Marquie Group, Inc. - Quarter Report: 2015 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

(800) 351-3021

(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  ☒   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 (§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  ☒   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:

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

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 16, 2015, there were 82,946,559 shares of $0.001 par value common stock, issued and outstanding.

PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements

MUSIC OF YOUR LIFE, INC.

Notes to the Financial Statements

February 28, 2015

(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, 2015 are not necessarily indicative of results that may be expected for the year ending May 31, 2015. 

Organization

Music of Your Life, Inc. (hereafter, “we”, ”our”, ”us”, “MYL”, or the ”Company”) was incorporated on January 30, 2008, in the State of Florida, as Zhong Sen International Tea Company, with 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. However, due to lack of capital, the Company was unable to implement its business plan fully. On May 31, 2013, the Company entered into a merger agreement (the “Merger”) with Music of Your Life, Inc., a Nevada corporation (“MYL Nevada”). As a result of the Merger, MYL Nevada is a wholly-owned subsidiary of the Company, and the Company is now operating a multi-media entertainment company, producing television shows and radio programming. The Company changed its name to Music of Your Life, Inc. effective July 26, 2013. 

NOTE 2–NOTES PAYABLE

On June 27, 2014, the Company issued a $37,500 Convertible Promissory Note which bore interest at a rate of 8% and was convertible into the Company’s common stock at the holder’s option, at the conversion rate of 58% of the average of the lowest three trading prices for the common stock during the ten trading days immediately preceding the date of conversion. The Company identified embedded derivatives related to the Convertible Promissory Note. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $53,057 for the embedded derivative. During the quarter ended February 28, 2015, the Company paid the note in full.

MUSIC OF YOUR LIFE, INC.

Notes to the Financial Statements

February 28, 2015

(Unaudited)

On August 15, 2014, the Company issued a $50,000 Promissory Note with a stated interest amount of $15,000 due at maturity on October 14, 2014. The Company also agreed to issue 350,000 shares of common stock, valued at $52,500, as part of the note agreement. The proceeds of the note were allocated between the principal and the market value of the stock resulting in the Company recording a discount on the debt of $25,610. This amount was amortized over the life of the promissory note.

NOTE 3 – NOTES PAYABLE TO RELATED PARTIES

NOTE 4 - STOCKHOLDERS' EQUITY

During the nine months ended February 28, 2015, the Company issued a total of 8,600,000 shares of common stock for cash in the total amount of $232,500.

Effective August 15, 2014, the Company issued 350,000 shares of common stock to a lender in connection with the issuance of a $50,000 Promissory Note (see Note 2).

Effective January 19, 2015, the Company issued a total of 450,881 shares of common stock to two related parties for the conversion of debt in the total amount of $65,378.

NOTE 5 – RELATED PARTY TRANSACTIONS

During the nine months ended February 28, 2015 and during the year ended February 28, 2014, the Company paid $125,000 and $26,000, respectively, to the wife of the chief executive officer as deposits for certain trademarks and other intellectual property to be assigned to the Company. Under the agreement, if the Company fails to pay to the wife of the chief executive officer $250,000 by December 31, 2015, the Company will forfeit all rights, title and interest in the trademarks and intellectual property unless extended by the wife of the chief executive officer.

MUSIC OF YOUR LIFE, INC.

Notes to the Financial Statements

February 28, 2015

(Unaudited)

For the nine months ended February 28, 2015 and 2014, the Company accrued consulting fees of $90,000 and $90,000, respectively, pursuant to its General Services Agreement dated November 5, 2012 with its chief executive officer (see Note 6).

NOTE 6 – COMMITMENTS AND CONTINGENCIES

On November 5, 2012, the Company executed a General Services Agreement with the Company’s chief executive officer. The agreement provides for the monthly compensation of $10,000 and remains in full force and effect until either party provides 30 days notice of termination to the other party.

On November 15, 2012 and June 3, 2013, the Company executed General Services Agreements with two other service providers. The agreements provide for monthly compensation of $1,000 and $500, respectively, and remain in full force and effect until either party provides 90 days and 30 days, respectively, notice of termination to the other party.

NOTE 7 - 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, 2015 the Company had a net loss of $303,253, and an accumulated deficit of $1,080,790 as of February 28, 2015. 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 8 – SUBSEQUENT EVENTS

On March 9, 2015, the Company issued 500,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $20,000.

On March 20, 2015, the Company issued 300,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $15,000.

