Notes to the Consolidated Financial Statements
May 31, 2018
NOTE 1 -ORGANIZATION
Music of Your Life, Inc. (the “Company”)
was incorporated under the laws of the State of Florida on January 30, 2008 under the name of “Zhong Sen International Tea
Company”. From January 2008 to May 2013, the Company operated with the principal business objective of providing sales and
marketing consulting services to small to medium sized Chinese tea producing companies who wished to export and distribute high
quality Chinese tea products worldwide. On May 31, 2013 (the “Closing Date”), the Company entered into a Merger Agreement
(the “Merger Agreement”) by and among the Company, Music of Your Life, Inc., a Nevada corporation (“MYL Nevada”)
incorporated October 10, 2012, and Music of Your Life Merger Sub, Inc., a Utah corporation ("Merger Sub"), pursuant to
which MYL Nevada merged with Merger Sub. As a result of the merger, MYL Nevada became a wholly-owned subsidiary of the Company,
and on July 26, 2013, the Company changed its name to Music of Your Life, Inc., and is now operating a multi-media entertainment
company, producing live concerts, television shows and radio programming. On May 20, 2014 the Company acquired 100% of the outstanding
stock of iRadio, Inc., a Utah corporation. A total of 20,000,000 shares (5,000 shares adjusted for the June 20, 2018 1 share for
4,000 shares reverse stock split) were issued to the shareholders of iRadio. The Company was the surviving corporation. iRadio
was an entity related to the Company by common ownership.
Reverse Stock Split
Effective June 20, 2018, the Company
effectuated a 1 share for 4,000 shares reverse stock split which reduced the issued and outstanding shares of common stock from
3,642,441,577 shares to 910,610 shares. The accompanying financial statements have been retroactively adjusted to reflect this
reverse stock split.
Acquisition of The Marquie Group,
Inc.
On August 16, 2018 (see Note 12),
the Company merged with The Marquie Group, Inc. (“TMG”) in exchange for the issuance of a total of 40,000,002 shares
of our common stock to TMG’s stockholders. Following the merger, the Company has 40,910,612 shares of common stock issued
and outstanding.
NOTE 2 -SIGNIFICANT
ACCOUNTING POLICIES
This summary of significant accounting
policies of 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 are responsible for their integrity and objectivity. These
accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently
applied in the preparation of the financial statements. The following policies are considered to be significant:
a. Accounting
Method
The Company recognizes income and
expenses based on the accrual method of accounting. The Company has elected a May 31 year-end.
b. Cash
and Cash Equivalents
Cash equivalents are generally comprised
of certain highly liquid investments with original maturities of less than three months.
c. Use
of Estimates in the Preparation of Financial Statements
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
The preparation of financial statements
in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
d. Basic
and Fully Diluted Net Loss per Share of Common Stock
In accordance with Financial Accounting
Standards No. ASC 260, “Earnings per Share,” basic net loss per common share is based on the weighted average number
of shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of
common shares plus dilutive common share equivalents outstanding during the period. Dilutive instruments (such as convertible notes
payable) have not been included in the diluted earnings per share computations as their effect were antidilutive for the periods
presented.
e. Revenue
Recognition
Revenue is recognized upon completion
of services or delivery of goods where the sales price is fixed or determinable and collectability is reasonably assured. Advance
customer payments are recorded as deferred revenue until such time as they are recognized. The Company does not offer any cash
rebates. Returns or discounts, if any, are netted against gross revenues.
f. Recent
Accounting Pronouncements
We have reviewed accounting pronouncements
issued 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 years ended May 31, 2018 and 2017.
Certain other accounting pronouncements
have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been
adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards
is not expected to be material.
g. Income
Taxes
Deferred income taxes are provided
on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
At May 31, 2018, the Company had
net operating loss carryforwards of approximately $3,035,346 which may be offset against future taxable income through 2038. No
tax benefit has been reported in the financial statements because the potential tax benefits of the net operating loss carryforwards
are offset by a valuation allowance of the same amount.
Due to the change in ownership provisions
of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual
limitations. Should a substantial change in ownership occur, net operating loss carryforwards may be limited as to future use.
