Property and equipment, net
79,251
92,953TOTAL ASSETS
$456,957
$754,066LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICITLiabilitiesCurrent liabilitiesAccounts
payable and accrued expenses
$22,386
20,328Accrued
interest payable - related party
12,981
9,553Payroll
liabilities
107,539
88,901Due
to related parties
75,000
75,000Royalty
payable
460,667
273,712Notes
payable
9,314
10,099Total current liabilities
687,887
477,593Long-term liabilitiesNotes
payable
32,135
41,864Total long-term liabilities
32,135
41,864Total Liabilities
720,022
519,457Series
A redeemable convertible preferred stock; $0.0001 par value,
1,000,000 shares authorized; 19,500 shares issued andoutstanding;
0 shares unissued as of August 31, 2016 (liquidation preference of
$62,207). Stated at redemption value.
130,456
119,487Series
B redeemable convertible preferred stock; $0.0001 par value,
1,000,000 shares authorized; 227,890 shares issued andoutstanding;
2,500 shares unissued as of August 31, 2016 (liquidation preference
of $469,321). Stated at redemption value.
1,394,410
1,087,906Stockholders' deficitConvertible
Preferred Stock Series A - 15%, $0.0001 par value, 1,000,000
sharesauthorized,
19,500 and 19,500 shares issued, respectively
-
-Convertible
Preferred Stock Series B - 12%, $0.0001 par value, 1,000,000
sharesauthorized,
227,890 and 2,500 shares issued, respectively
-
-Common
stock - $0.0001 par value, 100,000,000 shares authorized;
24,452,415and
24,255,231 shares issued and outstanding, respectively
2,446
2,425Additional
paid-in capital
3,421,653
3,135,349Stock
payable
175,000
100,000Deficit
accumulated
(5,387,030)
(4,210,558)Total stockholders' equity (deficit)
(1,787,931)
(972,784)TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
$456,957
$754,066The
accompanying notes are an integral part of these financial
statements.





3





EXEO ENTERTAINMENT, INC.STATEMENTS OF OPERATIONS(unaudited)Three
month period ending August 31, 2016
Three
month period ending August 31, 2015
Nine
month period ending August 31, 2016
Nine
month period ending August 31, 2015REVENUES
$7,110
$5,115
$24,727
$15,683COST OF GOOD SOLDCost
of direct materials, shipping and labor
(3,554)
(1,759)
(12,187)
(6,445)GROSS PROFIT
3,556
3,356
12,540
9,238OPERATING EXPENSESGeneral
and adminstrative
172,226
311,347
585,921
652,120Executive
compensation
90,607
96,022
271,822
255,580Professional
fees
66,907
34,022
174,893
55,982Depreciation
8,261
6,996
24,133
21,234TOTAL OPERATING EXPENSES
338,001
448,387
1,056,769
984,916INCOME (LOSS) FROM OPERATIONS
(334,445)
(445,031)
(1,044,229)
(975,678)OTHER INCOME (EXPENSE)Gain
from foreign currency transactions
505
17,601
(10,820)
16,121Other
income
-
-
312
-Interest
expense - related party
(1,146)
(1,147)
(3,427)
(3,565)Interest
expense
(322)
(245)
(1,086)
(440)TOTAL OTHER INCOME (EXPENSES)
(963)
16,209
(15,021)
12,116NET LOSS
(335,408)
(428,822)
(1,059,250)
(963,562)DIVIDEND OF REDEEMABLE PREFERRED STOCK
(40,660)
(20,302)
(117,222)
(55,048)NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
$(376,068)
$(449,124)
$(1,176,472)
$(1,018,610)NET LOSS PER SHARE: BASIC
$(0.02)
$(0.02)
$(0.05)
$(0.04)WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC24,255,231
24,255,231
24,255,231
24,255,231The
accompanying notes are an integral part of these financial
statements.





4





EXEO ENTERTAINMENT, INC.STATEMENTS OF CASH FLOWS(unaudited)Nine
month period ending August 31, 2016
Nine
month period ending August 31, 2015CASH FLOWS FROM OPERATING ACTIVITIESNet
loss for the period
$(1,059,250)
$(963,562)Adjustments to reconcile net loss to net cash used in operating
activitiesDepreciation
24,133
21,234Stock-based
compensation to officers
150,003
150,003Changes in assets and liabilitiesDecrease
(Increase) in pre-paid expenses
(2,358)
(4,166)Increase
in accounts receivable
-
(250)Decrease
(Increase) in inventory
13,236
(220,496)(Decrease)
Increase in accounts payable and accrued expenses
2,058
(22,590)Decrease
in accrued interest - related party
3,428
3,565Increase
in payroll liabilities
18,638
16,154Increase
in royalty payable
186,955
318,581Net Cash Used in Operating Activities
(663,157)
(701,527)CASH FLOWS FROM INVESTING ACTIVITIESAcquisition
of property and equipment
(10,430)
(2,423)Cash Flows Used in Investing Activities
(10,430)
(2,423)CASH FLOWS FROM FINANCING ACTIVITIESProceeds
from issuance of common stock, net of issuance costs
211,322Proceeds
from issuance of preferred stock, net of issuance
costs
200,250
758,855Payments
to related party debt
-
(10,000)Payments
on notes payable - auto loan (principal)
(10,514)
(8,010)Cash Flows Provided by Financing Activities
401,058
740,845Net increase in cash and cash equivalents
(272,529)
36,895Cash and cash equivalents, beginning of the period
427,663
326,683Cash and cash equivalents, end of the period
$155,134
$363,578SUPPLEMENTAL CASH FLOW INFORMATION:Cash
paid for interest
$-
$-Dividend
of redeemable preferred stock
$117,222
$55,048The
accompanying notes are an integral part of these financial
statements.





5
  EXEO
ENTERTAINMENT, INC.
 Notes
to Financial Statements
 August,
31, 2016





Note A: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES





This summary of
significant accounting policies of Exeo Entertainment, Inc. (the
“Company”) is presented to assist in understanding the
Company’s financial statements. The financial statements and
notes are representations of the Company’s management, who is
responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles and
have been consistently applied to the preparation of the financial
statements. The Company will adopt accounting policies and
procedures based upon the nature of future
transactions.