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

We are a multi-media entertainment company which that currently produces live radio programming 24 hours a day, syndicated to AM, FM and HD terrestrial radio stations around the country. The network is also heard streaming across the Internet using our registered trademark, iRadio®. Music of Your Life® has been on the air since 1978, making it the longest running syndicated music radio network in the world. Our principal source of revenue comes from selling radio spots, or commercials on the network, and licensing our trade names. Expenses which comprise the costs of goods sold include licensing agreements and royalties, as well as operational and staffing costs related to the management of the Company’s syndicated network. General and administrative expenses are comprised of administrative wages and benefits; occupancy and office expenses; outside legal, accounting and other professional fees; travel and other miscellaneous office and administrative expenses. Selling and marketing expenses include selling/marketing wages and benefits, advertising and promotional expenses, as well as travel and other miscellaneous related expenses.

Because we have incurred losses, income tax expenses are immaterial. No tax benefits have been booked related to operating loss carryforwards, given our uncertainty of being able to utilize such loss carryforwards in future years. We anticipate incurring additional losses during the coming year.

RESULTS OF OPERATION

Following is management’s discussion of the relevant items affecting results of operations for the three and nine months ended February 28, 2015.

Revenues. The Company generated net revenues of $-0- during the three months ended February 28, 2015 compared to $567 for three months ended February 28, 2014. The Company generated net revenues of $1,966 during the nine months ended February 28, 2015 compared to $875 for the nine months ended February 28, 2014. Revenues were generated from spot sales, digital sales and subscription based sales from the live radio programming through radio stations around the country.

Cost of Sales. Our cost of sales for the three and nine months ended February 28, 2015 and 2014 was $-0-. Our cost of sales in the future will consist principally of licensing costs and royalties associated with our syndicated radio network, other related services provided directly or outsourced through our affiliates, as well as operational and staffing costs with respect thereto.

Salaries and Consulting Fees. Salaries and consulting fees for the three months ended February 28, 2015 were $34,500 compared to $29,462 for the three months ended February 28, 2014. Salaries and consulting fees for the nine months ended February 28, 2015 were $106,500 compared to $226,262 for the nine months ended February 28, 2014. The decrease from the prior period is due to the issuance of 620,000 shares of stock for services rendered to the Company during the nine months ended February 28, 2014. These shares were valued at $155,000. We expect that salaries and consulting expenses, that are cash instead of share-based, will increase as we add personnel to build our multi-media entertainment business.

Professional Fees. Professional fees for the three months ended February 28, 2015 were $2,810 compared to $2,903 for the three months ended February 28, 2014. Professional fees for the nine months ended February 28, 2015 were $28,868 compared to $171,630 for the nine months ended February 28, 2014. The decrease from the prior period is due to the issuance of 600,000 shares of stock for services rendered to the Company during the nine months ended February 28, 2014. These shares were valued at $150,000. We anticipate that professional fees will increase in future periods as we scale up our operations.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $34,138 for the three months ended February 28, 2015 compared to $19,908 for the three months ended February 28, 2014. Selling, general and administrative expenses were $79,241 for the nine months ended February 28, 2015 compared to $53,164 for the nine months ended February 28, 2014. We anticipate that SG&A expenses will increase commensurate with an increase in our operations.

Other Income (Expense). The Company had net other income of $2,581 for the three months ended February 28, 2015 compared to net other expenses of $18,750 for the three months ended February 28, 2014. The Company had net other expenses of $90,610 for the nine months ended February 28, 2015 compared to $56,300 for the nine months ended February 28, 2014. Other expenses incurred were comprised of interest expenses related to notes payable. During the nine months ended February 28, 2015, the Company also recorded a gain on the change in fair value of derivative liability in the amount of $53,057 and the amortization of debt discount in the amount of $56,044.

LIQUIDITY AND CAPITAL RESOURCES

As of February 28, 2015, our primary source of liquidity consisted of $13,977 in cash and cash equivalents. We hold most of our cash reserves in local checking accounts with local financial institutions. Since inception, we have financed our operations through a combination of short and long-term loans, and through the private placement of our common stock.

We have sustained significant net losses which have resulted in an accumulated deficit at February 28, 2015 of $1,080,790 and are currently experiencing a substantial shortfall in operating capital which raises doubt about our ability to continue as a going concern. We generated a net loss for the nine months ended February 28, 2015 of $303,253. Without additional revenues, working capital loans, or equity investment, there is substantial doubt as to our ability to continue operations.

