Exhibit 2
MUSIC LICENSING, INC.
Financial Statements
For the years ended as of
December 31, 2023 and 2024
Music Licensing, Inc.
Financial Statements
As of December 31, 2023 and 2024
INDEX TO AUDITED FINANCIAL STATEMENTS
Page 2
 | February 26, 2025 |
Board of Directors and Members of
Music Licensing, Inc.
3811 Airport-Pulling Rd.
Naples, FL 34105
REPORT ON FINANCIAL STATEMENTS
We have audited the accompanying balance sheet of Music Licensing, Inc. as of December 31, 2023 and 2024 and the related statements of operations, changes in owner’s equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management.
MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of these financial statements in accordance with principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted the audit in accordance with generally accepted auditing standards as accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of risks of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion.
An audit also includes evaluating appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
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OPINION
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Music Licensing, Inc. as of December 31, 2023 and 2024 and the results of operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Amjad N. I. Abu Khamis
Certified Public Accountant, NH 08224
AAK CPA LLC
30 N Gould ST STE R
Sheridan, WY 82801
646-689-4725
amjad@aak-cpa.com
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Music Licensing, Inc.
As of December 31, 2023 and 2024
| ASSETS | 2023 | 2024 | ||||||
| Current Assets | ||||||||
| Cash at Bank | 415 | 1,182 | ||||||
| Accounts Receivable | 1,052,175,309 | 86,955,541 | ||||||
| Allowance for Doubtful Account | (993,632,492 | ) | (70,944,151 | ) | ||||
| Total Current Assets | 58,543,232 | 16,012,572 | ||||||
| Non-Current Assets | ||||||||
| Copy Rights and Domain Names | 205,135 | 355,329 | ||||||
| Goodwill | 3,550,601 | 3,550,601 | ||||||
| Total Non-Current Assets | 3,755,737 | 3,905,930 | ||||||
| TOTAL ASSETS | 62,298,968 | 19,918,503 | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts Payables | 405,769 | 477,426 | ||||||
| Sales Tax Payable | 4,535 | 4,535 | ||||||
| Total Current Liabilities | 410,304 | 481,961 | ||||||
| Non-Current Liabilities | ||||||||
| Convertible Notes Payable | 12,308,525 | 23,240,141 | ||||||
| Total Non-Current Liabilities | 12,308,525 | 23,240,141 | ||||||
| TOTAL LIABILITIES | 12,718,829 | 23,722,102 | ||||||
| Equity | ||||||||
| Common Shares | 802,635 | - | ||||||
| Preferred Shares | - | - | ||||||
| Additional Paid-In Capital | 17,095,119 | 18,932,596 | ||||||
| Retained Earnings (Deficit) | 31,682,385 | (22,736,195 | ) | |||||
| TOTAL EQUITY | 49,580,139 | (3,803,600 | ) | |||||
| TOTAL LIABILITIES AND EQUITY | 62,298,968 | 19,918,503 | ||||||
The accompanying notes are an integral part of these financial statements
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Music Licensing, Inc.
As of December 31, 2023 and 2024
| 2023 | 2024 | |||||||
| Revenues | ||||||||
| Sales | 1,052,274,588 | 128,874,114 | ||||||
| Total Revenues | 1,052,274,588 | 128,874,114 | ||||||
| Operating and Administrative Expenses | ||||||||
| Accounting and Legal Fees | 542,778 | 425,476 | ||||||
| Wages and Salaries | 12,000,000 | 12,000,000 | ||||||
| Professional Fees | 12,965 | 42,368 | ||||||
| Advertising and Promotion | 4,281 | 30,904 | ||||||
| Dues and Subscriptions | 688 | 41,527 | ||||||
| Office and Utilities Expenses | 32,999 | 17,860 | ||||||
| Board of Directors Fees | 15,000 | 72,456 | ||||||
| Bad Debt Expense | 993,632,492 | 170,404,894 | ||||||
| Taxes and Licenses Expense | - | 26,691 | ||||||
| Total Operating and Administrative Expenses | 1,006,241,204 | 183,062,176 | ||||||
| Non-Operating Income | 4 | 6,361 | ||||||
| Non-Operating Losses | - | 236,878 | ||||||
| Net Non-Operating Income (Loss) | 4 | (230,517 | ) | |||||
| NET INCOME (LOSS) | 46,033,387 | (54,418,580 | ) | |||||
The accompanying notes are an integral part of these financial statements
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Music Licensing, Inc.