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
Net deferred tax
assets consist of the following components as of May 31, 2018 and 2017:
|
|
May 31, 2018
|
|
May 31, 2017
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
NOL Carryover
|
|
$
|
637,423
|
|
|
$
|
790,273
|
|
Valuation allowance
|
|
|
(637,423
|
)
|
|
|
(790,273
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
The income tax provision differs
from the amount of income tax determined by applying the U.S. federal and state income tax rates of 34% to pretax income (loss)
for the years ended May 31, 2018 and 2017 due to the following:
|
|
May 31, 2018
|
|
May 31, 2017
|
Expected tax (benefit) at 34%
|
|
$
|
(212,726
|
)
|
|
$
|
(440,774
|
)
|
Non-deductible stock-based expenses
|
|
|
—
|
|
|
|
32,946
|
|
Non-deductible expense (non-taxable income) from derivative liability
|
|
|
(92,634
|
)
|
|
|
57,225
|
|
Non-deductible amortization of debt discounts
|
|
|
63,615
|
|
|
|
137,227
|
|
Remeasurement of deferred income tax from 34% to 21% (a)
|
|
|
394,595
|
|
|
|
—
|
|
Change in valuation allowance
|
|
|
(152,850
|
)
|
|
|
213,376
|
|
Provision for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(a)
|
As a result of the Tax Cuts and Jobs Act (Tax Legislation) enacted on December 22, 2017, the
United States corporate income tax rate is 21% effective January 1, 2018. Accordingly, we have reduced our deferred income tax
asset relating to our net operating loss carryforward (and the valuation allowance thereon) by $394,595 from $1,032,018 to $637,423
as of May 31, 2018.
|
For the periods presented, the Company had no tax
positions or unrecognized tax benefits.
The Company includes interest
and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income
taxes. For the periods presented, the Company had no such interest or penalties.
h.
Concentrations of Credit Risk
Financial instruments that potentially
subject the Company to concentrations of credit risks consist of cash and cash equivalents. The Company places cash and cash equivalents
at well-known quality financial institutions. Cash and cash equivalents at banks are insured by the Federal Deposit Insurance Corporation
for up to $250,000. The Company did not have any cash or cash equivalents in excess of this amount at May 31, 2018.
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
i. Principles
of Consolidation
The consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States and include the Company and
its wholly-owned subsidiary. All inter-company accounts and transactions have been eliminated.
j. Advertising
Advertising costs, which are expensed
as incurred, were $4,301 and $4,578 for the years ended May 31, 2018 and 2017, respectively.
NOTE 3 - FINANCIAL INSTRUMENTS
The Company has adopted FASB ASC
820-10-50, “
Fair Value Measurements.
” This guidance defines fair value, establishes a three-level valuation
hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three
levels are defined as follows:
Level 1 inputs
to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 inputs
to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs
to valuation methodology are unobservable and significant to the fair measurement.
The carrying amounts reported in
the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments
and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and
their expected realization and their current market rate of interest.
NOTE 4 - LOANS RECEIVABLE – RELATED PARTY
During the year ended May 31, 2013,
the Company loaned $174,950 to the Company’s current chief executive in anticipation of the merger agreement described in
Note 1. The loans were non-interest bearing and due on demand. Effective May 31, 2015, the Company agreed to waive collection of
$100,000 of the remaining $115,950 loans receivable balance in exchange for the chief executive officer’s agreement to waive
payment of the $100,000 accrued consulting fees balance due him at May 31, 2015 (see Note 10). As of May 31, 2018, the balance
due on this loan was $15,950.
NOTE 5 - MUSIC INVENTORY
Music inventory consisted of the
following:
|
|
May 31, 2018
|
|
May 31, 2017
|
Digital music acquired for use in operations – at cost
|
|
$
|
17,055
|
|
|
$
|
13,862
|
|
Accumulated depreciation
|
|
|
(7,374
|
)
|
|
|
—
|
|
Music inventory – net
|
|
$
|
9,681
|
|
|
$
|
13,862
|
|
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
The Company purchases digital music
to broadcast over the radio and internet. During the year ended May 31, 2018, the Company purchased $3,193 worth of music inventory.
For the years ended May 31, 2018 and 2017, depreciation on music inventory was $7,374 and $-0-, respectively.