Nature of Business


The Company was
incorporated in Nevada on May 12, 2011. The Company is based in Las
Vegas, Nevada, and designs, develops, licenses, manufactures, and
distributes its products. The Company plans to market the
ZaazTM Keyboard, to be
used with Samsung’s Smart TV® as well as other smart
devices, the Extreme
GamerTM, and other new peripheral products for the
video gaming industry, including the Psyko KryptonTM surround sound
gaming headphones.





Basis of Presentation


The financial
statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of
America and are presented in US dollars.





Accounting Basis


The
Company uses the accrual basis of accounting and accounting
principles generally accepted in the United States of America
(“GAAP” accounting).  The Company has adopted
a November 30 fiscal year end. Prior to that, the Company adopted a
calendar year end for 2011.





Foreign Currency Transactions


Transaction gains and losses, such as those resulting from the
settlement of nonfunctional currency receivables or payables,
including intercompany balances, are included in foreign currency
gain (loss) in our consolidated statements of earnings.
 Additionally, payable and receivable balances denominated in
nonfunctional currencies are marked-to-market at month-end, and the
gain or loss is recognized in our statements of
operations.





Cash and Cash Equivalents


The Company
considers cash on hand, cash in banks, certificates of deposit,
time deposits, and U.S. government and other short-term securities
with maturities of three months or less when purchased as cash and
cash equivalents.





Fair Value of Financial Instruments


The Company’s
financial instruments consist of cash and cash equivalents,
accounts payable, notes payable, and accrued expenses. The carrying
amount of these financial instruments approximates fair value due
either to length of maturity or interest rates that approximate
prevailing market rates unless otherwise disclosed in these
financial statements.





Inventory


Inventories are
stated at cost, not to exceed fair market value. The cost of the
Company’s inventory ($218,374 and $231,610 at August 31, 2016
and November 30, 2015, respectively) has been determined using the
first-in first-out (FIFO) method. The reduction in current costs as
compared to LIFO costs of inventory equals zero at August 31, 2016
and November 30, 2015, respectively.





6
  EXEO
ENTERTAINMENT, INC.
 Notes
to Financial Statements
 August,
31, 2016





Note A: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Property and Equipment


Property and
equipment are stated at the lower of cost or fair value.
Depreciation is provided on a straight-line basis over the
estimated useful lives of the assets, as follows:





Description
Estimated
LifeFurniture &
Equipment
5
yearsVehicles
5
years





The estimated
useful lives are based on the nature of the assets as well as
current operating strategy and legal considerations such as
contractual life. Future events, such as property expansions,
property developments, new competition, or new regulations, could
result in a change in the manner in which the Company uses certain
assets requiring a change in the estimated useful lives of such
assets.





Maintenance and
repairs that neither materially add to the value of the asset nor
appreciably prolong its life are charged to expense as incurred.
Gains or losses on disposition of property and equipment are
included in the statements of operations. There were no
dispositions during the periods presented.





Impairment of Long-Lived Assets


The Company
evaluates its property and equipment and other long-lived assets
for impairment in accordance with related accounting standards. No
impairments were recorded at August 31, 2016. For assets to be held
and used (including projects under development), fixed assets are
reviewed for impairment whenever indicators of impairment exist. If
an indicator of impairment exists, the Company first groups its
assets with other assets and liabilities at the lowest level for
which identifiable cash flows are largely independent of the cash
flows of other assets and liabilities (the “asset
group”). Secondly, the Company estimates the undiscounted
future cash flows that are directly associated with and expected to
arise from the completion, use and eventual disposition of such
asset group. The Company estimates the undiscounted cash flows over
the remaining useful life of the primary asset within the asset
group. If the undiscounted cash flows exceedthe carrying value, no
impairment is indicated. If the undiscounted cash flows do not
exceed the carrying value, then an impairment is measured based on
fair value compared to carrying value, with fair value typically
based on a discounted cash flow model.





Income Taxes


Income taxes are
computed using the asset and liability method. Under the asset and
liability method, deferred income tax assets and liabilities are
determined based on the differences between the financial reporting
and tax bases of assets and liabilities and are measured using the
currently enacted tax rates and laws. A valuation allowance is
provided for the amount of deferred tax assets that, based on
available evidence, are not expected to be realized.





Management Estimates


The preparation of
financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.










7
  EXEO
ENTERTAINMENT, INC.
 Notes
to Financial Statements
 August,
31, 2016





Note A: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Revenue Recognition


The
Company recognizes revenue when products are fully delivered or
services have been provided and collection is reasonably assured.
For the nine months ended August 31, 2016 and 2015, the Company
recognized $24,727 and $15,683 in revenue,
respectively.





Basic Income (Loss) Per Share


Basic
income (loss) per share is calculated by dividing the
Company’s net loss applicable to common shareholders by the
weighted average number of common shares during the period. Diluted
earnings per share is calculated by dividing the Company’s
net income available to common shareholders by the diluted weighted
average number of shares outstanding during the year. The diluted
weighted average number of shares outstanding is the basic weighted
number of shares adjusted for any potentially dilutive debt or
equity.





Stock-Based Compensation


Pursuant to ASC
Topic 718, the Company recorded the fair value of the stock options
on a monthly basis over the vesting period as stock-based
compensation expense. The fair value of the options is calculated
using the Black-Scholes method as of the date of grant. In fiscal
year 2012, the Company adopted an incentive stock option plan for
its employees. In fiscal year 2012 the Company granted stock
options to three officers of the Company. These are described in
Note G- Stock Options and Warrants.





Concentrations of Risk


The Company’s
bank accounts are deposited in insured institutions. The maximum
insured by the FDIC per bank account is not an issue here since the
Company’s bank accounts do not bear any interest and the FDIC
limits far exceed balances on deposit. The Company’s funds
were held in a single account. At August 31, 2016, the
Company’s bank balance did not exceed the insured
amounts.