As of December 31, 2023 and 2024
| Common Shares | Preferred Shares | APIC* | Retained Earnings | Total | ||||||||||||||||||||||||
| Balance - December 31, 2022 | 3,566,945,290 | 3,566,945 | - | - | 14,284,057 | (14,351,002 | ) | 3,500,000 | ||||||||||||||||||||
| Issued Stock During 2023 | - | - | 1 | - | - | 3,500,000 | ||||||||||||||||||||||
| Retirement for Shares During 2023 | 2,764,310,075 | (2,764,310 | ) | - | - | 2,764,310 | - | 3,500,000 | ||||||||||||||||||||
| Capital Contributions During 2023 | - | - | - | - | 46,752 | - | 3,546,752 | |||||||||||||||||||||
| Net Income (Loss) - December 31, 2023 | - | - | - | - | - | 46,033,387 | 49,580,139 | |||||||||||||||||||||
| Balance - December 31, 2023 | 802,635,215 | 802,635 | 1 | - | 17,095,119 | 31,682,385 | 49,580,139 | |||||||||||||||||||||
| Correction of Par Value of Stock | - | (802,635 | ) | - | - | 802,635 | - | 49,580,139 | ||||||||||||||||||||
| Stock Issued Prior Stock Split | 2,194,364,785 | - | - | - | 810,713 | - | 50,390,852 | |||||||||||||||||||||
| Applying Reverse Stock Split (500,000:1) | (2,996,994,006 | ) | - | - | - | - | - | 50,390,852 | ||||||||||||||||||||
| Shares issued after Stock Split 2024 | 29,999,995 | - | - | - | 224,129 | - | 50,614,981 | |||||||||||||||||||||
| Net Income (Loss) - as of December 31, 2024 | - | - | - | - | - | (54,418,580 | ) | (3,803,600 | ) | |||||||||||||||||||
| Balance as of December 31, 2024 | 30,005,989 | - | 1 | - | 18,932,596 | (22,736,195 | ) | (3,803,600 | ) | |||||||||||||||||||
| * | APIC = Additional Paid-In Capital |
The accompanying notes are an integral part of these financial statements
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Music Licensing, Inc.
As of December 31, 2023 and 2024
| 2023 | 2024 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Income | 46,033,387 | (54,418,580 | ) | |||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Change in Accounts Receivables | (1,052,175,309 | ) | 965,219,768 | |||||
| Change in Accounts Payables | 12,622,097 | 71,657 | ||||||
| Bad Debt Expense | 993,632,492 | 170,404,894 | ||||||
| Accounts Receivables Written-Off | - | (1,093,895,870 | ) | |||||
| Net Cash Flow from Operating Activities | 112,667 | (12,618,131 | ) | |||||
| Cash Flows from Investing Activities | ||||||||
| Investment in Royalties | (160,000 | ) | (150,194 | ) | ||||
| Net Cash Flows from Investing Activities | (160,000 | ) | (150,194 | ) | ||||
| Cash Flow by Financing Activities | ||||||||
| Additional Paid-In Capital | 52,826 | 1,837,477 | ||||||
| Notes Payables | - | 10,931,616 | ||||||
| Retirement of Common Shares | (6,074 | ) | - | |||||
| Net Cash Flow by Financing Activities | 46,752 | 12,769,093 | ||||||
| Net Change in Cash | (581 | ) | 767 | |||||
| Cash Balance at Beginning of the Year | 996 | 415 | ||||||
| CASH BALANCE AT END OF THE YEAR | 415 | 1,182 | ||||||
The accompanying notes are an integral part of these financial statements
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Music Licensing, Inc.
Notes to the Financial Statements
As of December 31, 2023 and 2024
NOTE 1: DESCRIPTION OF THE BUSINESS
Music Licensing, Inc. (OTC: SONG) (“Music Licensing” or “the Company”) is a diversified holding company and a music performing rights organization that represents songwriters, composers, and music publishers and issues public performance licenses to businesses for a flat monthly fee. Included in the standardized public performance license is a usage fee that is distributed as royalties to the songwriters, composers & music publishers that the Company represents. This model differs from competitors as the Company does not charge their artists an administration fee or utilize a royalty pool model.
The Company’s customers include television and radio stations, internet/streaming services and mobile technologies, Satellite audio services like XM and Sirius, nightclubs, restaurants, bars and other venues.
History of the Company
The Company was originally incorporated as Hyperbaric Oxygenation Corporation in the State of Nevada on November 17, 1997. The Company subsequently changed its name to Building Turbines, Inc. on January 1, 2011 in connection with the Company’s December 1, 2010 acquisition of Building Turbines, Inc which was in the development of wind turbines for office buildings. Prior to the acquisition of Building Turbines, Inc, the Company had been engaged in the business of Hyperbaric care centers in Canada.
On February 26, 2016, an exchange agreement was entered into by and among certain shareholders and debt holders of the Company, representing the majority of the outstanding shares of the Company and FutureWorld, Corp., a Delaware Corporation which was the owner of the partially owned subsidiary, NUVUS GRO. On March 10, 2016, Building Turbines, Inc. changed its name to HempTech Corp. There was a change of control in connection with the name change. As HempTech Corp, the Company was a provider of advanced controlled environment agriculture with sophisticated automation and analytical tools for the cultivators of legal industrial hemp and cannabis. On March 13, 2018 the Company changed its name to Nuvus Gro Corp. On November 21, 2022, the Company changed its name to Music Licensing Inc.
