8-K/A: Marquie Group Amends $2M Promissory Note

The Marquie Group, Inc. filed an amendment to correct scrivener's errors in a $2 million promissory note issued to Jacquie Angell with a 12% annual interest rate.

Summary

• An amendment to a Promissory Note dated September 20, 2022, was filed to correct scrivener's errors related to default and attorney's fees paragraphs.
• The Promissory Note is for a principal amount of $2,000,000.00.
• The Maker is The Marquie Group, Inc., and the Holder is Jacquie Angell.
• The loan accrues interest at a rate of 12% per annum.
• The entire principal and accrued interest are due 365 days from September 20, 2022, making the Maturity Date September 20, 2023.
• Prepayment is allowed but must include at least three months of interest.
• Upon default, the entire principal and unpaid interest become immediately due, a 288% penalty fee ($5,760,000) applies, and the Holder may convert amounts into common stock, subject to a 4.99% beneficial ownership cap.

Sentiment

Score: 4

Explanation: While securing $2 million in financing is positive, the high 12% interest rate, the extremely punitive 288% default penalty, and the related-party nature of the loan introduce significant risks and financial burdens. The amendment itself is for correcting errors, which is a neutral event but highlights prior inaccuracies.

Positives

• Secured $2,000,000 in financing, providing capital for operations.
• The company is actively addressing and correcting errors in its financial documents, demonstrating attention to detail and compliance.

Negatives

• A high annual interest rate of 12% applies to the $2 million note.
• A significant penalty fee of 288% of the original principal amount ($5,760,000) is imposed in case of default, which is extremely punitive.
• The Holder (Jacquie Angell) has broad discretion in applying payments and remedies upon default.
• Loan proceeds are disbursed 'from time to time, upon approval and at the direction of the Holder,' indicating potential lack of immediate full access to funds.
• The note is not registered under the Securities Act of 1933, implying restrictions on transferability for the Holder.

Risks

• **High Default Risk:** The company faces substantial financial penalties, including a 288% penalty fee ($5,760,000) and immediate acceleration of the $2,000,000 principal plus interest, if it fails to meet payment obligations.
• **Dilution Risk:** In case of default, the Holder has the option to convert the principal, accrued interest, and penalty fees into common stock, which could lead to significant dilution for existing shareholders, even with the 4.99% beneficial ownership cap.
• **Liquidity Risk:** The company must repay the $2,000,000 principal plus 12% interest within 365 days, requiring sufficient liquidity by September 20, 2023.
• **Related Party Risk:** The loan is from Jacquie Angell, implying a related-party transaction, which can raise questions about arm's-length terms and potential conflicts of interest.
• **Operational Risk:** The disbursement of loan proceeds is at the Holder's discretion, which could impact the company's ability to access funds as needed for operations.

Future Outlook

The filing does not contain explicit forward-looking statements or guidance beyond the maturity date of the promissory note.

Management Comments

• We have corrected these errors with the attached amended Promissory Note.

Industry Context

This filing primarily concerns internal financing and governance, and does not provide sufficient information to analyze broader industry trends or competitive positioning.

Corporate Governance

Related Party Transactions

• The Marquie Group, Inc. entered into a $2,000,000 Promissory Note with Jacquie Angell.

Stakeholder Impact

• **Shareholders:** Potential for significant dilution if the company defaults and the Holder converts the debt and penalty into common stock. The high interest rate and punitive default terms could negatively impact future earnings and financial stability.
• **Creditors:** The Promissory Note introduces a new debt obligation, which could affect the company's overall credit profile.
• **Management:** Responsible for managing the debt and ensuring timely repayment to avoid severe default penalties.

Next Steps

• Repayment of the $2,000,000 principal and accrued interest by September 20, 2023.
• Ongoing compliance with the terms and conditions of the amended Promissory Note.

Key Dates

Recommendation

The terms of this related-party promissory note are highly unfavorable for the company and its shareholders. A 12% annual interest rate is high, but the 288% penalty fee on default ($5.76 million on a $2 million loan) is exceptionally punitive and could lead to catastrophic financial distress or massive dilution if triggered. The discretion given to the Holder for fund disbursement and payment application further disadvantages the company. This debt structure introduces significant financial risk and potential for severe shareholder value destruction, making the stock a 'sell' for a seasoned investor.

Keywords

Marquie Group, Promissory Note, Debt Financing, SEC Filing, 8-K/A, Related Party Loan, Default Terms, Interest Rate, Convertible Debt, Corporate Governance