10-Q: Marquie Group Q1 Loss Widens Amid Investment Markdown

The Marquie Group, Inc. reported a significantly wider net loss in Q1 2026, driven by a substantial markdown of its Simply Whim investment and increased related party debt.

Summary

• Net loss for the three months ended August 31, 2025, was $2,306,313, a significant increase from $204,944 in the prior year period.
• The company recorded a $3,700,000 loss on the markdown of its investment in Simply Whim, Inc., reducing its value from $6,200,000 to $2,500,000.
• A gain on extinguishment of debt of $1,760,461 was recognized due to the removal of uncollectible accounts receivable.
• Total assets decreased from $6,258,966 to $2,610,783, while total liabilities decreased from $5,762,299 to $4,250,428.
• Stockholders' equity shifted from a positive $496,667 to a deficit of $(1,639,645).
• Negative working capital stood at $4,186,461 as of August 31, 2025.
• Net revenues were $11,920, up from $0 in the prior year, solely from radio advertising.
• A 1-for-1,000 reverse stock split was effective June 5, 2025, retroactively applied.
• Accrued consulting fees of $1,154,017 owed to the CEO and his wife were forgiven and credited to additional paid-in capital.
• Notes payable to related parties increased to $2,616,792 from $2,086,815, largely due to a $500,000 default penalty on the Simply Whim acquisition note.

Sentiment

Score: 2

Explanation: The company reported a significantly wider net loss, a substantial investment markdown, and a shift to negative equity. While there was a gain on debt extinguishment and some debt forgiveness, the overall financial health is severely distressed, with a 'going concern' warning and ineffective internal controls. The increase in related party debt due to a default penalty on an acquisition further highlights financial instability.

Positives

• Net revenues increased to $11,920 for the quarter, compared to $0 in the prior year period.
• A significant gain on extinguishment of debt of $1,760,461 was recorded.
• Accrued consulting fees owed to the CEO and his wife totaling $1,154,017 were forgiven, improving additional paid-in capital.
• Cash and cash equivalents increased to $41,007 from $1,071.
• Derivative liability significantly decreased from $625,824 to $63,448, resulting in income from derivative liability of $297,276.

Negatives

• Net loss significantly widened to $2,306,313 from $204,944 in the comparable prior year period.
• A substantial loss of $3,700,000 was incurred on the markdown of the Simply Whim investment.
• Total assets decreased significantly from $6,258,966 to $2,610,783.
• Stockholders' equity moved from a positive balance to a deficit of $(1,639,645).
• Accumulated deficit increased to $18,118,250.
• Notes payable to related parties increased by over $500,000, primarily due to a default penalty on the Simply Whim acquisition note.
• Interest expense increased significantly to $610,499 from $107,072.
• The company continues to operate with negative working capital of $4,186,461.

Risks

• Substantial doubt exists regarding the company's ability to continue as a going concern due to negative working capital of $4,186,461 and an accumulated deficit of $18,118,250.
• Anticipates another net loss for the fiscal year ending May 31, 2026, and expects cash requirements for the coming year to raise substantial doubt about its ability to continue operations.
• Inability to generate sufficient revenues and sales of products and services to cover costs and provide investor returns.
• Difficulty attracting additional capital to finance growth.
• Challenges in competing with larger companies possessing greater financial, production, and marketing resources.
• Lack of guaranteed financing agreements, with potential for substantial dilution to current shareholders if future equity financing occurs.
• Ineffective disclosure controls and procedures due to material weaknesses, including the absence of an audit committee, independent directors, and segregation of duties.
• Default on 8 notes payable aggregating $326,644 as of August 31, 2025.
• The variable conversion feature of certain convertible notes means the number of shares issuable is indeterminate, potentially leading to significant dilution.

Future Outlook

The company anticipates another net loss for the fiscal year ending May 31, 2026, and expects cash requirements for the coming year to raise substantial doubt about its ability to continue operations. Management expects salaries, consulting, professional, and SG&A expenses to increase as the health and beauty business scales up. Revenue for the Health and Beauty segment is expected to be included in the upcoming annual 10-K report for the year ending May 31, 2026.

Management Comments

• 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.
• We anticipate another net loss for the fiscal year ending May 31, 2026, and with the expected cash requirements for the coming year, there is substantial doubt as to the Company's ability to continue operations.
• 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.
• Our disclosure controls and procedures were ineffective as of the end of the period covered by this quarterly report because there was no segregation of duties.