On July 19, 2022, Jake P. Noch Family Office LLC acquired control of the Company by purchasing 37,900,000 Shares of Common Stock of the Company from C&S Advisors Inc., which had previously acquired 44,941,214 Shares of common stock from Talari Industries LLC and Harvest Fund LLC. Jake P. Noch paid $430,000 to Eric Horton for these 37,900,000 Shares of Common Stock. Eric Horton is currently a Shareholder of the Company.
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Music Licensing, Inc.
Notes to the Financial Statements
As of December 31, 2023 and 2024
In the transaction whereby Eric Horton acquired 44,941,214 Shares of Common Stock from Talari Industries LLC and Harvest Fund LLC the persons involved were Sam Talari, former CEO of the Company, and Eric Horton. Eric Horton is a Shareholder of the Company. Sam Talari is not affiliated with the Company in any way. Assignment of value to this transaction cannot be determined at this time. The value of this transaction cannot be determined at this time because this transaction was executed under the direction of prior management and such information is not available to the Company’s current management.
On August 15, 2022, the company signed an agreement with Pro Music Licensing, Inc. to acquire from the Shareholders its 1,409,500,000 shares of common stock, including 909,500,000 shares of class a common stock and 500,000,000 shares of class b common stock, which represent all of the issued and outstanding shares of common stock of Pro Music Licensing for 3,500,000,000 shares of common stock, $0.001 par value per share, of Music Licensing Inc.
Pro Music was formed as “Pro Music Rights, LLC,” a Florida limited liability company effective as of January 31, 2018, and converted into a Delaware corporation on November 4, 2020 resulting in, among things, a change of the legal name from “Pro Music Rights, LLC” to “Pro Music Rights Inc”.
Pro Music which was recognized in U.S. copyright law as a licensor of music was founded in 2018 and is based in Naples, FL. The Company was incorporated in the state of Delaware on November 4, 2020. The Company was created by virtue of the LLC conversion to a corporation under the “Plan of Conversion” from Pro Music Rights, LLC to Pro Music Rights, Inc.
On September 22, 2022, the Company, filed a Certificate of Amendment to Articles of Incorporation of the Company (the “Certificate of Amendment”) with the Secretary of State of the State of Nevada, pursuant to which the authorized shares of common stock were increased to 20,000,000,000. On November 21, 2022 the Company filed a Certificate of Amendment to the Articles of Incorporation to change the name of the Company from Nuvus Gro Corp. to Music Licensing Inc.
On December 31, 2022 the company executed a merger agreement in 2022 but are reflecting the accounting for the merger as of December 31, 2022 for simplicity, however exact date calculations may differ but Management does not believe such calculations are or would be material.
On Oct 25, 2023, the company has decided through its board of directors’ resolution to lower its authorized shares to 2,000,000,000 shares.
On January 11, 2024, Music Licensing, Inc. (OTC: SONG) passed a board resolution, authorizing the officers of the Company to change Company Purpose. The key points of the resolution are as follows:
| ● | The officers of the Company are authorized to change the Company’s Purpose from that of the owner and operator of a US public performance rights organization to that of a diversified holding company. |
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Music Licensing, Inc.
Notes to the Financial Statements
As of December 31, 2023 and 2024
| ● | The officers of the Company have the authority to take all actions necessary to effectuate this change in purpose. |
| ● | The officers of the Company have the authority to engage legal and financial professionals to ensure compliance with applicable laws and regulations. |
| ● | The officers of the Company have the authority to make any necessary amendments to the Company’s articles of incorporation and bylaws to reflect change in purpose. |
This resolution was adopted unanimously by the Board of Directors on January 11, 2024. Thus far, actions in accordance with this resolution include the purchase of publishing royalties from AT&C Investments LLC, royalty interest in Listerine Antiseptic, and two additional collections of published work.
NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.
Use of Estimates
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.
Management evaluates the estimates and assumptions based on historical experience, and believes that those estimates and assumptions are reasonable based upon information available to them.
Cash
Cash are stated at cost which approximates fair value. The Company deposits its cash with financial institutions that the management believes are of high credit quality. The Company’s cash consists primarily of cash deposited in U.S. dollar denominated investment accounts.
Fair Value of Financial Instruments
Pursuant to the accounting guidance for fair value measurements and its subsequent updates, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
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Music Licensing, Inc.
Notes to the Financial Statements
As of December 31, 2023 and 2024
The accounting guidance establishes a three-tier fair value hierarchy that requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1—Quoted prices in active markets for identical assets or liabilities;
Level 2—Inputs other than the quoted prices in active markets, that are observable either directly or indirectly;
Level 3—Unobservable inputs based on the Company’s own assumption.
