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. For the nine months ended August 31, 2021, we generated minimal 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 Psyko™ PC model and are working on the molds


    for the Psyko™ console unit, and the Psyko®5.1 Surround Sound Gaming Headsets
    (with built-in microphone) with external amplifier for Personal Computers.

2) We have an "Exclusive Distributor" Agreement with Axcel Electronics Thailand

Company Limited (Cableicons, Inc.) to distribute and sell the "Ford Officially
    Licensed Cell Phone Accessories" in all wholesale and retail channels in the
    USA and Canada.

3) We are also working with Vegas Golden Knight NHL team and have designed a


    custom Krankz headphone for them.




Products and Services

Products under development include the Psyko™ 5.1 surround sound gaming headphones for consoles and Krankz™ MAXX Bluetooth™ wireless headphones.

Strategy and Marketing Plan

Manufacturing is established, so 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 ™ Headphones

While our Psyko™ 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 Psyko™ 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.



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Krankz™ 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.

We are also, working with Vegas Golden Knights NHL team and have designed a custom Krankz Headphone for them. This is part of the sponsorship agreement we entered into during 2018 and renewed in 2019.

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.





Distributor Agreement

We have an "Exclusive Distributor" Agreement with Axcel Electronics Thailand Company Limited (Cableicons, Inc.) to distribute and sell the "Ford Officially Licensed Cell Phone Accessories" to all wholesale and retail channels in the USA and Canada. Here is the link for the online Ford Officially Licensed Cell Phone Accessories Catalog. https://bit.ly/2Qo1eom

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 Krypton™ surround sound gaming headphones.) With regard to intellectual property rights associated with Psyko® Headphones, we have a license to use this mark as well as the patented technology.

We entered into a license agreement with Digital Extreme Technologies, Inc., a Delaware corporation, (also referred to as DXT) for use of certain intellectual property associated with the products being designed and developed by us. The Black Widow keyboard is now known as the Zaaz keyboard. DXT worked to design and develop the Extreme Gamer as well as the Black Widow keyboard. We continue to work under a license agreement with DXT to advance the use of technologies designed by DXT. There is no licensing fee paid to DXT during the years ended November 30, 2014 and 2015.



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DXT applied to the U.S. PTO for a patent of its Multi Video Game Changer. The agency assigned an application number of 12/543296 to its application, which was published on February 25, 2010. The proposed 10 disk Video Game Changer is designed to interface directly with Sony PS3®, Nintendo Wii®, and Microsoft Xbox 360®. The Company anticipates incorporating Blu-Ray® compatible optics technology under a license agreement. This would allow users to insert Blu-Ray® discs into the Video Game Changer, and once connected to the video game console, to play movies on television. Sony PS3® is now capable of playing Blu-Ray® discs, but only with a capacity for a single disk. This technology would provide for the loading of up to 10 DVD's, CD's or Blu-Ray® discs into a single console that communicates with a video game console via USB. Furthermore, users would be able to plug in any external hard disc drive ("HDD") directly into the console via an internal ATPI port, allowing movies, music and pictures to be played directly from the HDD.

In regard to intellectual property rights associated with Krankz™ Bluetooth® wireless headphones, we do not have a federally registered trademark as to the word marks Krankz or Krankz Maxx. Therefore, we do not have the same presumptive rights which might otherwise apply had we obtained a federally registered trademark. We have an "Exclusive Distributor" Agreement with Axcel Electronics Thailand Company Limited (Cableicons, Inc.) which covers the USA and Canada to Distribute and sell the "Ford Officially Licensed Cell Phone Accessories" in all wholesale and retail channels. 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.





Sponsorship Agreement

On July 13, 2018, the Company entered into a sponsorship agreement for headphones with Black Knight Sports and Entertainment, LLC (dba Vegas Golden Knights)("BKSE") for a period through June 2021. During the first NHL season, the Company was obligated to pay $230,000. For the second NHL season, the Company is obligated to pay $239,200 and for the third NHL season, the Company is obligated to pay $248,768. If the team goes into playoffs there could be additional fees due.





COVID-19

Since the outset of the pandemic the US and worldwide national securities markets have undergone unprecedented stress due to the uncertainties of the pandemic and the resulting reactions and outcomes of government, business and the general population. Closures and disruptions to business in the U.S. due to the COVID-19 pandemic have led to negative effects on our clients, in some situations, reducing demand for certain of our products. It is unclear how a prolonged outbreak with travel, commercial and other similar restrictions, may adversely affect our business operations and the business operations of our customers and suppliers. However, we anticipate a prolonged period will have a negative effect on our business operations.





Subsidiaries

We do not have any subsidiaries.



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MANAGEMENT'S DISCUSSION AND ANALYSIS

COMPARISON OF THREE MONTHS RESULTS FOR THE QUARTERS ENDED August 31, 2021 and 2020, RESPECTIVELY





Revenues and Gross Profit

For the three months ended August 31, 2021 and 2020, the Company recognized $2,033 and $5,101 in revenue, respectively. Cost of sales for the quarter ended August 31, 2021 was $3,043, leading to a gross loss of $1,010 during the period. In the comparable quarter ended August 31, 2020, revenue was $5,101 and cost of sales was $3,213, resulting in a loss of $1,888. The Company had an error which caused an overstatement of revenue by approximately $450 during the quarter ended May 31, 2021 and corrected it during this quarter. Additionally, the cost of goods sold includes minimum fees charged by the various sales channels for our products. These factors created the gross loss during this quarter.