Industry Context

The Marquie Group operates in two distinct segments: radio broadcasting (Music of Your Life network) and health and beauty (Simply Whim). The radio segment generates minimal revenue, while the health and beauty segment, though a focus for future growth, has not yet generated reported revenue and has incurred a significant investment markdown. The company's financial struggles and "going concern" warning indicate it is significantly underperforming relative to established players in both industries and faces severe challenges in scaling its operations. The health and beauty segment's focus on plant-based, amino-acid formulations and products for chemotherapy patients suggests a niche market, but its current financial state prevents meaningful comparison to broader industry trends.

Comparison to Industry Standards

• The company's minimal revenue ($11,920) and significant net loss ($2,306,313) are far below industry standards for publicly traded companies in either the broadcasting or health and beauty sectors, which typically require substantial revenue generation and profitability to sustain operations.
• The accumulated deficit of $18,118,250 and negative working capital of $4,186,461 indicate severe financial distress, unlike healthy industry peers.
• The "going concern" warning is a critical indicator of financial instability, a condition not typically seen in well-managed, comparable companies like iHeartMedia (broadcasting) or Estée Lauder (beauty) without specific, severe, and recent external shocks.
• The lack of segregation of duties in internal controls is a fundamental governance weakness, falling short of best practices for public companies, which typically have robust internal control frameworks and independent audit committees.

Corporate Governance

Related Party Transactions

• Loans receivable from related party: $35,237 as of August 31, 2025.
• Accrued consulting fees due to CEO, wife of CEO, and mother of CEO (forgiven or converted to notes).
• Forgiveness of $1,154,017 in accrued consulting fees from CEO and wife of CEO, credited to additional paid-in capital.
• Note payable to the mother of the CEO for $131,300, converted from accrued consulting fees.
• Notes payable to the Company law firm and The OZ Corporation (both owners of common stock).
• Note payable to the Chief Executive Officer for $492.
• Note payable to the wife of the Chief Executive Officer as part of the Simply Whim acquisition, increased to $2,485,000 due to a default penalty.
• Investment in Simply Whim, Inc., where the wife of the CEO is involved in the acquisition note.

Stakeholder Impact

• Shareholders: Significant dilution risk from future equity financing (SECA), negative equity, substantial net losses, and a "going concern" warning indicate high risk of investment loss. The reverse stock split may temporarily increase share price but doesn't address underlying financial issues.
• Creditors: Default on 8 notes payable and the "going concern" warning suggest increased credit risk and potential difficulty in recovering debts. The increase in related party notes payable also shifts the debt structure.
• Management/Employees: Accrued consulting fees for CEO and wife were forgiven, but the CEO's compensation continues to accrue. The company anticipates increasing personnel for the health and beauty business, which could create new employment opportunities if successful.
• Customers: The company's financial instability could impact the long-term viability of its radio network and the development/marketing of its health and beauty products.
• Suppliers: Potential risk of delayed or non-payment due to the company's liquidity issues and "going concern" status.

Next Steps

• Attempt to improve conditions through issuances of additional equity.
• Generate revenues through sales of products and services.
• Include revenue for the Health and Beauty segment in the upcoming annual 10-K report for the year ending May 31, 2026.
• Scale up operations, which is expected to increase salaries, consulting, professional, and SG&A expenses.

Key Dates

Recommendation

The filing presents a dire financial picture for The Marquie Group, Inc. The company reported a significantly widened net loss, a substantial markdown of a key investment (Simply Whim), and a shift from positive equity to a significant deficit. The "going concern" warning, coupled with negative working capital and an accumulated deficit, indicates severe financial distress and a high probability of business failure without substantial, uncertain future financing. Internal control weaknesses, including a lack of segregation of duties and absence of an audit committee, raise serious governance concerns. While there was a gain on debt extinguishment and some related party debt forgiveness, these are overshadowed by the overall operational and financial deterioration, including increased related party debt due to a default penalty. The potential for substantial dilution from future capital raises further diminishes shareholder value. Given these factors, the stock carries extreme risk and is highly speculative.

Keywords

The Marquie Group, TMGI, 10-Q, SEC Filing, Financial Report, Quarterly Results, Net Loss, Going Concern, Simply Whim, Investment Markdown, Related Party Transactions, Convertible Notes, Reverse Stock Split, Health and Beauty, Radio Broadcasting, Disclosure Controls, Capital Raise, Shareholder Dilution