Revenue Recognition
The Company recognizes revenue when persuasive evidence of an arrangement exists, control has been transferred, the fee is fixed or determinable, and collectability is reasonably assured. In instances where final acceptance of the product Is specified by the customer, revenue is deferred until all acceptance criteria have been met. The Company’s primary source of revenue is the monthly licensing subscription fee.
The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its arrangements:
| ● | Identify the contract with a customer. |
| ● | Identify the performance obligations in the contract. |
| ● | Determine the transaction price. |
| ● | Allocate the transaction price to performance obligations in the contract, and |
| ● | Recognize revenue as the performance obligation is satisfied. |
Breakdown of Income Streams
| ● | License Subscription Fee: This represents the core revenue generated from our standard licensing agreements with clients. It includes the regular fees charged for the use of our copyrighted musical compositions. |
| ● | Late Fee Income: This category captures additional revenues earned from late payment fees imposed on clients. The separate reporting of late fee income allows for a clearer assessment of revenue that is contingent on client payment behaviors. |
| ● | Usage/Non-Reporting Fee: This category includes fees levied on clients who do not comply with the usage reporting requirements stipulated in their licensing agreements. It is an important revenue component that aligns with our policy enforcement and contractual compliance. |
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Music Licensing, Inc.
Notes to the Financial Statements
As of December 31, 2023 and 2024
| ● | Royalties: Revenue from shares in the licensed ownership of products, technology, or creative works. |
Income Taxes
The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Because tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes certain estimates and assumptions in (i) calculating its income tax expense, deferred tax assets and deferred tax liabilities, (ii) determining any valuation allowance recorded against deferred tax assets and (iii) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions may differ significantly from tax benefits ultimately realized.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740), which amends the existing guidance relating to the accounting for income taxes. ASU 2019-12 is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance.
NOTE 3: GOODWILL
ASC 350 defines goodwill as an intangible asset representing the excess of the purchase price of a business over the fair value of its identifiable net assets acquired in a business combination.
As a result of the acquisition of Pro Music Rights, Music Licensing issued 3,500,000,000 shares of common stock, $0.001 par value per share, which on the execution date and net asset value of the pro music rights was $(50,601), which resulted in a goodwill valued at $3,550,601. The Goodwill shall be assessed for impairment regularly, and the management decided that no impairment of the goodwill is required as of December 31, 2023.
NOTE 4 – COPYWRITES, DOMAN NAMES AND ROYALTY STAKES
The Company is the owner for the exclusive rights to use these copyrights and domain names as intangible assets. As such, these assets do have an indefinite life. The Company reviews the currently held intangible assets on an annual basis for impairment to determine if an adjustment is required. As the current intangible assets are working no impairment adjustment was considered necessary as of December 31, 2024.
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Music Licensing, Inc.
Notes to the Financial Statements
As of December 31, 2023 and 2024
On November 24, 2023, Music Licensing Inc. entered into a purchase agreement with AT&C Investments LLC, whereby Music Licensing Inc. acquired 100% of the rights, title, and interest in the songwriter/publisher’s share of all publishing royalties. The total consideration for this acquisition was U.S. $160,000.00.
On February 21, 2024, the Company completed the purchase of a portion of the royalty interest in Listerine “Mouthwash” Antiseptic for a total consideration of $79,500. This transaction is part of the Company’s strategy to invest in revenue-generating assets, and it has been recorded in the financial statements accordingly.
Effective October 4, 2024, in consideration of $140,200, Music Licensing Inc. assigned 100% of its rights, title, and interest (equivalent to Jasper Sheff Corp’s entire interest), along with a security interest, in the songwriter/publisher’s share of all publishing royalties—excluding the songwriter’s share of public performance royalties—for a term of 30 years.
As of December 31, 2023 and 2024 The company’s intangible assets at the period end are categorized as follows:
| 2023 | 2024 | |||||||
| Copyrights | 19,010 | 19,010 | ||||||
| Domain Names | 26,125 | 26,125 | ||||||
| Royalty Stakes | 160,000 | 310,194 | ||||||
| $ | 205,135 | $ | 355,329 | |||||
NOTE 5 - ACCOUNTS RECEIVABLES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivables are stated at Net Realizable Value (NRV). On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance or if any accounts should be written off based on a past history of write offs, collections, and current credit conditions. A receivable is considered past due if the company has not received payments based on agreed-upon terms. The company generally does not require any security or collateral to support its receivables.
The company has identified a prior period item (error) relating to the past periods ending December 31, 2022. There was an omission in booking and sending the sales invoices to the customers. Due to this, the prior year sales were not recorded. These omitted invoices are a part of a signed legal licensing agreement between the company and its customers. As such management has decided to record these invoices as Sales starting 2023.
In accordance with our accounting policies and the applicable financial reporting standards, the Allowance for Doubtful Accounts represents a current period estimation, reflecting our assessment of the credit risk associated with our outstanding accounts receivable. This estimate is based on a thorough evaluation of existing conditions, including an analysis of historical collection rates, and current economic trends.