Accounting for Research and Development Costs


The Company records
an expense in the current period for all research and development
costs, which include Hardware Development Costs. The Company does
not capitalize such amounts. Pursuant to ASC Topic 730 Research and
Development, once we determine that our Extreme Gamer video game
console is technologically feasible and a working model is put into
use, the Company will capitalize Software Development costs
associated with its products. Once this occurs we will determine a
useful life of our software and apply a reasonable economic life of
five years or less. At this time, our software development costs
only relate to the Extreme Gamer and Zaaz keyboard hardware. The
software development costs cannot be separated from the associated
hardware development. We do not develop stand-alone software for
sale to the retail consumers, rather we develop software in order
to operate the designed hardware. The software is designed to be
encoded within chips inside the hardware. Thus, it has been
determined that the current software development costs, which are
intertwined within the hardware development, are to be expensed
rather than capitalized pursuant to ASC Topic 730.





This conclusion is
also based upon our decision to devote further research and
development costs in the support of our product interface to the
video game players: Sony PS3® (and other products such as
Nintendo Wii® and Microsoft Xbox 360®).





Liquidity and Going Concern


The Company has
incurred an accumulated deficit of ($5,387,030) since inception.
The Company incurred significant initial research and product
development costs, including expenditures associated with hardware
engineering and the design and development of its hardware
components and prototypes associated with the ZaazTM keyboard,
the Extreme Gamer, and the Psyko KryptonTM surround sound
gaming headphones. The Company also incurred costs associated with
its acquisition of property, plant and equipment for its 10,000
square foot office and warehouse.










8
  EXEO
ENTERTAINMENT, INC.
 Notes
to Financial Statements
 August,
31, 2016





Note A: SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





These factors
create substantial doubt about the Company’s ability to
continue as a going concern. The financial statements do not
include any adjustments to reflect the possible future effects on
the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible
inability of the Company to continue as a going
concern.





The ability of the
Company to continue as a going concern is dependent on the Company
generating cash from the sale of its common stock or obtaining debt
financing and attaining future profitable operations.





Management’s
plan includes selling its equity securities and obtaining debt
financing to fund its capital requirement and ongoing operations;
however, there can be no assurance the Company will be successful
in these efforts.





Recent Accounting Pronouncements





The Company does
not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company’s
results of operations, financial position or cash
flow.





Note
B: PROPERTY AND
EQUIPMENT





The Company owned
property and equipment, recorded at cost, which consisted of the
following at May 31, 2016 and November 30, 2015:





August
31, 2016
November
30, 2015Furniture and
fixtures
$21,499
$21,499Office &
computer equipment
37,717
34,051Vehicles
103,444
96,943Subtotal
162,660
152,494Less: Accumulated
depreciation
(83,409)
(59,541)Property
and equipment, net
$79,251
$92,953





Depreciation
expense was $24,133 and $21,234 for the nine months ended August
31, 2016 and 2015.








Note
C: HARDWARE DEVELOPMENT
COSTS





The Company
incurred $17,788 and $3,461 for research and development costs for
the nine months ended August 31, 2016 and 2015, respectively. As to
the nine months ended August 31, 2016, these costs relate to
hardware engineering, design and development of the KrankzTM
and Krankz MaxxTM Bluetooth Wireless Headset and the Psyko
Krypton® surround sound gaming headphones for personal
computers.





Note
D: PREPAID
EXPENSES





At August 31, 2016,
the balance of prepaid expenses on the balance sheet of the Company
is $4,198, which primarily relates to a prepayment of an annual fee
for investor relations. At November 30, 2015, the balance of
prepaid expenses on the balance sheet of the Company is $1,840.
Prepaid expenses at November 30, 2015 also consist of a prepayment
of an annual fee for investor relations.








9
  EXEO
ENTERTAINMENT, INC.
 Notes
to Financial Statements
 August,
31, 2016





Note
E: PATENT AND
TRADEMARKS





In June 2013, the
Company executed a license agreement with Psyko Audio Labs Canada
to manufacture and distribute the Carbon and Krypton line of
patented headphones. US Patent # 8,000,486 (for the Psyko
KryptonTM surround sound gaming headphones). On April 2, 2015,
Krank Amplifiers, LLC submitted to the U.S. Patent and Trademark
Office a request for a design mark as to “Krank
Amplifiers”) for registry on the Principal Register (serial
number 86585697). This design mark includes the name Krank
Amplifiers. The requested goods and services category is for IC
009, which is the same category in which our Company would request
as to our common law trademark “KrankzTM.” This
amplifier company submitted its mark on the basis of 1B – not
yet in commerce, while our Company has used the name KrankzTM
in commerce for several years, well before Krank Amplifiers. As of
the date of this report, no office action has been taken by the
U.S. PTO. We may no longer be able to use the common law trademark
“KrankzTM” if Krank Amplifiers is granted its
trademark and we do not file an opposition to such mark or we do
not prevail in the defense of our mark in the U.S. Trademark and
Trial Appeal Board (TTAB).








Note F: COMMON
STOCK





The Company has
100,000,000 shares at $0.0001 par value common stock authorized and
24,452,415and 24,255,231
shares issued and outstanding at August 31, 2016 and November 30,
2015, respectively.





On August 18, 2016,
the Company issued 197,184 shares of common stock for cash totaling
$137,500. The price per share is equal to eighty-five percent of
the average daily “Ask Price” as quoted on the OTC
Electronic Bulletin Board Quotation System for the ten trading days
immediately preceding the Closing. In addition, for each share of
common stock purchased, each investor shall receive two warrants.
Warrant A shall provide the investor the right to purchase one
additional share of the Company’s common stock equal to one
hundred percent of the average daily “Ask Price” as
quoted on the OTC Electronic Bulletin Board Quotation System for
the ten trading days immediately preceding the Closing. Warrant B
shall provide the investor the right to purchase one additional
share of the Company’s common stock equal to one hundred
twenty-five percent of the average daily “Ask Price” as
quoted on the OTC Electronic Bulletin Board Quotation System for
the ten trading days immediately preceding the
Closing.





Note G: PREFERRED
STOCK





Issuances of Series A Convertible Preferred Stock





Since March 3,
2014, the Company has not offered or sold any Series A Convertible
Preferred Stock and has no intent to do so during fiscal year ended
November 30, 2016.