NOTE 6 -NOTES PAYABLE
Notes payable consisted of the following:
|
|
May 31,
2018
|
|
May 31,
2017
|
Notes payable to a corporation, non-interest bearing, due on demand, unsecured
|
|
$
|
78,250
|
|
|
$
|
63,750
|
|
Note payable to an individual, due on May 22, 2015, in default (B)
|
|
|
25,000
|
|
|
|
25,000
|
|
Note payable to an entity, non-interest bearing, due on February 1, 2016, in default (D)
|
|
|
50,000
|
|
|
|
50,000
|
|
Note payable to a family trust, stated interest of $2,500, due on October 31, 2015, in default (E)
|
|
|
7,000
|
|
|
|
7,000
|
|
Note payable to a corporation, stated interest of $5,000, due on October 21, 2015, in default (G)
|
|
|
50,000
|
|
|
|
50,000
|
|
Note payable to a corporation, stated interest of $5,000, due on November 6, 2015, in default (H)
|
|
|
50,000
|
|
|
|
50,000
|
|
Note payable to an individual, stated interest of $2,500, due on December 20, 2015, in default (I)
|
|
|
25,000
|
|
|
|
25,000
|
|
Note payable to a corporation, stated interest of $2,500, due on December 18, 2015, in default (K)
|
|
|
25,000
|
|
|
|
25,000
|
|
Convertible note payable to an entity, interest at 12%, due on December 22, 2016, in default (M)
|
|
|
40,000
|
|
|
|
20,000
|
|
Note payable to a family trust, interest at 10%, due on November 30, 2016, in default (P)
|
|
|
25,000
|
|
|
|
25,000
|
|
Convertible note payable to an entity, interest at 10%, due on March 17, 2017, in default (Q)
|
|
|
33,686
|
|
|
|
46,126
|
|
Convertible note payable to an entity, interest at 10%, due on June 13, 2017, in default (R)
|
|
|
46,250
|
|
|
|
56,250
|
|
Convertible note payable to an entity, interest at 10%, due on April 21, 2017, in default – net of discount of $-0- and $1,940, respectively (S)
|
|
|
40,750
|
|
|
|
38,810
|
|
Convertible note payable to an entity, interest at 12%, due on August 16, 2017, in default (T)
|
|
|
36,900
|
|
|
|
33,744
|
|
Convertible note payable to an entity, interest at 12%, due on October 31, 2017, in default – net of discount of $-0- and $20,288, respectively (S)
|
|
|
46,750
|
|
|
|
26,462
|
|
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
Convertible note payable to an individual, interest at 10%, due on demand (V)
|
|
|
46,890
|
|
|
|
59,820
|
|
Convertible note payable to an individual, interest at 8%, due on demand (W)
|
|
|
29,000
|
|
|
|
29,000
|
|
Convertible note payable to an individual, interest at 8%, due on demand (X)
|
|
|
21,500
|
|
|
|
21,500
|
|
Convertible note payable to an entity, interest at 10%, due on demand (Y)
|
|
|
8,600
|
|
|
|
8,600
|
|
Convertible note payable to an entity, interest at 12%, due on March 16, 2018, in default (Z)
|
|
|
37,000
|
|
|
|
—
|
|
Convertible note payable to an entity, interest at 10% – net of discount of $54,247 and $-0-, respectively (AA)
|
|
|
33,753
|
|
|
|
—
|
|
Convertible note payable to an entity, interest at 10%, due on demand (BB)
|
|
|
50,000
|
|
|
|
—
|
|
Convertible note payable to an individual, interest at 10%, due on demand (CC)
|
|
|
50,000
|
|
|
|
—
|
|
Convertible note payable to an entity, interest at 10%, due on March 5, 2019 – net of discount of $26,658 and $-0-, respectively (DD)
|
|
|
8,342
|
|
|
|
—
|
|
Convertible note payable to an entity, interest at 10%, due on April 4, 2019 – net of discount of $31,644 and $-0-, respectively (EE)
|
|
|
5,856
|
|
|
|
—
|
|
Notes payable to individuals, non-interest bearing, due on demand
|
|
|
103,476
|
|
|
|
72,500
|
|
Total Notes Payable
|
|
|
974,003
|
|
|
|
733,562
|
|
Less: Current Portion
|
|
|
(974,003
|
)
|
|
|
(733,562
|
)
|
Long-Term Notes Payable
|
|
$
|
—
|
|
|
$
|
—
|
|
(B) On April 22, 2015, the Company
issued a $25,000 Promissory Note, non-interest bearing (interest at 24% per annum after May 22, 2015), due at maturity on May 22,
2015. The Company also agreed to issue 500,000 shares (125 shares adjusted for the June 20, 2018 1 share for 4,000 shares reverse
stock split) of common stock, valued at $50,000 on April 22, 2015, 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
$16,667. This amount was amortized over the 30 days life of the promissory note.