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Music Licensing, Inc.
Notes to the Financial Statements
As of December 31, 2023 and 2024
| ● | 0-60 Days Past Due: Apply 5% for allowance |
| ● | 61-120 Days Past Due: Apply 15% for allowance |
| ● | 121-180 Days Past Due: Apply 35% for allowance |
| ● | 181-360 Days Past Due: Apply 75% for allowance |
| ● | 361-And Over Days Past Due: Apply 100% for allowance |
We have deducted the Allowance for Doubtful Accounts from the total Accounts Receivable balance to arrive at the Net Accounts Receivables. This deduction is made to accurately represent the Net Realizable Value (NRV) of these assets on our balance sheet. The NRV is the estimated amount that we expect to collect from our receivables, considering the likelihood of some amounts being uncollectible.
It is important to note that this allowance is an estimation and may be adjusted in future periods as new information becomes available or as the actual collection experience deviates from our current expectations.
During the second quarter of 2024, the Company undertook a review of its accounts receivable and identified a significant customer account with a balance of approximately $1.2 billion. This customer, located in a foreign country, has shown prolonged non-payment, and the Company has determined that the likelihood of collection is unrealistic due to the customer’s financial instability and geopolitical factors affecting the region.
As a result, the Board of Directors has authorized the removal of this account from the accounts receivable balance. The removal has been reflected in the current financial statements as a charge to bad debt expense, consistent with the Company’s accounting policies regarding the allowance for doubtful accounts. The decision to write off this account aligns with the Company’s commitment to maintaining accurate and realistic financial reporting.
The Company has signed Business License Agreements with 660 Customers as of December 31, 2024 to license, on a non-exclusive basis, non-dramatic public performances of their copyrighted musical compositions. After signing the agreements, and based on the agreement terms, the company issues invoices to its customers for Minimum and Base License Fees and Per Usage Fees based on number of business locations. The amount invoiced within the quarter ended December 31, 2024, is $55,699,389.20. Management believes that the contracts with the customers are legally enforceable as the provision and use of the services was provided. The agreements provide a clear obligation to pay a fixed monthly base license fee, plus any utilization fee.
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Music Licensing, Inc.
Notes to the Financial Statements
As of December 31, 2023 and 2024
This adjustment has been made to better reflect the Company’s current financial position and to provide investors with a clearer view of the Company’s receivables portfolio.
As part of our efforts to manage outstanding accounts receivable, Music Licensing Inc. has engaged Gebeloff Law to initiate legal proceedings against certain customers who have failed to fulfil their payment obligations. This action is intended to improve the collectability of these receivables and reduce the amount of bad debt. The outcome of these legal proceedings is currently uncertain, and they may result in additional legal expenses. The company will closely monitor these proceedings and update the financial impact as more information becomes available.”
NOTE 6 – ACCOUNTS PAYABLES
Trade and other payables primarily represent amounts owed by the company to suppliers and vendors for goods and services received. These payables arise in the ordinary course of business operations and are generally settled within the company’s normal credit terms.
The company regularly reviews the carrying amount of trade and other payables to ensure they are stated at their estimated settlement amounts. If there are significant changes in the expected timing of settlement or in the estimated amounts, adjustments are made to the carrying amount and recognized in the statement of profit or loss.
As of December 31, 2024, Music Licensing Inc. has reported an accounts payable balance of $477,426. which includes charges for legal and professional services. However, it’s important to note that a portion of these charges is currently under dispute.
The management of Music Licensing Inc. is actively engaged in discussions with Troutman Pepper Hamilton Sanders LLP to resolve these discrepancies. The outcome of these discussions may lead to adjustments in the reported accounts payable balance. The company is committed to ensuring that all expenses are justified and accurately reflect the services rendered.
Any significant developments or resolutions post the reporting period will be disclosed in subsequent financial statements as per the applicable accounting standards.
NOTE 7 – CONVERTIBLE NOTES PAYABLE
Employment Agreement with Jake P. Noch
On June 25, 2023, Music Licensing Inc. entered into an Employment Agreement with Jake P. Noch, appointing him as Chief Executive Officer, Chairman of the Board of Directors, President, Secretary, and Interim Chief Financial Officer. The Agreement outlines various terms of employment, including duties, compensation, and termination provisions.
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Music Licensing, Inc.
Notes to the Financial Statements
As of December 31, 2023 and 2024
Compensation to Mr. Noch is structured in the form of a convertible note, allowing him to receive shares worth twelve million dollars ($12,000,000.00) upon conversion. The note remains valid until Mr. Noch realizes the full amount, and additional shares may be added to the convertible note as necessary. The timing of payments under this agreement is at the discretion of Mr. Noch and can be received in various increments (monthly, quarterly, or annually). Upon conversion of the note, the beneficiary of the shares may be either Mr. Noch or the Jake P. Noch Family Office LLC.