Issuances of Series B Convertible Preferred Stock





On January 14, 2014, the Board of Directors of
Exeo Entertainment, Inc. (the “Company” adopted
a resolution pursuant to the Company’s Certificate of
Incorporation, as amended, providing for the designations,
preferences and relative, participating, optional and other rights,
and the qualifications, limitations and restrictions, of the Series
B Convertible  Preferred Stock.





On January 18, 2014, the Company filed a
Certificate of Designations for a Series B Convertible Preferred
Stock. The authorized number of Series B Convertible Preferred
Stock is 1,000,000 shares, par value 0.0001. The holders of
shares of Series B Convertible Preferred Stock shall vote as a
separate class on all matters adversely affecting the Series B
Stock.  The authorization or issuance of additional
Common Stock, Series B Convertible Preferred Stock or other
securities having liquidation, dividend, voting or other rights
junior to or on a parity with, the Series B Convertible Preferred
Stock shall not be deemed to adversely affect the Series B
Convertible Preferred Stock. In each case the holders shall be
entitled to one vote per share.  During the conversion period, each Series B
Preferred share may be converted to common stock at a fixed
conversion price of $1.25 per share or the Variable Conversion
Price set forth in the Company’s Certificate of Designation.
Series B stock bears interest at 12% per annum, paid annually, with
principal paid at maturity twenty-four (24) months after the date
of issuance of the stock. See table below in this note. Principal
repayment may not apply if the stockholder exercises the right to
convert all preferred stock to common stock during the conversion
period.








10
  EXEO
ENTERTAINMENT, INC.
 Notes
to Financial Statements
 August,
31, 2016





Note G: PREFERRED STOCK
(CONTINUED)





During the three
month period ended May 31, 2016, nine accredited investors subscribed to 21,300 shares,
in total, of Series B Preferred Stock in exchange for cash
consideration of $106,500, in total, at $5.00 for each
share. As of
August 31, 2016, 23,800 shares have not been issued and have been
presented outside of permanent equity in accordance with ASC
48-10, Classification and
Measurement of Redeemable Securities. The Company relies upon an exemption from
registration under the Securities Act of 1933 pursuant to
Regulation D, Section 506. The Company agreed to pay interest on
such funds at 12% per annum. Each person executed a stock
subscription agreement and delivered funds in exchange for the
delivery of Series B Convertible Preferred Shares at a price of
$5.00 per share. Stock warrants were not sold or included in the
offering to such investors.





All shares of
redeemable convertible preferred stock have been presented outside
of permanent equity in accordance with ASC 48-10, Classification and Measurement of Redeemable
Securities. The Company accretes the carrying value of its
Series A and B redeemable convertible preferred stock to its
estimate of fair value (i.e. redemption value) at period end. The
estimated fair value of the Series A and Series B redeemable
convertible preferred stock at May 31, 2016 was $126,800 and
$1,382,405, respectively.





We
incurred equity issuance costs of $96 and $1,577 for the nine
months ended August 31, 2016, and 2015,
respectively.  Rather than expense these costs, such
items are charged against the Company’s equity. Our employees
coordinate various matters associated with the sales of issuer
securities to accredited investors.  Equity issuance
costs include such wages. These costs also include mailing,
copying, courier, and other miscellaneous costs associated with the
duplication and delivery of our offering circular to investors and
paying for the return delivery of signed stock subscription
agreements.





Note H: RELATED PARTY
TRANSACTIONS





Notes Payable to Officer





An officer received
promissory notes from the Company in exchange for loans from the
officer for $85,000. The terms of the notes provide that the
Company shall repay the principal of each note in full within nine
months of the date of each note. In addition, the Company is
obligated to pay interest at a flat rate of 6.00% upon maturity of
each note. At the sole discretion of the officer, the notes may be
extended for an additional nine month term. The Officer agreed to
extend the notes for an additional nine month period. The maturity
dates after the extensions are reflected below. In August 2015, the
Company made a $10,000 payment to an officer towards the entire
principal of one note dated December, 2013. The Company made no
payment towards $11,834 accrued interest.





Date
of Each Note
Amount
of Each Note
Accrued
Interest through the Maturity Date
Maturity
Date of Each NoteDecember
30, 2013
$
25,000
$4,442
September
29, 2016January
24, 2014
$
50,000
$9,106
October
23, 2016













11
  EXEO
ENTERTAINMENT, INC.
 Notes
to Financial Statements
 August,
31, 2016





Note H: RELATED PARTY
TRANSACTIONS (CONTINUED)





Compensation of Officers





The Company entered
into officer compensation agreements with two officer/directors
whereby each receives $60,000 per annum as cash compensation. The
Company pays each officer $5,000 per month.





The amount paid to
the two officers in total was $121,819 and $105,577 during the nine
months ended August 31, 2016 and 2015, respectfully. In addition,
each officer/director received additional compensation in the form
of non-cash incentive stock options granted on July 15, 2012. Each
person received 2,000,000 stock options. For further discussion of
the terms of the grant of stock options, see Note G.





Note
I: COMMITMENTS AND
CONTINGENCIES





Royalty Payable Obligation





At
January 1, 2015, the Company is obligated to pay minimum monthly
royalties of approximately $80,000 (CDN $100,000) per quarter for
the remaining term of the Psyko Audio Labs
contract.   The company carries the risk of currency
exchange rate fluctuations as our royalty obligation under the
license agreement is stated in Canadian dollars.  
Royalty payable was $460,667 for the nine months ended August 31,
2016. For the nine months ended August 31, 2016, royalty expense
and the related loss on foreign currency transactions was $226,135
and $10,820, respectively.





Operating Lease Obligation





On October 25,
2012, the Company signed a lease for its current office and
warehouse. The Company executed a one year extension effective
October 1, 2014. The original lease contains an option for a three
year renewal; which shall expire on September 30, 2016. The typical
monthly rent expense is $7,006, which includes base rent of $5,496
and common area maintenance of $1,510. The Company is not obligated
to pay a security deposit to the management company.





As of August 31,
2016, the monthly minimum rental payment is $7,006. Rent expense
was $63,054 and $70,060 for the nine months ended August 31, 2016
and 2015, respectively.