(D) On July 24, 2015, the Company
issued a $50,000 Promissory Note to Kodiak Capital Group, LLC (“Kodiak”) for services rendered in association with
the Equity Purchase Agreement (See Note 8). As amended and restated January 4, 2016, the note is non-interest bearing and was due
on February 1, 2016.
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
(E) On July 31, 2015, the Company
issued a $25,000 Promissory Note with a stated interest amount of $2,500 due at maturity on October 31, 2015. The Company also
issued 1,000,000 shares (250 shares adjusted for the June 20, 2018 1 share for 4,000 shares reverse stock split) of common stock,
valued at $38,000, 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 $15,079. This amount was amortized over the 90
days life of the promissory note.
(G) On August 6, 2015, the Company
issued a $50,000 Promissory Note with a stated interest amount of $5,000 due at maturity on October 21, 2015. The Company also
agreed to issue 2,000,000 shares (500 shares adjusted for the June 20, 2018 1 share for 4,000 shares reverse stock split) of common
stock, valued at $76,000, 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 $30,159. This amount was amortized over
the 75 days life of the promissory note.
(H) On August 21, 2015, the Company
issued a $50,000 Promissory Note with a stated interest amount of $5,000 due at maturity on November 6, 2015. The Company also
agreed to issue 2,000,000 shares (500 shares adjusted for the June 20, 2018 1 share for 4,000 shares reverse stock split) of common
stock, valued at $60,000, 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 $27,273. This amount was amortized over
the 75 days life of the promissory note.
(I) On September 21, 2015, the Company
issued a $25,000 Promissory Note with a stated interest amount of $2,500 due at maturity on December 20, 2015. The Company also
agreed to issue 1,000,000 shares (250 shares adjusted for the June 20, 2018 1 share for 4,000 shares reverse stock split) of common
stock, valued at $30,000, 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 $13,636. This amount was amortized over
the 90 days life of the promissory note. In the event that all principal and interest are not paid to the lender by January 20,
2016, the Company is obligated to issue another 1,000,000 shares (250 shares adjusted for the June 20, 2018 1 share for 4,000 shares
reverse stock split) of common stock to the lender and for interest to accrue at a rate of 24% per annum commencing on January
21, 2016.
(K) On November 13, 2015, the Company
issued a $25,000 Promissory Note with a stated interest amount of $2,500 due at maturity on December 18, 2015. The Company also
agreed to issue 200,000 shares (50 shares adjusted for the June 20, 2018 1 share for 4,000 shares reverse stock split) of common
stock, valued at $6,000, 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 $4,839. This amount was amortized over the 35 days
life of the promissory note. In the event that all principal and interest are not paid to the lender by December 18, 2015, the
Company is obligated to pay late fees of 5,000 shares (1.25 shares adjusted for the June 20, 2018 1 share for 4,000 shares reverse
stock split) of common stock per day for the first 60 days after December 18, 2015, and beginning with the 61
st
day
after December 18, 2015, any balance owed shall accrue interest at a rate of 10% per annum.
(M) On December 29, 2015, the Company
issued a $20,000 Convertible Promissory Note to a lender for net loan proceeds of $15,000. The note bears interest at a rate of
12% per annum, was due on December 22, 2016, and is convertible at the option of the lender into shares of the Company common stock
at a Conversion Price equal to 50% of the lowest closing bid price during the 30 Trading Day period prior to the Conversion Date.
See Note 8 (Derivative Liability).
(P) On June 3, 2016, the Company
issued a $25,000 Promissory Note. The note bears interest at a rate of 10% per annum and was due on November 30, 2016.
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
(Q) On June 17, 2016, the Company
issued a $50,750 Convertible Promissory Note to a lender for net loan proceeds of $44,000. The note bears interest at a rate of
10% per annum (24% per annum default rate), was due on March 17, 2017, and is convertible at the option of the lender into shares
of the Company common stock at a Conversion Price equal to 55% of the lowest Trading Price during the 25 Trading Day period prior
to the Conversion Date. See Note 8 (Derivative Liability).
(R) On July 21, 2016, the Company
issued a $56,250 Convertible Promissory Note to a lender for net loan proceeds of $50,000. The note bears interest at a rate of
10% per annum (24% per annum default rate), was due on April 21, 2017, and is convertible at the option of the lender into shares
of the Company common stock at a Conversion Price equal to $0.0005 per share ($2.00 per share adjusted for the June 20, 2018 1
share for 4,000 shares reverse stock split).