This employment agreement is perpetual unless terminated according to its terms or voluntarily by either party. It also includes provisions for bonuses, vacation, business expenses, and a car allowance for Mr. Noch. In the event of termination, severance pay and share payments are specified in the Agreement.
The agreement is integral to our executive management structure and is critical in maintaining the leadership necessary for our strategic and operational directives. This Agreement has been approved by the Board of Directors and is in full compliance with our corporate governance policies.
Details of 3(a)(10) Agreement for Executive Compensation and Severance Package
During the prior period, Music Licensing Inc. entered into a 3(a)(10) agreement, as per the Securities Act of 1933, to facilitate the compensation of our executive, Jake P. Noch. This agreement is notable for its role in addressing both the executive salary and additional financial commitments as follows:
Executive Salary: The agreement provisions for an annual salary of $12 million for Jake P. Noch, with the full amount recognized on January 1st of each fiscal year. This salary arrangement is primarily financed through the issuance of shares under the 3(a)(10) exemption, thereby minimizing cash outflows for the company.
Additional Executive Expenses: In addition to the salary, the agreement encompasses any additional expenses incurred by Jake P. Noch in the performance of his executive duties. These expenses are covered in a similar manner to the salary, primarily through the issuance of shares, allowing the company to manage cash resources effectively.
Severance Package: A key component of this agreement is an $18 million cash severance package for Jake P. Noch. This severance is structured to be payable under specific conditions outlined in the executive agreement, ensuring the company’s preparedness for potential future financial obligations.
The implementation of this agreement aligns with the company’s strategic financial management objectives. It provides a structure that allows for effective cash flow management while ensuring competitive executive compensation. This approach is reflective of our commitment to fiscal responsibility and strategic resource allocation.
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Music Licensing, Inc.
Notes to the Financial Statements
As of December 31, 2023 and 2024
The above-mentioned agreement and its terms are in compliance with the relevant securities regulations and have been duly approved by the appropriate legal channels. The financial implications of this agreement have been considered in our financial planning and reporting.
Payments on Convertible Note Funded through a 3(a)(10) Agreement
During the current reporting period, the Company commenced payments toward a convertible note that was issued under the provisions of a 3(a)(10) exemption agreement. The convertible note was originally issued as part of a strategic initiative to finance the company’s ongoing operations and expansion.
The continued management of this liability is crucial for maintaining the Company’s financial stability and supporting strategic growth initiatives. Detailed information regarding the terms of the convertible note and its potential impact on our financial position and performance will be further represented in the sections concerning “Debt Obligations”, “Equity”, and “Cash Flows” of our financial statements.
NOTE 8 – SHAREHOLDERS EQUITY
The company is authorized to issue 14,500,000,000 common stock shares at 0.000000000001 par value and 1 Preferred J stock. The current total of outstanding common stock as of December 31, 2024 is 30,005,989, of which 67 are Restricted.
On June 12, 2024 the Board of Directors of Music Licensing Inc. approved a 500,000-for-1 reverse stock split of its outstanding common shares. This reverse stock split was effective on June 13, 2024. As a result of the reverse stock split, each 500,000 shares of issued and outstanding common stock were automatically combined into one share of common stock. No fractional shares were issued in connection with the reverse stock split. Instead, shareholders who would have otherwise held a fractional share of common stock received a cash payment for the value of the fractional share.
The reverse stock split did not affect the total authorized number of shares of common stock or the par value per share. The reverse stock split was implemented to improve the marketability and liquidity of the Company’s common stock.
On November 20, 2023, the Board of Directors of Music Licensing Inc. adopted a resolution to create a new class of shares known as “Preferred J Class” shares. Only one share is authorized to be issued. Class J shares established to enhance strategic decision-making and safeguard the long-term interests of the company. The key characteristics of the Preferred J Class shares are as follows:
Voting Rights: Each Preferred J Class share is entitled to vote on all matters that common stock is entitled to vote on.
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Music Licensing, Inc.
Notes to the Financial Statements
As of December 31, 2023 and 2024
| 1. | Control: The Preferred J Class shares are intended to be exclusively held by Jake P. Noch or his affiliated entities. |
| 2. | Voting Power: The Preferred J Class shares represent 80% of the total voting power across all classes of shares of the company. |
| 3. | Other Rights and Preferences: The rights, preferences, privileges, and restrictions granted to or imposed on the Preferred J Class shares are as set forth in the Articles of Amendment to the Articles of Incorporation of the Company, which have been filed with the state of Nevada. |
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Board Compensation
During the quarter ended December 31, 2024, the company paid a bonus of $18,000 to a member of its board of directors. This bonus was awarded in recognition of exceptional service and contributions made during a critical phase of the company’s development. This amount has been included in the line item “Director’s Fees” under administrative expenses in our consolidated Income Statement for the period. The board member is not an employee of the company, and this payment is in line with the remuneration policy approved by the shareholders.