Operating Expenses

Operating expenses were $190,396 and $260,206 for the three months ended August 31, 2021 and 2020, respectively. The decrease was primarily due to general and administrative expenses related to office expense and promotion expense.





Other Income and Expenses

During the course of our business, we experienced a gain from foreign currency transactions of $88,347 in the three months period ended August 31, 2021, compared to a loss of $82,933 in the comparable period ended August 31, 2020. These losses and 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 $1,171 and $1,171 in the three months periods ended August 31, 2021 and 2020, respectively.

Interest expense and financing expense associated with non-related party obligations was $55,520 and $1,811 in the three months periods ended August 31, 2021 and 2020, respectively. The increase was primarily due to the Company issued the convertible promissory notes during the six months ended August 31, 2021.

COMPARISON OF NINE MONTHS RESULTS FOR THE QUARTERS ENDED August 31, 2021 and 2020, RESPECTIVELY





Revenues and Gross Profit

For the nine months ended August 31, 2021 and 2020, the Company recognized $ 10,757 and $19,377 in revenue, respectively. Cost of sales for the quarter ended August 31, 2021 was $9,948, leading to a gross profit of $809 during the period. In the comparable quarter ended August 31, 2020, revenue was $19,377 and cost of sales was $15,327, resulting in a gross profit of $4,050.





Operating Expenses

Operating expenses were $894,129 and $867,744 for the nine months ended August 31, 2021 and 2020, respectively. The increase was primarily due to general and administrative expenses related to sponsorship fees.





Other Income and Expenses

During the course of our business, we experienced a loss from foreign currency transactions of $50,931 in the nine months period ended August 31, 2021, compared to a loss of $29,356 in the comparable period ended August 31, 2020. These losses and 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 $3,489 and $3,501 in the nine months periods ended August 31, 2021 and 2020, respectively.



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Interest expense and financing expense associated with non-related party obligations was $76,376 and $44,649 in the nine months periods ended August 31, 2021 and 2020, respectively. The decrease was primarily due to the Company recorded the modification of warrants during the three months ended February 29, 2020.

Liquidity and Capital Resources

Other than what is described in this Report, the Company had no material commitments for capital expenditures at August 31, 2021.

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 nine months ended August 31, 2021 and 2020, the Company made no payments towards this obligation and no royalty invoices have been received from Psyko Audio Labs. Royalty payable was $2,063,391 as of August 31, 2021.

The Company entered into the office lease extension agreement with the landlord in September 2020 for two years and is set to expire on September 30, 2022. The monthly minimum rental payment is $9,162 from October 1, 2020 to September 30, 2021 and $9,391 from October 1, 2021 to September 30, 2022.





Cash Flow Information

On August 31, 2021, the Company had working capital of approximately ($3,064,052). On November 30, 2020, the Company had working capital of approximately $(2,174,998). The decrease in working capital of $889,054 primarily relates to an increase in royalty payable in the amount of $290,473 and accounts payable in the amount of $256,318 during the nine months ending August 31, 2021. 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 $68,041 and $170,852 at August 31, 2021 and November 30, 2020, respectively. This represents a decrease in cash of $102,811.

Cash used in Operating Activities

The Company used $382,386 of cash for operating activities in the nine months ended August 31, 2021 as compared to using $560,054 of cash for operating activities in the nine months ended August 31, 2020. This decrease in cash used in operating activities, is primarily attributed to increase in net loss, accounts payable, and royalty payable.

Cash used in Investing Activities

The Company used $8,175 of cash for investing activities in the nine months ended August 31, 2021 as compared to using $7,180 of cash for investing activities in the nine months ended August 31, 2020.

Cash Provided by Financing Activities

Financing activities in the nine months ended August 31, 2021 provided $287,750 of cash as compared to providing $571,084 of cash in the nine months ended August 31, 2020. The difference is attributable to the decrease in cash receipts from sales of the Company's common stock and current year proceeds from convertible notes payable and prior year proceeds from exercise of warrants.



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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

Management included an explanatory paragraph in their footnotes on the accompanying financial statements expressing concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure.

As of August 31, 2021, the Company has cumulative losses totaling $13,066,449 and negative working capital of $3,064,052. The Company incurred a net loss of $1,023,341 for the nine months ended August 31, 2021.

We have negative working capital and have not yet received significant revenues from sales of products. Due to the coronavirus pandemic, the Company has adversely affected our business, which the demand for our products has decreased. These factors raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.

Since the outset of the pandemic the US and worldwide national securities markets have undergone unprecedented stress due to the uncertainties of the pandemic and the resulting reactions and outcomes of government, business and the general population. The demand for our products has decreased and the ability of our customers to make payment for the products they currently purchase has been negatively impacted. It is unclear how a prolonged outbreak with travel, commercial and other similar restrictions, may adversely affect our business operations and the business operations of our customers and suppliers. However, we anticipate a prolonged period will have a negative effect on our business operations.

Our ability to continue as a going concern is dependent on our generating cash from the sale of our common stock and/or obtaining debt financing and attaining future profitable operations. Management's plans include increasing revenue, selling our equity securities and/or obtaining debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be successful in these.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.





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.

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