(S) On September 13, 2016, the Company
issued a $40,750 Convertible Promissory Note to a lender for net loan proceeds of $35,000. The note bears interest at a rate of
10% per annum (24% per annum default rate), was due on June 13, 2017, and is convertible at the option of the lender into shares
of the Company common stock at a Conversion Price equal to $0.0005 per share ($2.00 per share adjusted for the June 20, 2018 1
share for 4,000 shares reverse stock split).
(T) On November 16, 2016, the Company
issued a $47,000 Convertible Promissory Note to a lender for net loan proceeds of $40,000. The note bears interest at a rate of
12% per annum (24% per annum default rate), was due on August 16, 2017, and is convertible at the option of the lender into shares
of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 25 Trading Day period prior
to the Conversion Date. See Note 8 (Derivative Liability).
(U) On January 31, 2017, the Company
issued a $46,750 Convertible Promissory Note to a lender for net loan proceeds of $40,000. The note bears interest at a rate of
12% per annum (24% per annum default rate), was due on October 31, 2017, and is convertible at the option of the lender into shares
of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 25 Trading Day period prior
to the Conversion Date. See Note 8 (Derivative Liability).
(V) On May 3, 2017, the Company issued
a $72,750 Convertible Promissory Note to a lender as a replacement for the principal and interest due on a promissory note due
on October 14, 2014. The note bears interest at a rate of 10% per annum, is due on demand, and is convertible at the option of
the lender into shares of the Company common stock at a Conversion Price equal to $0.0001293 per share ($0.5172 per share adjusted
for the June 20, 2018 1 share for 4,000 shares reverse stock split).
(W) On April 5, 2017, the Company
issued a $35,000 Convertible Promissory Note to a lender as a replacement for the principal and interest due on a promissory note
due on August 23, 2015. The note bears interest at a rate of 8% per annum, is due on demand, and is convertible at the option of
the lender into shares of the Company common stock at a Conversion Price equal to 40% of the lowest Trading Price during the 5
Trading Day period prior to the Conversion Date. See Note 8 (Derivative Liability).
(X) On April 5, 2017, the Company
issued a $27,500 Convertible Promissory Note to a lender as a replacement for the principal and interest due on a promissory note
due on October 31, 2015. The note bears interest at a rate of 8% per annum, is due on demand, and is convertible at the option
of the lender into shares of the Company common stock at a Conversion Price equal to 40% of the lowest Trading Price during the
5 Trading Day period prior to the Conversion Date. See Note 8 (Derivative Liability).
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
(Y) On March 1, 2017, the Company
issued a $8,600 Convertible Promissory Note to a vendor of the Company to convert certain accounts payable due to the vendor. The
note bears interest at a rate of 10% per annum, is due on demand, and is convertible at the option of the lender into shares of
the Company common stock at a Conversion Price equal to the higher of $0.00004 per share ($0.16 per share adjusted for the June
20, 2018 1 share for 4,000 shares reverse stock split) or 60% of the lowest Trading Price during the 5 Trading Day period prior
to the Conversion Date.
(Z) On June 16, 2017, the Company
issued a $37,000 Convertible Promissory Note to a lender for net loan proceeds of $31,000. The note bears interest at a rate of
12% per annum (24% per annum default rate), was due on March 16, 2018, and is convertible at the option of the lender into shares
of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 25 Trading Day period prior
to the Conversion Date. See Note 8 (Derivative Liability).
(AA) On January 11, 2018, the Company
issued a $500,000 Convertible Promissory Note to a lender. During the quarter ended February 28, 2018, the Company borrowed $88,000
(of the $500,000), and received net loan proceeds of $75,000. The note bears interest at a rate of 10% per annum and is convertible
at the option of the lender into shares of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price
during the 15 Trading Day period prior to the Conversion Date. See Note 8 (Derivative Liability). The maturity date for each tranche
funded is twelve months from the effective date of each payment.
(BB) On December 1, 2017, the Company
issued a $50,000 Convertible Promissory Note to pay for certain consulting services rendered by the Company law firm. The note
bears interest at a rate of 10% per annum, is due on demand, and is convertible at the option of the lender into shares of the
Company common stock at a Conversion Price equal to 60% of the lowest Trading Price during the 20 Trading Day period prior to the
Conversion Date. See Note 8 (Derivative Liability).