Note Payable for Vehicle Financing Obligations





On September 27,
2012, the Company acquired a pre-owned company vehicle on credit.
The original cost basis was $49,824. On November 13, 2015, the
Company traded the vehicle for a new leased vehicle for $6,714 due
at signing. The Company is obligated to pay a total of $51,963 for
36 months with a monthly payment of $1,196.





On November 13,
2015, the Company acquired a pre-owned company vehicle on credit.
The original cost basis was $56,963. The Company paid $5,000 as a
down payment. The amount financed by the seller is $48,259, and the
Company makes monthly payments of $866. The Company is obligated to
pay a total of $51,963 over the course of the loan. This note bears
interest at the annual percentage rate of 2.9%, and the term is 60
months. The total finance charge associated with this note is
$3,704.










12
  EXEO
ENTERTAINMENT, INC.
 Notes
to Financial Statements
 August,
31, 2016





Note
J: REINSTATEMENT OF
FINANCIAL STATEMENTS





Below are adjustments to financial statements for the nine months
ended August 31, 2015.





EXEO
ENTERTAINMENT, INC.BALANCE
SHEETS(unaudited)August
31,

August
31,2015

2015(Originial

(Correctedamount)
(Adjustments)
amount)ASSETSCurrent
AssetsCash and cash
equivalents
$363,578
$-
$363,578Inventory
235,453
-
235,453Prepaid
expenses
4,166
-
4,166Accounts
Receivable
360
-
360Total
current assets
603,557

603,557Property
and equipment, net
63,370
44
63,414TOTAL
ASSETS
$666,927

$666,971LIABILITIES,
REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(DEFICIT)LiabilitiesCurrent
liabilitiesAccounts payable
and accrued expenses
$4,923
$11,000
15,923Accrued interest
payable to non-affiliates
11,601
(11,601)
-Accrued interest
payable - related party
-
8,419
8,419Payroll
liabilities
35,530
46,815
82,345Due to related
parties
75,000
-
75,000Royalty
payable
247,850
104,880
352,730Notes
payable
9,698
-
9,698Total
current liabilities
384,602

544,115Long-term
liabilitiesNotes
payable
1,297
-
1,297Total
long-term liabilities
1,297

1,297Total
Liabilities
385,899

545,412Series A redeemable
convertible preferred stock; $0.0001 par value, 1,000,000 shares
authorized; 19,500 shares issued andoutstanding; 0
shares unissued as of November 30, 2015 (liquidation preference of
$51,238). Stated at redemption value.
115,832
-
115,832Series B redeemable convertible preferred stock;
$0.0001 par value, 1,000,000 shares authorized; 201,640 shares
issued andoutstanding; 5,000
shares unissued as of November 30, 2015 (liquidation preference of
$316,131). Stated at redemption value.
735,910
-
735,910Stockholders'
equity (deficit)Convertible
Preferred Stock Series A - 15%, $0.0001 par value, 1,000,000
sharesauthorized, 19,500
and 19,500 shares issued, respectively
-
-
-Convertible
Preferred Stock Series B - 15%, $0.0001 par value, 1,000,000
sharesauthorized, 61,500
and 10,000 shares issued, respectively
-
-
-Common stock -
$0.0001 par value, 100,000,000 shares authorized;
24,140,600and 24,140,600
shares issued and outstanding, respectively
2,414
-
2,414Additional paid-in
capital
2,979,097
31,428
3,010,525Stock
payable
100,000
-
100,000Deficit
accumulated
(3,652,225)
(190,897)
(3,843,122)Total
stockholders' equity (deficit)
(570,714)

(730,183)TOTAL
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
$666,927

$666,971





13





Note
J: REINSTATEMENT OF
FINANCIAL STATEMENTS (CONTINUED)





EXEO
ENTERTAINMENT, INC.STATEMENTS
OF OPERATIONS(unaudited)August
31,

August
31,2015

2015(Originial

(Correctedamount)
(Adjustments)
amount)REVENUES
$15,683
$-
$15,683COST
OF GOOD SOLDCost of direct
materials, shipping and labor
(6,402)
(43)
(6,445)GROSS
PROFIT
9,281

9,238OPERATING
EXPENSESGeneral and
adminstrative
556,262
95,858
652,120Executive
compensation
247,503
8,077
255,580Professional
fees
49,983
5,999
55,982Depreciation
20,448
786
21,234TOTAL
OPERATING EXPENSES
874,196

984,916INCOME
(LOSS) FROM OPERATIONS
(864,915)

(975,678)OTHER
INCOME (EXPENSE)Gain (Loss) from
foreign currency transactions
14,641
1,480
16,121Forgiveness of
debt
-
-
-Interest expense -
related party
-
(3,565)
(3,565)Interest
expense
(4,270)
3,830
(440)TOTAL
OTHER INCOME (EXPENSES)
10,371

12,116NET
INOME (LOSS)
(854,544)

(963,562)DIVIDEND
OF REDEEMABLE PREFERRED STOCK
-
(55,048)
(55,048)NET
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
$(854,544)
(164,066)
$(1,018,610)NET
LOSS PER SHARE: BASIC
$(0.04)

$(0.04)WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC24,140,600

24,140,600





14





Item
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations





OVERVIEW





Exeo Entertainment,
Inc. designs, develops, licenses, manufacturers, and markets
consumer electronics in the video gaming, music and smart TV
sector. Our current business objectives are:





· Complete
product development and establish channels of distribution,
and


· Expand
SKUs within the headphone market for both music and
gaming





Activities to
date





We incorporated in
the state of Nevada on May 12, 2011. From our inception to date we
have generated $55,610 in revenues and continue to operate at a
loss. Our activities have centered on the design and engineering of
peripherals in the video gaming, music, and smart TV
sector.





We accomplished the
following:





1)
 We completed the
molds for the PsykoTM PC model and are working on the molds
for the PsykoTM console unit.


