Marquie Group, Inc. - Quarter Report: 2013 February (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the transition period from ______to______

Commission File Number: 000-54163

 (702) 871-8535

(Registrant’s telephone number, including area code)

Not Applicable

 (Former Name, former address and former fiscal year, if changed since last report)

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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  x   No  o

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x   No  o

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:

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: As of April 14, 2013, there were 23,650,000 shares of $0.001 par value common stock, issued and outstanding.

PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements

ZHONG SEN INTERNATIONAL TEA COMPANY

Notes to the Financial Statements

February 28, 2013 and February 29, 2012

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

Basis of Presentation

The accompanying unaudited financial statements are presented in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal occurring accruals) considered necessary in order to make the financial statements not misleading, have been included. Operating results for the nine months ended February 28, 2013 are not necessarily indicative of results that may be expected for the year ending May 31, 2013. 

Organization

Zhong Sen International Tea Company (the “Company”) was incorporated on January 30, 2008, in the State of Florida. The Company has the principal business objective of providing sales and marketing consulting services to small to medium sized Chinese tea producing companies who wish to export and distribute high quality Chinese tea products worldwide. The Company commenced business activities in August, 2008, when it entered into a related party Sales and Marketing Agreement with Yunnan Zhongsen Group, Ltd (YZG) (a/k/a Yunnan Zhongsen Commercial Forest Plantation Group Inc., a/k/a Yunnan Zhongsen Forest Co., Ltd.), a company located in Kunming, China, to provide sales and marketing consulting services for YZG’s tea and tea related business lines. 

NOTE 2 - STOCKHOLDERS' EQUITY

On June 12, 2012, a related party contributed $13,000 to the Company.  This payment was accounted for as Additional Paid in Capital.

On October 15, 2012, our President contributed $50,000 to the Company to fund ongoing operations.  This payment was accounted for as Additional Paid in Capital.

In February, 2013, the Company issued 3,650,000 shares of common stock for the settlement of liabilities.

NOTE 3 - GOING CONCERN

The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the nine months ended February 28, 2013 the Company has a net loss of $112,287, and an accumulated deficit of $12,435,845 as of February 28, 2013. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management continues to actively seek additional sources of capital to fund current and future operations. There is no assurance that the Company will be successful in continuing to raise additional capital and establish its business model. These unaudited financial statements do not include any adjustments that might result from the outcome of these uncertainties.

NOTE 4 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events for the period of February 28, 2013 through the date the financial statements were issued, and concluded there were no other events or transactions occurring during this period that required recognition or disclosure in its financial statements.

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operation

The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this prospectus. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

BUSINESS OVERVIEW

Zhong Sen International Tea Company (the “Company”) was incorporated on January 30, 2008, in the State of Florida. The Company has the principal business objective of providing sales and marketing consulting services to small to medium sized Chinese tea producing companies who wish to export and distribute high quality Chinese tea products worldwide. The Company commenced business activities in August 2008, when it entered into a related party Sales and Marketing Agreement with Yunnan Zhongsen Group, Ltd (“YZG”) , a related party company located in Kunming, China (the “YZG Agreement”), to provide sales and marketing consulting services for YZG’s tea and tea related business lines.  During the year ended May 31, 2009, the Company exited the development stage.

RESULTS OF OPERATION

Results of Operations for the Three Months Ended February 28, 2013 as Compared to the Three Months ended February 29, 2012

Total Revenues

We had revenues of $0 for the three months ended February 28, 2013 and $0 for the three months ended February 29, 2012.  We are entitled to receive 20% of YZG’s sales through YZG Agreement.  Due to operational and cash flow issues with YZG, a related party and our sole customer, management has determined that future collections under our marketing agreement are doubtful and stopped recording sales in the fourth quarter of 2010 related to the YZG Agreement.

Operating Expenses

Operating expenses for the three months ended February 28, 2013 totaled $45,392 as compared to $11,322 for the three months ended February 29, 2012.  Professional fees increased by approximately $4,000 during the three month period ended February 28, 2013, as compared to the three month period ended February 29, 2012. During the three months ended February 29, 2012, the Company recovered $25,000 from a customer on accounts receivable that had been previously written off. This amount was credited to bad debt expense thus decreasing operating expenses.

Net Loss

Net loss was $19,590 for the three months ended February 28, 2013, as compared to a net loss of $11,322 for the three months ended February 29, 2012. During the three months ended February 28, 2013, the Company recorded a gain on the settlement of debt in the amount of $25,802.

Results of Operations for the Nine Months Ended February 28, 2013 as Compared to the Nine Months ended February 29, 2012

Total Revenues

We had revenues of $0 for the nine months ended February 28, 2013 and $0 for the nine months ended February 29, 2012.  We are entitled to receive 20% of YZG’s sales through the YZG Agreement.  Due to operational and cash flow issues with YZG, a related party and our sole customer, management has determined that future collections under t are doubtful and stopped recording sales in the fourth quarter of 2010 related to the YZG Agreement.