(CC) On December 1, 2017, the Company
issued a $50,000 Convertible Promissory Note to a vendor in settlement of certain accrued consulting fees of $50,000. The note
bears interest at a rate of 10% per annum, is due on demand, and is convertible at the option of the lender into shares of the
Company common stock at a Conversion Price equal to 60% of the lowest Trading Price during the 20 Trading Day period prior to the
Conversion Date. See Note 8 (Derivative Liability).
(DD) On March 5, 2018, the Company
issued a $35,000 Convertible Promissory Note to a lender for net loan proceeds of $33,000. The note bears interest at a rate of
10% per annum, is due on March 5, 2019, and is convertible at the option of the lender into shares of the Company common stock
at a Conversion Price equal to 50% of the lowest Trading Price during the 20 Trading Day period prior to the Conversion Date. See
Note 8 (Derivative Liability).
(EE) On April 4, 2018, the Company
issued a $37,500 Convertible Promissory Note to a lender for net loan proceeds of $35,500. The note bears interest at a rate of
10% per annum, is due on April 4, 2019, and is convertible at the option of the lender into shares of the Company common stock
at a Conversion Price equal to 50% of the lowest Trading Price during the 20 Trading Day period prior to the Conversion Date. See
Note 8 (Derivative Liability).
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
NOTE 7 - NOTES PAYABLE – RELATED PARTIES
Notes payable – related parties
consisted of the following:
|
|
May 31,
2018
|
|
May 31,
2017
|
Note payable to wife of Company’s chief executive officer, non-interest bearing, due on demand, unsecured
|
|
$
|
23,088
|
|
|
$
|
10,188
|
|
Note payable to Company law firm, non-interest bearing, due on demand, unsecured
|
|
|
2,073
|
|
|
|
2,073
|
|
Total Notes Payable
|
|
|
25,161
|
|
|
|
12,261
|
|
Less: Current Portion
|
|
|
(25,161
|
)
|
|
|
(12,261
|
)
|
Long-Term Notes Payable
|
|
$
|
—
|
|
|
$
|
—
|
|
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
NOTE 8 - DERIVATIVE LIABILITY
The derivative liability at May 31,
2018 and 2017 consisted of:
|
|
May 31, 2018
|
|
May 31, 2017
|
|
|
Face Value
|
|
Derivative Liability
|
|
Face Value
|
|
Derivative Liability
|
Convertible note payable issued December 29, 2015, due December 29, 2016 (M)
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
|
$
|
20,000
|
|
|
$
|
60,000
|
|
Convertible note payable issued June 17, 2016, due March 17, 2017 (Q)
|
|
|
33,686
|
|
|
|
27,561
|
|
|
|
46,127
|
|
|
|
121,607
|
|
Convertible note payable issued November 16, 2016, due August 16, 2017 (T)
|
|
|
36,900
|
|
|
|
47,000
|
|
|
|
47,000
|
|
|
|
166,098
|
|
Convertible note payable issued January 31, 2017, due August 31, 2017 (U)
|
|
|
46,750
|
|
|
|
46,750
|
|
|
|
46,750
|
|
|
|
168,552
|
|
Convertible note payable issued April 5, 2017, due on demand (W)
|
|
|
29,000
|
|
|
|
43,500
|
|
|
|
29,000
|
|
|
|
81,667
|
|
Convertible note payable issued April 5, 2017, due on demand (X)
|
|
|
21,500
|
|
|
|
32,250
|
|
|
|
21,500
|
|
|
|
64,167
|
|
Convertible note payable issued June 16, 2017, due on March 16, 2018 (Z)
|
|
|
37,000
|
|
|
|
37,000
|
|
|
|
—
|
|
|
|
—
|
|
Convertible note payable issued January 11, 2018 (AA)
|
|
|
88,000
|
|
|
|
171,204
|
|
|
|
21,500
|
|
|
|
64,167
|
|
Convertible note payable issued December 1, 2017, due on demand (BB)
|
|
|
50,000
|
|
|
|
33,333
|
|
|
|
—
|
|
|
|
—
|
|
Convertible note payable issued December 1, 2017, due on demand (CC)
|
|
|
50,000
|
|
|
|
33,333
|
|
|
|
—
|
|
|
|
—
|
|
Convertible note payable issued March 5, 2018, due on March 5, 2019 (DD)
|
|
|
35,000
|
|
|
|
68,915
|
|
|
|
—
|
|
|
|
—
|
|
Convertible note payable issued April 4, 2018, due on April 4, 2019 (EE)
|
|
|
37,500
|
|
|
|
72,957
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
505,336
|
|
|
$
|
653,803
|
|
|
$
|
367,197
|
|
|
$
|
662,091
|
|
The above convertible notes contain
a variable conversion feature based on the future trading price of the Company common stock. Therefore, the number of shares of
common stock issuable upon conversion of the notes is indeterminate. Accordingly, we have recorded the fair value of the embedded
conversion features as a derivative liability at the respective issuance dates of the notes and charged the applicable amounts
to debt discounts and the remainder to other expense. The increase (decrease) in the fair value of
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
the derivative liability from the
respective issuance dates of the notes to the measurement dates is charged (credited) to other expense (income). The fair value
of the derivative liability of the notes is measured at the respective issuance dates and quarterly thereafter using the Black
Scholes option pricing model.