2)
 During the six
months ending May 31, 2015, we received inventory of the
KrankzTM Bluetooth Wireless Headsets, and the
Psyko®5.1 Surround Sound Gaming Headsets (with built-in
microphone) with external amplifier for Personal Computers. We also
approved the working prototypes of the similar type of Psyko®
Krypton headphones for use with gaming consoles (such as
Xbox®), and the Company is ready to go forward with the
manufacturing.


3)
 We are currently
working on molds for the ZaazTM keyboard.





Products and
Services





Products under
development include the PsykoTM 5.1 surround sound gaming
headphones for consoles, KrankzTM MAXX BluetoothTM
wireless headphones, ZaazTM Smart TV keyboards, the Extreme
Gamer®; a multi-disc video game changer, and an android based
portable gaming system. We are finalizing development on the
ZaazTM keyboard and will soon begin tooling for manufacturing.
The Extreme GamerTM and portable gaming system are still in
development.  We expect to release several new products
in fiscal years 2015 and 2016.





Strategy
and Marketing Plan





Once manufacturing
is established we intend on utilizing existing consumer electronics
distributers, such as Synnex Corp. (SNX) and Ingram Micro to
distribute our products to big box retailers such as Best Buy,
GameStop, and Fry’s Electronics.  We do not have
distribution agreements with these companies at this
time.





Competition





Psyko
TM Headphones





While our
PsykoTM headphone offering differs from the competition in the
method of 5.1-surround sound delivery, we will face competition
from manufacturers with established channels of distribution,
mature capital structures, and significantly larger marketing
budgets. Well established gaming headphone manufacturers include
Turtle Beach; a private company, Tritton – a subsidiary of
Mad Catz Interactive (MCZ), and Astro Gaming which is a subsidiary
of Skullcandy (SKUL).





While other
headphone manufacturers replicate 5.1 surround sound through
Digital Signal Processing (DSP), the PsykoTM headphones use a
patented method of sound delivery that doesn’t require the
use of DSP. Management believes that the difference in audio
quality is a major differentiating factor between our product
offering and what is currently available on the
market.





15





KrankzTM
Headphones





The driver design
provides a deep bass sound with clear midrange audio for a
full-range for use up to 30’ distance.  These
headsets work with most mobile devices and have a retractable,
foldable design with built-in microphone and noise cancelling
feature. We expect to face competition from lifestyle headphone
companies such as Beats by Dr. Dre and Skull candy. These entities
are well established and have a loyal customer following. We expect
to carve out a niche within the market by initially marketing to
the X games demographic through endorsements and sponsorships in
Extreme sports such as motocross, supercross, snowboarding,
surfing, skating, and similar such sports..





ZaazTM
Keyboard





The majority of the
competition in the Bluetooth wireless keyboard arena is
concentrated amongst a few well-known companies such as
Logitech® (LOGI), Microsoft® (MSFT), Apple® (AAPL),
and Samsung® (SSNLF). While management believes that only
Samsung makes keyboards specifically designed to interact with
smart TVs, and that their keyboards only work with certain
Samsung® TVs, there can be no assurance that other companies
do not currently manufacture, or plan to manufacture, such units in
the future. Any such companies that manufacture keyboards capable
of connecting to a smart TV would further increase
competition.





The Company intends
on differentiating the ZaazTM keyboard through a set of
features designed specifically for smart TV users. The ZaazTM
keyboard features a customized set of “one touch access
keys” that allows users to access specific, user defined
features of the consumers smart TV. Examples include one touch
access to the following: Netflix®, Facebook®, Hulu®,
and Amazon®. Additionally, the ZaazTM keyboard will
differentiate itself by including a full size track pad –
built into the keyboard – to navigate, point, click, and
select.





Extreme
Gamer®





The Extreme
Gamer® is a patent pending (patent application 12/543,296)
multi-disc video game changer that connects to current generation
video game consoles offered by Nintendo®, Microsoft®, and
Sony®.





Management believes
from regularly reading Video Gaming news from sources such as
IGN.com, EGNnow.com, 1up.com, and gamespot.com that no other
company is currently manufacturing a multi-disc video game changer.
If such a unit is being made management is unaware of its
existence.





Management however
acknowledges that while it cannot find any commercially available
products that our patents may never be awarded and that we could
face competition from any number of existing video game accessory
manufacturers.





Sources
and Availability of Suppliers and Supplies





Currently we have
access to an adequate supply of products, from various
manufacturers.  These companies and their products are
new, not well established, and are a subject to significant risk
and uncertainty.





Dependence
on One or a few Major Customers





We do not
anticipate dependence on one or a few major customers into the
foreseeable future.





Patents,
Trademarks, Licenses, Franchise Restrictions and Contractual
Obligations and Concessions





We executed a
license agreement with Psyko Audio Labs Canada to manufacture and
distribute the Carbon and Krypton line of patented headphones. US
Patent # 8,000,486 (for the Psyko KryptonTM surround sound
gaming headphones).  With regard to intellectual property
rights associated with Psyko TM Headphones, we have a license
to use this mark as well as the patented technology.





In regard to
intellectual property rights associated with KrankzTM
Bluetooth® wireless headphones, we do not have a federally
registered trademark in the word Krankz.  Therefore, we
do not have the same presumptive rights which might otherwise apply
had we obtained a federally registered trademark.  We
believe we have intellectual property rights to this mark under
common law.  If we are unable to register this mark, we
may use an alternative name for these headphones.  On
April 2, 2015, KrankTM Amplifiers (associated with guitar
amplifiers) filed an application for a design plus words mark on
the Principal Register with the U.S. PTO.  Guitar
amplifiers consist of electronic communication and amplification
devices and would generally fall in the same or similar category as
our KrankzTM Bluetooth® Audio Headset. As of this date of
this report, no office action has been issued by the U.S. PTO, and
KrankTM Amplifiers reported in April that they have not yet
made any use of this mark in interstate commerce.  We
have been using this mark in interstate commerce for quite some
time prior to April, 2015.  We may no longer be able to
use the common law trademark “KrankzTM” if Krank
Amplifiers is granted its trademark and we do not file an
opposition to such mark or we do not prevail in the defense of our
mark in the U.S. Trademark and Trial Appeal Board (TTAB). We shall
continue to monitor the status of that mark to determine what
impact it might have, if any, as to our Krankz mark.