3(a)(10) Agreement Obligation
At the beginning of the quarter ended December 31, 2024, the balance of the 3(a)(10) agreement obligation was $20,358,422. During the quarter, the obligation increased by $2,881,719, resulting in an ending balance of $23,240,141. This increase comprised total additional expenditures of $3,077,774, offset by payments of $197,717 towards the obligation.
Severance Package Obligation
The Company has entered into an employment agreement with its CEO, Jake P. Noch, which includes a severance package clause. According to the terms of this agreement, the Company is obligated to pay a cash severance package of $18,000,000 in the event of the CEO’s departure, regardless of the reason for departure. This obligation is recognized as a contingent liability and will be recognized as an expense in the period in which it becomes probable that the CEO will depart and the amount becomes reasonably estimable.
As of December 31, 2024, the Company has not recorded a liability related to this severance package obligation, as the triggering event for the payment has not occurred and the departure of the CEO is not deemed probable.
Management will continue to evaluate this obligation at each reporting period and recognize the liability and related expense when the conditions for recognition under GAAP are met.
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Music Licensing, Inc.
Notes to the Financial Statements
As of December 31, 2023 and 2024
This disclosure is made in accordance with ASC 450, Contingencies, which requires that contingent liabilities be disclosed when there is at least a reasonable possibility that a loss may be incurred.
Ongoing Legal Proceeding
The Company has initiated chargeback claims against INVESTORSHUB CO due to disputed transactions. These transactions pertain to charges for cryptocurrency purchases that were neither agreed upon nor authorized by the Company as part of its service contract. The Company strictly does not engage in cryptocurrency-related activities. The transactions in question arose after INVESTORSHUB CO required the purchase of proprietary cryptocurrency instead of invoicing for agreed-upon press release services.
Furthermore, the Company has formally demanded the removal of personal information, including the CEO’s home address, from INVESTORSHUB CO’s website. Despite repeated legal notices, the information remains publicly accessible. The Company is exploring legal remedies to resolve this matter. As of the reporting date, no provisions for potential losses or recoveries have been recognized in the financial statements. Management will continue to monitor the situation and update disclosures as necessary. U.S. GAAP (ASC 450).
Purchase of Royalty Rights
On November 24, 2023, Music Licensing Inc. entered into a purchase agreement with AT&C Investments LLC, whereby Music Licensing Inc. acquired 100% of the rights, title, and interest in the songwriter/publisher’s share of all publishing royalties, excluding the songwriter’s share of public performance royalties, for a set of musical compositions as listed in Attachment A of the agreement. This acquisition includes rights under a previous purchase agreement between AT&C Investments LLC and Jasper Sheff Corp dated October 29, 2023. The total consideration for this acquisition was U.S. $160,000.00. This acquisition reflects the company’s strategic initiative to expand its portfolio of royalty-generating assets. The financial impact of this transaction has been reflected in the financial statements for the period ending December 31, 2023.
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ANNEXURE 1: QUARTERLY BALANCE SHEET FOR 2024 (UNAUDITED)
| Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | |||||||||||||
| ASSETS | ||||||||||||||||
| Current Assets | ||||||||||||||||
| Cash at Bank | 1,395 | 10,375 | 2,817 | 1,182 | ||||||||||||
| Accounts Receivable | 1,158,100,319 | 71,542,512 | 79,067,744 | 86,955,541 | ||||||||||||
| Allowance for Doubtful Account | (1,120,237,941 | ) | (56,380,568 | ) | (63,626,594 | ) | (70,944,151 | ) | ||||||||
| Total Current Assets | 37,863,773 | 15,172,319 | 15,443,967 | 16,012,572 | ||||||||||||
| Non-Current Assets | ||||||||||||||||
| Copy Rights and Domain Names | 284,635 | 329,635 | 329,635 | 355,329 | ||||||||||||
| Goodwill | 3,550,601 | 3,550,601 | 3,550,601 | 3,550,601 | ||||||||||||
| Total Non-Current Assets | 3,835,236 | 3,880,236 | 3,880,236 | 3,905,930 | ||||||||||||