We believe these conditions have resulted from the inherent risks associated with small public companies. Such risks include, but are not limited to, the ability to (i) generate revenues and sales of our products and services at levels sufficient to cover our costs and provide a return for investors, (ii) attract additional capital in order to finance growth, and (iii) successfully compete with other comparable companies having financial, production and marketing resources significantly greater than those of the Company.

We believe that our capital resources are insufficient for ongoing operations, with minimal current cash reserves, particularly given the resources necessary to expand our multi-media entertainment business. We will likely require considerable amounts of financing to make any significant advancement in our business strategy. There is presently no agreement in place that will guarantee financing for our Company, and we cannot assure you that we will be able to raise any additional funds, or that such funds will be available on acceptable terms. Funds raised through future equity financing will likely be substantially dilutive to current shareholders. Lack of additional funds will materially affect our Company and our business, and may cause us to substantially curtail or even cease operations. Consequently, you could incur a loss of your entire investment in the Company.

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 of 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 an 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, 2015.

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, 2014, during the assessment of the effectiveness of internal control over financial reporting as of May 31, 2013, 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

On May 31, 2013, the Company entered into a Merger Agreement between the Company and Music of Your Life, Inc., a Nevada corporation (“MYL Nevada”). In accordance with the terms of the merger agreement, all of the shares of MYL Nevada held by MYL Nevada shareholders were cancelled and 100 shares of MYL Nevada were issued to the Company. An aggregate of 34,860,000 shares of common stock of the Company were issued to the MYL Nevada shareholders.

On July 15, 2013, the Company issued 280,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $70,000.

On September 4, 2013, the Company issued an aggregate of 1,200,000 shares of its common stock to certain consulting personnel for services provided.

On November 11, 2013, the Company issued 20,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $5,000.

On December 3, 2013, the Company issued 40,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $10,000.

On December 24, 2013, the Company issued 160,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $20,000.

On December 27, 2013, the Company issued 40,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $10,000.

On January 15, 2014, the Company issued 32,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $8,000.

On January 31, 2014, the Company issued 40,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $10,000.

On February 27, 2014, the Company issued 40,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $10,000.

On March 19, 2014, the Company issued 200,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $10,000.

On April 16, 2014, the Company issued 40,000 shares of unregistered common stock to accredited investors in exchange for cash in the amount of $2,000.

On April 17, 2014, the Company issued 400,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $20,000.

On May 7, 2014, the Company issued 500,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $25,000.

On May 20, 2014, the Company entered into a Merger Agreement (the “Merger Agreement”) by and among the Company and iRadio, Inc., a Utah corporation ("iRadio"). Pursuant to the terms of the Merger Agreement, each shareholder of iRadio received one (1) share of common stock of the Company for every one (1) share of iRadio common stock held as of May 20, 2014. In accordance with the terms of the Merger Agreement, all of the shares of iRadio held by iRadio shareholders were cancelled, and an aggregate of 20,000,000 shares of common stock of the Company were issued to the iRadio shareholders.

On May 21, 2014, the Company issued 100,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $5,000.

On June 2, 2014, the Company issued 200,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $10,000.

On June 12, 2014, the Company issued 200,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $10,000.

On June 20, 2014, the Company issued 200,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $10,000.

On August 15, 2014, the Company issued 350,000 shares of unregistered common stock to an accredited investor in consideration of the investor making a $50,000 loan to the Company.

On August 29, 2014, the Company issued 700,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $35,000.

On November 6, 2014, the Company issued 300,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $30,000.

On December 9, 2014, the Company issued 3,125,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $50,000.

On January 19, 2015, the Company issued 450,881 shares of unregistered common stock for the conversion of debt in the amount of $65,378.

On January 23, 2015, the Company issued an aggregate of 750,000 shares of unregistered common stock to certain accredited investors in exchange for cash in the aggregate amount of $37,500.

On February 5, 2015, the Company issued 3,125,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $50,000.

On March 9, 2015, the Company issued 500,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $20,000.

On March 20, 2015, the Company issued 300,000 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $15,000.

With respect to the transactions noted above, each of the recipients of securities of the Company was an accredited investor, or is considered by the Company to be a “sophisticated person”, inasmuch as each of them has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of receiving securities of the Company. No solicitation was made and no underwriting discounts were given or paid in connection with these transactions. The Company believes that the issuance of its securities as described above was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(2) of the Securities Act of 1933.

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.