16





Subsidiaries





We do not have any
subsidiaries.





MANAGEMENT’S
DISCUSSION AND ANALYSIS





Comparison
of Three and Six Month Results for the quarters ended August 31,
2016 and 2015, respectively





Revenues
and Gross Profit





For the three
months ended August 31, 2016 and 2015, the Company recognized
$7,110 and $5,115 in revenue, respectively.   For the
nine months ended August 31, 2016 and 2015, the Company recognized
$24,727 and $15,683 in revenue, respectively.   At August
31, 2016, the Company had incurred an accumulated deficit of
$5,387,030 since inception.





Costs
and Expenses





Total cost and
expenses were $338,001 and $340,839 for the three months ended
August 31, 2016 and 2015, respectively. Total cost and expenses
were $1,056,769 and $984,916 for the nine months ended August 31,
2016 and 2015, respectively. The increase was primarily due to the
increasing costs associated with public relations, royalty fees,
and professional fees.





Research
and Development Costs





The Company
incurred $2,770 and ($2,877) for research and development costs for
the three months ended August 31, 2016 and 2015, respectively. The
Company incurred $15,018 and $3,461 for research and development
costs for the nine months ended August 31, 2016 and 2015,
respectively. These costs relate to hardware engineering, design
and development of the KrankzTM and Krankz MaxxTM
Bluetooth Wireless Headset and the Psyko Krypton® surround
sound gaming headphones for personal computers were reclassed to
promotional costs.





Other
Income and Expenses





During the course
of our business, we experienced a gain from foreign currency
transactions of $505 in the three month period ended August 31,
2016, compared to $11,918 in the comparable period ended August 31,
2015. During the nine months ended August 31, 2016 and 2015, we
experienced a loss from foreign currency transactions of $10,820
and a gain of $16,121, respectively. These gains are associated
with currency exchange rate fluctuations as our royalty obligation
under the license agreement is stated in Canadian
dollars.





Interest expense
associated with obligations to related parties was $1,146 and
$1,147 in the three month periods ended August 31, 2016 and 2015,
respectively. Interest expense associated with obligations to
related parties was $3,427 and $3,565 in the nine month periods
ended Augut 31, 2016 and 2015, respectively.





Liquidity
and Capital Resources





Other than what is
described in this Report, the Company had no material commitments
for capital expenditures at Augut 31, 2016 and 2015.





On May 25, 2011,
Exeo Entertainment, Inc. entered into an exclusive license
agreement with Digital Extreme Technologies, Inc. whereby Exeo
Entertainment, Inc. will manufacture and market the Extreme Gamer
and Zaaz keyboard. Exeo Entertainment, Inc. will pay Digital
Extreme Technologies, Inc. a 5% royalty fee on gross sales of both
products.





Unless the Royalty
Agreement is modified by Psyko Audio Labs Canada and the Company,
at January 1, 2016, the Company is obligated to pay minimum monthly
royalties of $80,000 (CDN $100,000) per quarter for the remaining
term of the contract.  No such modification has been made as
of the date of this report. The company carries the risk of
currency exchange rate fluctuations as our royalty obligation under
the license agreement is stated in Canadian dollars. For the three
months ended May 31, 2016, the Company made a $50,000 payment
towards this obligation and no royalty invoices have been received
from Psyko Audio Labs. Royalty payable was $460,667 as of August
31, 2016. For the three months ended August 31, 2016, royalty
expense and related gain on foreign currency transactions was
$77,065 and $505, respectively. For the nine months ended August
31, 2016, royalty expense and related loss on foreign currency
transactions was $226,135 and $10,820, respectively.





17





The Company has an
office and warehouse rental lease obligation through September 30,
2016, which equals $70,060 as of November 30, 2015. The monthly
minimum rental payment is $7,006. Rent expense was $21,018 and
$28,024 for the three months ended August 31, 2016 and 2015,
respectively. Rent expense was $63,054 and $70,060 for the nine
months ended August 31, 2016 and 2015, respectively.





Cash
Flow Information





On August 31, 2016,
the Company had working capital of approximately $(310,181). On
November 30, 2015, the Company had working capital of approximately
$183,520. The decrease in working capital primarily relates to a
decrease in cash, offset by an increase in royalty payable during
the nine months ending August 31, 2016. The Company believes it has
insufficient cash resources to meet its liquidity requirements for
the next 12 months.





The Company had
cash and cash equivalents of approximately $155,134 and $427,663 at
August 31, 2016 and November 30, 2015, respectively. This
represents a decrease in cash of $272,529.





Cash used in Operating Activities


The Company used
approximately $663,157 of cash for operating activities in the nine
months ended August 31, 2016 as compared to using $701,527 of cash
for operating activities in the nine months ended August 31, 2015.
This decrease in cash used in operating activities, is primarily
attributed to an increase in operating loss.





Cash used in Investing Activities


The Company used
approximately $10,430 of cash for investing activities in the nine
months ended August 31, 2016 as compared to using $2,423 of cash
for investing activities in the nine months ended August 31, 2015.
This decrease in cash used in investing activities, is primarily
attributed to a purchase of a vehicle.





Cash Provided by Financing Activities


Financing
activities in the nine months ended August 31, 2016 provided
$401,058 of cash as compared to providing $740,845 of cash in the
nine months ended August 31, 2015. The difference is attributable
to an increase in cash receipts from sales of the Company’s
preferred stock.





The Company’s
principal sources and uses of funds are investments from accredited
investors. The Company would need to raise additional capital in
order to meet its business plan. Management intends to secure
additional funds using borrowing or the further sale of Regulation
D, Section 506 securities to accredited investors in the
future.





The Company
anticipates that its future liquidity requirements will arise from
the need to fund its growth, pay its current obligations and future
capital expenditures. The primary sources of funding for such
requirements are expected to be cash generated from operations and
raising additional funds from private sources and/or debt
financing.





Going
Concern Consideration





There is
substantial doubt about the Company’s ability to continue as
a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible
inability of the Company to continue as a going
concern.