Operating Expenses

Operating expenses for the nine months ended February 28, 2013 totaled $132,641 as compared to $11,490,372 for the nine months ended February 29, 2012.  During the nine months ended February 29, 2012, we issued 18,998,992 shares of common stock, with a value of $11,399,395, at the most recent cash sale price of $0.60 per share, to our President for her service to the Company.  Exclusive of the stock issuance, professional fees increased approximately $11,000 during the nine month period ended February 28, 2013, as compared to the nine month period ended February 29, 2012.  

Net Loss

Net loss was $112,287 for the nine months ended February 28, 2013, as compared to a net loss of $11,490,372 for the nine months ended February 29, 2012.  During the nine months ended February 28, 2013, the Company recorded a gain on the settlement of debt in the amount of $25,802. Other expenses incurred during the nine months ended February 28, 2013 were interest expense in the amount of $2,522 and loss on early extinguishment of beneficial conversion feature of $2,926 of an outstanding convertible debenture that was repaid during the period.

LIQUIDITY AND CAPITAL RESOURCES

As of February 28, 2013, we have assets of $0 and total liabilities of $0.  As compared to May 31, 2012 we had assets of $40 consisting of cash of $40 and total liabilities of $224,509, consisting of accounts payable of $223,637, notes payable from related party of $50, convertible debenture payable (net of discount) of $822.

Cash and cash equivalents from inception to date have been insufficient to cover our expenses. Current cash on hand is insufficient to support our operations for the next twelve months. Therefore, we will require additional funds to continue to implement and expand our business plan during the next twelve months.

PLAN OF OPERATIONS

Acquisition or Merger Candidates

We will attempt to locate and negotiate with a business entity for a combination with us. The combination will normally take the form of a merger, stock- for-stock exchange or stock-for-assets exchange. In most instances the target company will wish to structure the business combination to be within the definition of a tax-free reorganization under Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended. No assurances can be given that we will be successful in locating or negotiating with any target company.

Employees

As of February 28, 2013, we have no employees.  Our officers and directors contribute their services at no cost to the Company.

GOING CONCERN

As reflected in the accompanying unaudited financial statements, we have a net loss of $112,287 and an accumulated deficit of $12,435,845 as of February 28, 2013.  This raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital and implement our business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.  In June, 2012, a related party contributed $24,256 to the Company, and in October, 2012, our President contributed $50,000 to the Company.

We believe that actions presently being taken to obtain additional funding and implement our strategic plans provide the opportunity for us to continue as a going concern.

CRITICAL ACCOUNTING PRONOUNCEMENTS

Our financial statements and related public financial information are based on the application of generally accepted accounting principles in the United States (“GAAP”). GAAP requires the use of estimates, assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our significant accounting policies are summarized in Note 1 of our financial statements. While all these significant accounting policies impact its financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the periods presented in this report. 

Revenue Recognition

We recognize revenue on arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”.  In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

RECENT ACCOUNTING PRONOUNCEMENTS

We have reviewed accounting pronouncements issued during the past two years and have adopted any that are applicable to the Company. We have determined that none had a material impact on our financial position, results of operations, or cash flows for the nine months ended February 28, 2012 and February 29, 2013.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (“SPE”s).

Item 3.    Quantitative and Qualitative Disclosures about Market Risks

Not applicable because we are a smaller reporting company.

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits 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 the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure as a result of continuing material weaknesses in its internal control over financial reporting.

As disclosed in the Company’s Annual Report on Form 10-K for the year ended May 31, 2012, during the assessment of the effectiveness of internal control over financial reporting as of May 31, 2012, our management identified material weaknesses related to the lack of requisite U.S. GAAP expertise of our CFO. Additionally, we do not have an independent audit committee. This lack of expertise to prepare, evaluate and review our financial statements in accordance with U.S. GAAP constitutes a material weakness in our internal control over financial reporting. Until such time as we hire the proper internal accounting staff with the requisite U.S. GAAP experience, and we appoint qualified independent directors to the Board of Directors and audit committee, it is unlikely we will be able to remediate the material weakness in our internal control over financial reporting.

Changes in Internal Controls Over Financial Reporting

There have been no changes in the Company's internal control over financial reporting during the latest fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.    Legal Proceedings.

Currently we are not aware of any litigation pending or threatened by or against the Company.

Item 1A. Risk Factors

Not applicable because we are a smaller reporting company.

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

None.

Item 3.    Defaults Upon Senior Securities.

None.

Item 4.    Mine Safety Disclosures

Not Applicable.

Item 5.    Other Information.

None.

Item 6.    Exhibits.

SIGNATURES

Pursuant to the requirements 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.