Notes to the Consolidated Financial
Statements
August 31, 2017
(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 recurring accruals) considered necessary in order to make the financial statements not
misleading, have been included. Operating results for the three months ended August 31, 2017 are not necessarily indicative of
results that may be expected for the year ending May 31, 2018.
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 ZhongSen 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 - 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 are 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 8). As of August 31, 2017, the
balance due on this loan was $15,950.
NOTE 3 - MUSIC INVENTORY
The Company purchases digital
music to broadcast over the radio and internet. During the three months ended August 31, 2017, the Company purchased $591 worth
of music inventory. The amount of music inventory held at August 31, 2017 was $14,453.
NOTE 4 - NOTES PAYABLE
Notes payable consisted of
the following:
|
|
August 31, 2017
|
|
May 31,
2017
|
Notes payable to two corporations, non-interest bearing, due on demand, unsecured
|
|
$
|
66,750
|
|
|
$
|
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
|
|
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial
Statements
August 31, 2017
(Unaudited)
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 an individual, 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 29, 2016, in default (M)
|
|
|
20,000
|
|
|
|
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)
|
|
|
40,522
|
|
|
|
46,126
|
|
Convertible note payable to an entity, interest at 10%, due on April 1, 2017, in default (R)
|
|
|
56,250
|
|
|
|
56,250
|
|
Convertible note payable to an entity, interest at 10%, due on June 13, 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 – net of discount of $-0- and $13,256, respectively (T)
|
|
|
47,000
|
|
|
|
33,744
|
|
Convertible note payable to an entity, interest at 12%, due on October 31, 2017 – net of discount of $-0- and $20,288, respectively (U)
|
|
|
46,750
|
|
|
|
26,462
|
|
Convertible note payable to an entity, interest at 12%, due on March 16, 2018 – net of discount of $26,700 and $-0-, respectively (Z)
|
|
|
10,300
|
|
|
|
—
|
|
Convertible note payable to an individual, interest at 10%, due on demand (V)
|
|
|
59,820
|
|
|
|
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 individual, interest at 10%, due on demand (Y)
|
|
|
8,600
|
|
|
|
8,600
|
|
Notes payable to individuals, non-interest bearing, due on demand
|
|
|
87,475
|
|
|
|
72,500
|
|
Total Notes Payable
|
|
|
791,717
|
|
|
|
733,562
|
|
Less: Current Portion
|
|
|
(791,717
|
)
|
|
|
(733,562
|
)
|
Long-Term Notes Payable
|
|
$
|
—
|
|
|
$
|
—
|
|
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial
Statements
August 31, 2017
(Unaudited)
(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 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.
(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 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 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 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 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 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 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 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, is due on December 29, 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 6 (Derivative Liability).
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial
Statements
August 31, 2017
(Unaudited)
(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.
(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 6 (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.
(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.
(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 6 (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), is 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 6 (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 an earlier promissory
note. 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.
(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 an earlier
promissory note. 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 6 (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 an earlier
promissory note. 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 6 (Derivative Liability).
(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 or 60% of the lowest Trading Price
during the 5 Trading Day period prior to the Conversion Date.
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial
Statements
August 31, 2017
(Unaudited)
(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), is 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 6 (Derivative Liability).
NOTE 5 - NOTES PAYABLE – RELATED PARTIES
Notes payable – related
parties consisted of the following:
|
|
August 31,
2017
|
|
May 31,
2017
|
Note payable to wife of Company’s chief executive officer, non-interest bearing, due on demand, unsecured
|
|
$
|
11,188
|
|
|
$
|
10,188
|
|
Note payable to Company law firm, non-interest bearing, due on demand, unsecured
|
|
|
2,073
|
|
|
|
2,073
|
|
Total Notes Payable
|
|
|
13,261
|
|
|
|
12,261
|
|
Less: Current Portion
|
|
|
(13,261
|
)
|
|
|
(12,261
|
)
|
Long-Term Notes Payable
|
|
$
|
—
|
|
|
$
|
—
|
|
NOTE 6 - DERIVATIVE LIABILITY
The derivative liability at
August 31, 2017 and May 31, 2017 consisted of:
|
|
August 31, 2017
|
|
May 31, 2017
|
|
|
Face Value
|
|
Derivative Liability
|
|
Face Value
|
|
Derivative Liability
|
Convertible note payable issued December 29, 2015, due December 29, 2016 (M)
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
$
|
60,000
|
|
Convertible note payable issued June 17, 2016, due March 17, 2017 (Q)
|
|
|
40,522
|
|
|
|
33,154
|
|
|
|
46,127
|
|
|
|
121,607
|
|
Convertible note payable issued November 16, 2016, due August 16, 2017 (T)
|
|
|
47,000
|
|
|
|
47,000
|
|
|
|
47,000
|
|
|
|
166,098
|
|
Convertible note payable issued January 31, 2017, due October 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
|
|
|
|
68,820
|
|
|
|
—
|
|
|
|
—
|
|
Totals
|
|
$
|
241,772
|
|
|
$
|
291,474
|
|
|
$
|
367,197
|
|
|
$
|
662,091
|
|
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial
Statements
August 31, 2017
(Unaudited)
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 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 August 31, 2017 include (1) stock price of $0.0001 per share, (2) exercise prices ranging
from $0.00004 to $0.000055 per share, (3) terms ranging from -0- days to 197 days, (4) expected volatility of 434% and (5) risk
free interest rates ranging from 0.95% to 1.23%.
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, (2) exercise prices ranging
from $0.00005 to $0.00006 per share, (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 7 - EQUITY TRANSACTIONS
During the three months ended
August 31, 2017 the Company issued an aggregate of 190,950,000 shares of common stock for the conversion of notes payable and accrued
interest in the aggregate amount of $7,638.
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 has no conversion, liquidation, or dividend rights.
NOTE 8 - 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 2). 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 three months ended
August 31, 2017 and 2016, the chief executive officer was paid $21,000 and $32,000, respectively.
MUSIC OF YOUR LIFE, INC.
Notes to the Consolidated Financial
Statements
August 31, 2017
(Unaudited)
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.
NOTE 9 - 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 August 31, 2017, the Company had negative working capital
of $1,368,034 and an accumulated deficit of $3,421,704. 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, 2018 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 notes payable and 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.