The ability of the
Company to continue as a going concern is dependent on the Company
generating cash from the sale of its common stock or obtaining debt
financing and attaining future profitable operations.
Management’s plan includes selling its equity securities and
obtaining debt financing to fund its capital requirement and
ongoing operations; however, there can be no assurance the Company
will be successful in these efforts.





Off-Balance
Sheet Arrangements





The Company has no
off-balance sheet arrangements.





18





Forward-Looking
Statements





Many statements
made in this report are forward-looking statements that are not
based on historical facts. Because these forward-looking statements
involve risks and uncertainties, there are important factors that
could cause actual results to differ materially from those
expressed or implied by these forward-looking statements. The
forward-looking statements made in this report relate only to
events as of the date on which the statements are
made.





Item
3. Quantitative and Qualitative Disclosure About Market
Risks





As a “smaller
reporting company”, we are not required to provide the
information required by this Item.





Item
4. Controls and Procedures





Evaluation
of Disclosure Controls and Procedures





Our management has
evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the period
covered by this Report. Based on the management evaluation, we
concluded that our disclosure controls and procedures may not be
effective to provide reasonable assurance that information we are
required to disclose in the reports that we file or submit under
the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to
our management, including our principal executive officer and
principal financial officer, or persons performing similar
functions, as appropriate to allow timely decisions regarding
required disclosure. In the 3rd Quarter, 2015, management is in the
process of determining how to most effectively improve our
disclosure controls and procedures.





Management’s
Report on Internal Control over Financial Reporting





Our management is
responsible for establishing and maintaining adequate internal
control, as is defined in the Securities Exchange Act of 1934.
These internal controls are designed to provide reasonable
assurance that the reported financial information is presented
fairly, that disclosures are adequate and that the judgments
inherent in the preparation of financial statements are reasonable.
There are inherent limitations in the effectiveness of any system
of internal controls, including the possibility of human error and
overriding of controls. Consequently, an effective internal control
system can only provide reasonable, not absolute, assurance with
respect to reporting financial information.





Our internal
control over financial reporting includes policies and procedures
that: (i) pertain to maintaining records that in reasonable detail
accurately and fairly reflect our transactions; (ii) provide
reasonable assurance that transactions are recorded as necessary
for preparation of our financial statements in accordance with
generally accepted accounting principles and the receipts and
expenditures of company assets are made and in accordance with our
management and directors authorization; and (iii) provide
reasonable assurance regarding the prevention or timely detection
of unauthorized acquisition, use or disposition of assets that
could have a material effect on our financial
statements.





Management has
undertaken an assessment of the effectiveness of our internal
control over financial reporting based on the framework and
criteria established in the Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”). Based upon this
evaluation, management concluded that our internal control over
financial reporting may not be effective as of May 31, 2016. Other
than our two officers, we have no employees or contractors that
have the authority to implement any changes in our internal control
or financial reporting.





This quarterly
report does not include an attestation report of our registered
public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation
by our registered public accounting firm pursuant to the temporary
rules of the Securities and Exchange Commission that permit us to
provide only management’s report in this quarterly
report.





Changes
in Internal Control Over Financial Reporting





There were changes
in our internal control over financial reporting that occurred
during our most recent fiscal quarter that may have materially
affected, or may be reasonably likely to materially affect, our
internal control over financial reporting.








19





Limitations
on Effectiveness of Controls and Procedures





In designing and
evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of
achieving the desired control objectives. In addition, the design
of disclosure controls and procedures must reflect the fact that
there are resource constraints and that management is required to
apply its judgment in evaluating the benefits of possible controls
and procedures relative to their costs. In the second quarter of
2016, management is in the process of determining how to most
effectively improve our disclosure controls and
procedures.





PART
II – OTHER INFORMATION





Item
1. Legal Proceedings





The Company has no
knowledge of existing or pending legal proceedings against the
Company, nor is the Company involved as a plaintiff in any
proceeding or pending litigation. There are no proceedings in which
any of the Company’s directors, officers or any of their
respective affiliates, or any beneficial stockholder, is an adverse
party or has a material interest adverse to our interest. The
Company’s address for service of process in Nevada is
Business Filings, Incorporated located at 311 S. Division Street,
Carson City, Nevada 89703.





Item
1A. Risk Factors





As a “smaller
reporting company”, we are not required to provide the
information required by this Item.





Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds





None.





Item
3. Defaults Upon Senior Securities





None. All payments
were made on schedule.





Item
4. Mine Safety Disclosures





Not
applicable.





Item
5. Other Information





Market
for the Company’s Common Stock





The Company’s
common stock is traded on the over-the-counter market and quoted on
the Over-The-Counter Bulletin Board (OTCBB) under the trading
symbol “EXEO”.  Our common stock is also
quoted on OTCQB, a segment of OTC Link LLC and OTC Markets Group.
As of the date of this report, there is a limited public market for
our common stock. For purpose of this Item, the existence of
limited or sporadic quotations should not of itself be deemed to
constitute an “established public trading market,” if
any, for our common stock. We can provide no assurance that our
shares will be actively traded on the OTC or, that the public
market will achieve or continue with any particular daily volume or
price for our listed securities.





Related Party
Transactions





At August 31, 2016
we owed an officer $83,419.





20





Item
6. Exhibits





Exhibit
Number
Name
and/or Identification of Exhibit31.1
Certification
of Chief Executive Officer pursuant to Securities Exchange Act Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
Certification
of Chief Financial Officer pursuant to Securities Exchange Act Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
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
200232.2
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
200299.1
Temporary
Hardship Exemption101.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
*101.LAB
XBRL
Taxonomy Extension Label Linkbase Document *101.PRE
XBRL
Taxonomy Extension Presenation Linkbase Document
*





* To be
furnished by amendment per Temporary Hardship Exemption under
Regulation S-T.
































21





SIGNATURES





Pursuant to the
requirements of the Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.





EXEO
ENTERTAINMENT, INC.(Registrant)Signature
Title
Date/s/ Jeffrey A. Weiland
President and
Director
October 17,
2016Jeffrey A.
Weiland/s/ Robert S. Amaral
Chief Executive
Officer,
October 17,
2016Robert S.
Amaral
Treasurer and
Director(Principal
Executive and Financial Officer)
















































































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