10-Q/A: Marquie Group Restates Q1, Reveals Deepening Losses

The Marquie Group, Inc. filed an amended quarterly report to correct promissory note classifications, revealing a significant increase in net loss and a substantial markdown of its Simply Whim investment.

Summary

• Restated financial statements for the first fiscal quarter ended August 31, 2025, to correct the misclassification of interest-bearing promissory notes and their related expenses.
• The restatement increased accrued interest and notes payable by $123,767, and professional fees and interest expenses by the same amount.
• Reported a net loss of $2,430,080 for the three months ended August 31, 2025, a significant increase from the $204,944 loss in the prior year period.
• Experienced a $3,700,000 loss on the markdown of its 25% investment in Simply Whim, Inc., reducing the investment value to $2,500,000.
• Recognized a gain on extinguishment of debt of $1,760,461 and income from derivative liability of $297,276.
• Cash and cash equivalents increased to $41,007 as of August 31, 2025, from $1,071 at May 31, 2025.
• Total stockholders' equity shifted to a deficit of $(1,763,412) as of August 31, 2025, from a positive $496,667 at May 31, 2025.
• The accumulated deficit grew to $18,242,017 as of August 31, 2025.
• The company has negative working capital of $4,310,228, raising substantial doubt about its ability to continue as a going concern.
• A 1-for-1,000 reverse stock split was effective June 5, 2025, reducing outstanding shares and authorized common stock.
• Forgiveness of $1,154,017 in accrued consulting fees from the CEO and his wife was credited to additional paid-in capital.
• Accrued consulting fees due to the CEO's mother were converted into a $131,300 promissory note.

Sentiment

Score: 2

Explanation: The filing reveals severe financial distress, including a substantial net loss, negative equity, and significant doubt about the company's ability to continue as a going concern. While there was a slight revenue increase and debt extinguishment gain, these are overshadowed by the investment markdown and operational challenges. The ineffective internal controls add to the negative sentiment.

Positives

• Cash and cash equivalents increased to $41,007 as of August 31, 2025, from $1,071 at May 31, 2025.
• Net revenues increased to $11,920 for the quarter ended August 31, 2025, up from $0 in the prior year period.
• Recorded a gain on extinguishment of debt of $1,760,461 for the three months ended August 31, 2025.
• Recognized income from derivative liability of $297,276 for the three months ended August 31, 2025.
• The forgiveness of $1,154,017 in accrued consulting fees from the CEO and his wife improved additional paid-in capital.

Negatives

• Net loss significantly worsened to $2,430,080 for the three months ended August 31, 2025, compared to $204,944 in the prior year period.
• Incurred a substantial $3,700,000 loss on the markdown of the Simply Whim investment.
• Total stockholders' equity turned into a deficit of $(1,763,412) as of August 31, 2025, from a positive $496,667 at May 31, 2025.
• The accumulated deficit increased to $18,242,017 as of August 31, 2025.
• Negative working capital of $4,310,228 raises substantial doubt about the company's ability to continue as a going concern.
• Interest expense increased significantly to $701,263 for the three months ended August 31, 2025, from $107,072 in the prior year period.
• Professional fees increased to $79,220 for the three months ended August 31, 2025, from $0 in the prior year period.
• The company has defaulted on 8 notes payable aggregating $326,644 as of August 31, 2025.
• Disclosure controls and procedures were deemed ineffective due to a lack of segregation of duties.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to significant net losses, negative working capital of $4,310,228, and an accumulated deficit of $18,242,017.
• Inability to generate sufficient revenues and sales of products/services at levels adequate to cover costs and provide a return for investors.
• Difficulty attracting additional capital to finance growth, which is necessary for business strategy advancement.
• Inability to successfully compete with other comparable companies that possess significantly greater financial, production, and marketing resources.
• Future equity financing will likely be substantially dilutive to current shareholders.
• Sales of shares under the Standby Equity Financing Agreement (SECA) may cause the trading price of common stock to fall.
• Ineffective disclosure controls and procedures due to a lack of segregation of duties, with one management team member handling all accounting functions, posing a risk of errors or fraud.
• Default on 8 notes payable totaling $326,644 as of August 31, 2025.