| TOTAL ASSETS | 41,699,009 | 19,052,555 | 19,324,203 | 19,918,503 | ||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||||
| Current Liabilities | ||||||||||||||||
| Accounts Payables | 405,769 | 499,614 | 509,910 | 477,426 | ||||||||||||
| Sales Tax Payable | 4,535 | 4,535 | 4,535 | 4,535 | ||||||||||||
| Total Current Liabilities | 410,304 | 504,149 | 514,445 | 481,961 | ||||||||||||
| Non-Current Liabilities | ||||||||||||||||
| Convertible Notes Payable | 14,921,204 | 17,315,296 | 20,358,422 | 23,240,141 | ||||||||||||
| Total Non-Current Liabilities | 14,921,204 | 17,315,296 | 20,358,422 | 23,240,141 | ||||||||||||
| TOTAL LIABILITIES | 15,331,508 | 17,819,444 | 20,872,866 | 23,722,102 | ||||||||||||
| Equity | ||||||||||||||||
| Common Shares | - | - | - | - | ||||||||||||
| Preferred Shares | - | - | - | - | ||||||||||||
| Additional Paid-In Capital | 18,708,467 | 18,708,467 | 18,759,093 | 18,929,793 | ||||||||||||
| Retained Earnings (Deficit) | 7,659,033 | (17,475,356 | ) | (20,307,756 | ) | (22,733,392 | ) | |||||||||
| TOTAL EQUITY | 26,367,501 | 1,233,111 | (1,548,664 | ) | (3,803,600 | ) | ||||||||||
| TOTAL LIABILITIES AND EQUITY | 41,699,009 | 19,052,555 | 19,324,203 | 19,918,503 | ||||||||||||
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ANNEXURE 2: QUARTERLY INCOME STATEMENTS FOR 2024 (UNAUDITED)
| Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | |||||||||||||
| Revenues | ||||||||||||||||
| Sales | 105,969,348 | 7,318,842 | 7,540,838 | 8,045,086 | ||||||||||||
| Total Revenues | 105,969,348 | 7,318,842 | 7,540,838 | 8,045,086 | ||||||||||||
| Operating and Administrative Expenses | ||||||||||||||||
| Accounting and Legal Fees | 150,737 | 215,096 | 56,843 | 2,800 | ||||||||||||
| Wages and Salaries | 3,000,000 | 3,000,000 | 3,000,000 | 3,000,000 | ||||||||||||
| Professional Fees | 6,127 | 12,800 | - | 23,441 | ||||||||||||
| Advertising and Promotion | 9,734 | 4,421 | 3,749 | 13,000 | ||||||||||||
| Dues and Subscriptions | 9,144 | 19,306 | 12,773 | 304 | ||||||||||||
| Office and Utilities Expenses | 1,025 | 1,385 | 2,615 | 12,835 | ||||||||||||
| Board of Directors Fees | 28,456 | 10,000 | 22,000 | 12,000 | ||||||||||||
| Bad Debt Expense | 126,719,136 | 29,124,222 | 7,243,979 | 7,317,557 | ||||||||||||
| Taxes and Licenses | 15,657 | 794 | - | 10,240 | ||||||||||||
| Total Operating and Admin. Expenses | 129,940,015 | 32,388,024 | 10,341,958 | 10,392,177 | ||||||||||||
| Non-Operating Income | 6,346 | - | 15 | - | ||||||||||||
| Non-Operating Expense | 59,030 | 65,208 | 31,296 | 81,344 | ||||||||||||
| Net Non-Operating Income (Loss) | (52,684 | ) | (65,208 | ) | (31,281 | ) | (81,344 | ) | ||||||||
| NET INCOME (LOSS) | (24,023,352 | ) | (25,134,389 | ) | (2,832,400 | ) | (2,428,436 | ) | ||||||||
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ANNEXURE 3: QUARTERLY CASH FLOW STATEMENTS FOR 2024 (UNAUDITED)
| Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | |||||||||||||
| Cash Flows from Operating Activities | ||||||||||||||||
| Net Income | (24,023,352 | ) | (25,134,389 | ) | (2,832,400 | ) | (2,428,436 | ) | ||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
| Change in Accounts Receivables | (105,925,010 | ) | 1,086,557,807 | (7,525,232 | ) | (7,887,797 | ) | |||||||||
| Change in Accounts Payables | 2,612,679 | 2,487,936 | 3,053,422 | 2,849,236 | ||||||||||||
| Bad Debt Expense | 126,605,449 | 29,124,222 | 7,246,026 | 7,317,557 | ||||||||||||
| Write-off Accounts Receivables | - | (1,092,932,751 | ) | - | - | |||||||||||
| Net Cash Flow from Operating Activities | (730,233 | ) | 102,825 | (58,183 | ) | (149,440 | ) | |||||||||
| Cash Flows from Investing Activities | ||||||||||||||||
| Investment in Royalties | (79,500 | ) | (93,845 | ) | - | (25,694 | ) | |||||||||
| Net Cash Flows from Investing Activities | (79,500 | ) | (93,845 | ) | - | (25,694 | ) | |||||||||
| Cash Flow by Financing Activities | ||||||||||||||||
| Additional Paid-In Capital | 810,713 | - | 50,626 | 173,500 | ||||||||||||
| Net Cash Flow by Financing Activities | 810,713 | - | 50,626 | 173,500 | ||||||||||||
| Net Change in Cash | 980 | 8,980 | (7,558 | ) | (1,635 | ) | ||||||||||
| Cash Balance at Beginning of the Period | 415 | 1,395 | 10,375 | 2,817 | ||||||||||||
| CASH BALANCE AT END OF THE PERIOD | 1,395 | 10,375 | 2,817 | 1,182 | ||||||||||||
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