Assumptions used for the calculations
of the derivative liability of the notes at May 31, 2018 include (1) stock price of $0.0001 per share ($0.40 per share adjusted
for the June 20, 2018 reverse stock split, (2) exercise prices ranging from $0.00004 to $0.00006 per share ($0.16 to $0.24 per
share adjusted for the June 20, 2018 1 share for 4,000 shares reverse stock split), (3) terms ranging from 0 days to 278 days,
(4) expected volatility of 527% and (5) risk free interest rates ranging from 1.76% to 2.23%.
Assumptions used for the calculations
of the derivative liability of the notes at May 31, 2017 include (1) stock price of $0.0002 per share ($0.80 per share adjusted
for the June 20, 2018 1 share for 4,000 shares reverse stock split), (2) exercise prices ranging from $0.00005 to $0.00006 per
share ($0.20 to $0.24 per share adjusted for the June 20, 2018 1 share for 4,000 shares reverse stock split), (3) terms ranging
from 0 days to 92 days, (4) expected volatility of 490% and (5) risk free interest rates ranging from 0.86% to 0.98%.
NOTE 9 - EQUITY TRANSACTIONS
On October 3, 2016, the Company amended
its Articles of Incorporation to increase the number of authorized shares of common stock from 500,000,000 to 2,000,000,000 shares
and to change the par value of both the common stock and preferred stock from $0.001 per share to $0.0001 per share.
On November 9, 2016, the Company
amended its Articles of Incorporation to increase the number of authorized shares of common stock from 2,000,000,000 to 10,000,000,000
shares and to amend the voting rights for the Series A Preferred Stock. As amended, each share of Series A Preferred Stock shall
have voting rights equal to four times the sum of (a) all shares of Common Stock issued and outstanding at the time of voting;
plus (b) the total number of votes of all other classes of preferred stock which are issued and outstanding at the time of voting;
divided by (c) the number of shares of Series A Preferred Stock issued and outstanding at the time of voting. The Series A Preferred
Stock continues to have no conversion, liquidation, or dividend rights.
During the year ended May 31, 2017,
the Company issued an aggregate of 417,990 shares (as adjusted for the June 20, 2018 reverse stock split) of common stock for the
conversion of notes payable and interest in the aggregate amount of $260,391.
During the year ended May 31, 2017,
the Company issued an aggregate of 28,250 shares (as adjusted for the June 20, 2018 reverse stock split) of common stock for consulting
services rendered to the Company and was recorded as consulting fees on the statement of operations in the amount of $96,900.
During the year ended May 31, 2017,
the Company issued an aggregate of 125,000 shares of common stock for cash in the aggregate amount of $40,000.
During the year ended May 31, 2018,
the Company issued an aggregate of 278,818 shares (as adjusted for the June 20, 2018 reverse stock split) of common stock for the
conversion of notes payable and interest in the aggregate amount of $54,653.
During the year ended May 31, 2018,
the Company issued 29,500 shares (as adjusted for the June 20, 2018 reverse stock split) of common stock for cash in the amount
of $500.
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
On May 18, 2018, the Company amended
its Articles of Incorporation for a 1 for 4,000 reverse stock split of the Company’s common stock. Each 4,000 shares of
common stock will be consolidated into 1 share of common stock following the reverse split. All references to common stock in
this document have been adjusted to reflect this reverse split.
At May 31, 2018 and 2017, there are
no stock options or warrants outstanding.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Service Agreements
On November 5, 2012, the Company
executed a General Services Agreement with the Company’s chief executive officer. The agreement provided for monthly compensation
of $10,000 and was to remain in full force and effect until either party provided 30 days notice of termination to the other party.