Future Outlook

The company anticipates another net loss for the fiscal year ending May 31, 2026, and expects to incur additional losses during the coming year. It plans to improve these conditions through additional equity issuances and by generating revenues from sales of products and services. Professional fees and selling, general, and administrative (SG&A) expenses are expected to increase as operations scale up.

Management Comments

• Management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, but 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.
• 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.
• 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.
• 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 company operates in two distinct segments: radio broadcasting (Music of Your Life network) and health and beauty (Simply Whim). The health and beauty segment, particularly the Whim brand, focuses on plant-based, natural alternatives, targeting consumers with sensitive needs, aligning with a growing market trend for clean and specialized beauty products. The radio broadcasting segment operates in a competitive media landscape, relying on syndicated content and direct advertiser responsiveness rather than traditional audience metrics. The company's small size and limited financial resources place it at a significant disadvantage against larger, more established competitors in both industries.

Comparison to Industry Standards

• The company's significant accumulated deficit of $18,242,017 and negative working capital of $4,310,228 are far below industry standards for healthy operating businesses, indicating severe financial distress and a precarious financial position.
• The reliance on related-party financing and the forgiveness of significant accrued consulting fees from the CEO and his wife are not standard practices for well-governed public companies and raise concerns about corporate governance and financial independence.
• The ineffective disclosure controls due to a lack of segregation of duties is a material weakness, falling short of internal control standards expected of public companies, regardless of size, and increases the risk of financial misstatement.
• The substantial markdown of the Simply Whim investment ($3,700,000 loss) suggests a significant overvaluation at acquisition or poor performance, which is a red flag compared to successful strategic investments in the health and beauty sector.
• The minimal revenue of $11,920 for the quarter is extremely low for a publicly traded company with two business segments, indicating a severe lack of market penetration or operational scale compared to industry peers.

Corporate Governance

Related Party Transactions

• Accrued consulting fees of $848,817 due to the Chief Executive Officer and $305,200 due to the wife of the Chief Executive Officer were forgiven as of February 28, 2025, and credited to additional paid-in capital.
• Accrued consulting fees of $131,350 due to the mother of the Chief Executive Officer were converted into a promissory note during the quarter ended August 31, 2025.
• A note payable to the wife of the Chief Executive Officer, part of the Simply Whim acquisition, increased from $2,000,000 to $2,485,000 due to a 25% default ($500,000) on the principal balance.
• Notes payable to the company's law firm, The OZ Corporation, the Chief Executive Officer, and the mother of the Chief Executive Officer are disclosed.

Stakeholder Impact

• Shareholders face significant dilution risk from future equity raises and the Standby Equity Financing Agreement (SECA). The substantial net loss, negative equity, and going concern doubt indicate a high risk of loss of investment.
• Creditors face increased risk due to the company's default on 8 notes payable totaling $326,644, and the overall financial instability.
• Employees/Consultants, particularly related parties, have seen accrued fees forgiven or converted to notes, indicating potential instability in compensation arrangements.
• Customers of the nascent Simply Whim health and beauty brand may face uncertainty regarding product availability and company longevity given the financial distress.

Next Steps

• Generate revenues through sales of products and services.
• Seek financial assistance through issuances of additional equity.
• Scale up operations, which is expected to increase professional fees and SG&A expenses.
• Include Health and Beauty revenue and Cost of Sales in the upcoming annual 10-K report for the year ending May 31, 2026.

Key Dates

Recommendation

The Marquie Group faces severe financial distress, evidenced by a substantial net loss of $2.43 million, negative working capital of $4.31 million, and an accumulated deficit exceeding $18 million. The company explicitly states 'substantial doubt' about its ability to continue as a going concern. A significant $3.7 million markdown of its Simply Whim investment further highlights operational and valuation issues. While a small revenue increase and debt extinguishment gain occurred, these are dwarfed by the losses and liabilities. The ineffective internal controls and reliance on dilutive financing, including a Standby Equity Financing Agreement at a discount to market price, present significant risks to shareholders. The company has also defaulted on multiple notes. Given the profound financial instability, high risk of further dilution, and fundamental operational weaknesses, a strong sell recommendation is warranted.

Keywords

The Marquie Group, TMGI, 10-Q/A, Restatement, Promissory Notes, Financial Results, Net Loss, Going Concern, Simply Whim, Investment Markdown, Reverse Stock Split, Related Party Transactions, Internal Controls, Health and Beauty, Radio Broadcasting, SEC Filing