Effective May 31, 2015, the chief executive officer agreed to waive payment of the $100,000 accrued consulting fees balance due
him at May 31, 2015 in exchange for the Company’s agreement to waive collection of $100,000 of the remaining $115,950 loans
receivable balance due from the chief executive officer at May 31, 2015 before this transaction (see Note 4). On May 31, 2015,
this agreement was terminated.
On March 1, 2017, the Company executed
a Consulting Agreement with the Company’s chief executive officer. The agreement provides for monthly compensation of $10,000
through December 31, 2020. The Company may terminate the agreement at any time without cause. For the years ended May 31, 2018
and 2017, the chief executive officer was paid $54,700 and $136,500, respectively.
On November 15, 2012 and June 3,
2013, the Company executed General Services Agreements with two other service providers. The agreements provided for monthly compensation
of $1,000 and $500, respectively, and were to remain in full force and effect until either party provided 90 days and 30 days,
respectively, notice of termination to the other party. Effective September 1, 2015, these two agreements were replaced by Consulting
Agreements to provide for monthly compensation of $5,000 to each of the two service providers. The term of the agreements is from
September 1, 2015 to December 31, 2016 and thereafter on a month-to-month basis. The Company may terminate both of these Consulting
Agreements at any time without cause.
Effective September 1, 2015, the
Company entered into a Consulting Agreement with another service provider. The agreement provides for monthly compensation of $1,000
for a term from September 1, 2015 to December 31, 2016 and thereafter on a month-to-month basis. The Company may terminate this
Consulting Agreement at any time without cause.
Corporate Consulting Agreement
On March 14, 2018, the Company executed
a Corporate Consulting Agreement (the “Agreement”) with a consulting firm entity (the “Consultant”). The
Agreement provided for the Consultant to perform certain investor relations and other services for the Company. The term of the
Agreement was 4 months but the Agreement provided that the Company could terminate the Agreement for any reason at any time upon
5 days written prior notice. The Agreement provided for 8 payments of cash fees totaling $240,000 to be paid to the Consultant
over 4 months.
On April 1, 2018, the Company notified
the Consultant that the Agreement was terminated. A total of $25,000 was paid to the Consultant in March 2018 which has been expensed
and included in “Salaries and Consulting Fees” in the accompanying Consolidated Statement of Operations for the year
ended May 31, 2018. No other amounts have been accrued at May 31, 2018.
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial Statements
May 31, 2018
NOTE 11 - GOING CONCERN
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. At May 31, 2018, the Company had negative working capital of $2.191.837
and an accumulated deficit of $4,297,794. These factors raise substantial doubt regarding the Company’s ability to continue
as a going concern.
To date the Company has funded its
operations through a combination of loans and sales of common stock. The Company anticipates another net loss for the fiscal year
ended May 31, 2019 and with the expected cash requirements for the coming year, there is substantial doubt as to the Company’s
ability to continue operations.
The Company is attempting to improve
these conditions by way of financial assistance through issuances of additional equity and by generating revenues through sales
of products and services.
The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
NOTE 12 – SUBSEQUENT EVENTS
Effective June 20, 2018, the Company
effectuated a 1 share for 4,000 shares reverse stock split which reduced the issued and outstanding shares of common stock from
3,642,441,577 shares to 910,610 shares. The accompanying financial statements have been retroactively adjusted to reflect this
reverse stock split.
On August 16, 2018, the Company entered
into a Merger Agreement by and among the Company, and The Marquie Group, Inc., a Utah Corporation (“TMG”), pursuant
to with the Company merged with TMG. The Company is the surviving corporation. Each shareholder of TMG will receive one (1) share
of common stock of the Company for every one (1) share of TMG common stock held as of August 16, 2018. In accordance with the terms
of the merger agreement, all of the shares of TMG held by TMG shareholders were cancelled, and 40,000,002 shares of common stock
of the Company will be issued to the TMG shareholders. Following the merger, the Company has 40,910,612 shares of common stock
issued and outstanding.
TMG was incorporated on August 3,
2018. The merger will provide the Company with certain registered trademarks and intellectual property of TMG with respect to health,
beauty, and social networking products. The three stockholders of TMG prior to the merger who are to receive the 40,000,002 shares
are (1) Marc Angell (CEO of the Company) and Jacquie Angell (20,000,002 shares), (2) The OZ Corporation (holder of $103,250 of
Company notes payable at May 31, 2018) (10,000,000 shares), and (3) John Thomas P.C. (Company law firm and holder of $52,073 of
Company notes payable at May 31, 2018) (10,000,000 shares).