Music Licensing, Inc. (OTC: SONG) Q3 2024 Financial Results and Strategic Realignment Announced

Rhea-AI Summary

Music Licensing, Inc. (OTC: SONG) reported challenging Q3 2024 financial results with revenues of $7.54M, showing a sequential increase from Q2 but a significant year-over-year decline. The company posted an operating loss of $2.8M and a net loss of $2.83M. Total assets decreased to $19.32M from $55.67M in Q3 2023, while liabilities increased to $20.87M, resulting in a shareholders' equity deficit of $1.55M.

The company announced a strategic shift away from public performance rights operations toward acquiring royalty-generating intellectual property stakes. Management has identified acquisition targets valued between $36M and $250M for 2025. The company also clarified its $20.36M convertible note arrangement with Jake P. Noch Family Office, , which carries no interest or default risk.

Positive

• Sequential revenue increase in Q3 2024 compared to Q2
• Strategic pivot to royalty-generating IP acquisitions with targets of $36M-$250M
• Interest-free convertible note arrangement with no default risk

Negative

• Significant revenue decline year-over-year
• Q3 operating loss of $2.8M and net loss of $2.83M
• Total assets decreased by 65% to $19.32M from $55.67M
• Shareholders' equity shifted to deficit of $1.55M
• Bad debt expenses of $7.24M in Q3
• Cash balance declined to $2,817
• Negative operational cash flow of $58,183

Naples, FL, Dec. 12, 2024 (GLOBE NEWSWIRE) -- Music Licensing, Inc. (OTC: SONG) today reported its financial results for the quarter ended September 30, 2024, and provided insights into its strategic evolution aimed at delivering sustainable shareholder value and operational resilience.

Financial Highlights

Revenue and Profitability:

Music Licensing, Inc. reported Q3 2024 revenues of $7.54 million, a modest sequential increase compared to Q2 2024. However, this reflects a significant decline from prior-year levels, primarily due to the underperformance of the Pro Music Rights (PMR) subsidiary’s collection campaigns. The Company posted an operating loss of $2.8 million and a net loss of $2.83 million for the quarter.

Balance Sheet Overview:

•	Assets: Total assets stood at $19.32 million, down from $55.67 million as of Q3 2023. The reduction was driven by a significant adjustment to accounts receivable, reflecting a conservative accounting stance on doubtful accounts.
•	Liabilities: Total liabilities increased to $20.87 million, primarily due to a rise in non-current liabilities, notably the convertible notes payable.
•	Equity: Shareholders’ equity shifted to a deficit of $1.55 million, reflecting cumulative operating losses and bad debt write-offs.

Cash Flow:

Operational cash flow for Q3 2024 showed a net use of $58,183, with the cash balance declining to $2,817 by the end of the period. This highlights the Company's immediate need to bolster liquidity through strategic measures.

Management Analysis and Strategic Insights

Performance Analysis:

The Q3 results underscore the challenges inherent in the PMR subsidiary's current business model. Despite representing an extensive catalog of intellectual property, collection campaigns have struggled to yield expected results due to customer non-compliance and broader market headwinds. Legal actions to enforce receivables recovery are ongoing, but outcomes remain uncertain in the near term.

Bad debt expenses of $7.24 million during the quarter reflect the Company’s commitment to financial transparency and prudent accounting. The adjustment ensures that receivables accurately represent realizable value, a step deemed critical for informed decision-making and investor confidence.

Strategic Realignment:

Music Licensing, Inc. is initiating a transformative shift, moving away from reliance on public performance rights operations to focus on acquiring and trading royalty-generating intellectual property (IP) stakes. These assets provide consistent and recurring cash flows with attractive yields, aligning with the Company’s goal of achieving sustainable profitability.

The Company has identified acquisition targets valued between $36 million and $250 million in royalty-generating IP assets for 2025. These investments are designed to mitigate the volatility and unpredictability of the current revenue model.

Convertible Note Clarification:

The $20.36 million in convertible note liabilities on the balance sheet as of Q3 2024 is part of a court-approved 3(a)(10) hybrid convertible exemption arrangement with the Jake P. Noch Family Office, LLC. This arrangement, which accrues no interest and carries no risk of default, offers flexibility by aligning repayment with market conditions. Every dollar realized by the Family Office through block trade transactions will directly reduce the Company’s liability.

The arrangement contrasts sharply with traditional convertible instruments prevalent in the OTC space, which often impose severe dilution risks and accrue interest. This innovative financing approach ensures that shareholder value remains a priority while funding critical strategic initiatives.

Outlook

Jake P. Noch, CEO and COB of Music Licensing, Inc., commented:

"Our Q3 performance, while challenging, reflects the reality of the current market landscape and the inherent risks of our prior business model. Recognizing these dynamics, we are decisively pivoting toward high-quality, revenue-generating assets that align with our vision for sustainable growth and consistent shareholder returns."

The Company anticipates the liability under the hybrid convertible note arrangement to peak at approximately $32 million by early Q1 2025. Block trade transactions with institutional broker-dealers and QIB market participants are expected to reduce this burden significantly, enhancing balance sheet strength.

Commitment to Shareholders

Music Licensing, Inc. remains steadfast in its commitment to operational transparency and strategic clarity. The transition toward a royalty-focused IP acquisition model represents a pivotal step in unlocking long-term value for stakeholders. The management team is optimistic about the Company’s ability to navigate these challenges and emerge stronger, with a more predictable and profitable business model.

About Music Licensing, Inc. (OTC: SONG) (ProMusicRights.com)

Music Licensing, Inc. (OTC: SONG), also known as Pro Music Rights, is a diversified holding company and the fifth public performance rights organization (PRO) formed in the United States. Its licensees include notable companies such as TikTok, iHeart Media, Triller, Napster, 7Digital, Vevo, and many others. Pro Music Rights holds an estimated market share of 7.4% in the United States, representing over 2,500,000 works by notable artists such as A$AP Rocky, Wiz Khalifa, Pharrell, Young Jeezy, Juelz Santana, Lil Yachty, MoneyBagg Yo, Larry June, Trae Pound, Sauce Walka, Trae Tha Truth, Sosamann, Soulja Boy, Lex Luger, Trauma Tone, Lud Foe, SlowBucks, Gunplay, OG Maco, Rich The Kid, Fat Trel, Young Scooter, Nipsey Hussle, Famous Dex, Boosie Badazz, Shy Glizzy, 2 Chainz, Migos, Gucci Mane, Young Dolph, Trinidad James, Chingy, Lil Gnar, 3OhBlack, Curren$y, Fall Out Boy, Money Man, Dej Loaf, Lil Uzi Vert, and countless others, as well as artificial intelligence (A.I.) created music.

Additionally, Music Licensing, Inc. (OTC: SONG) owns royalty stakes in Listerine "Mouthwash" Antiseptic and musical works by artists such as The Weeknd, Justin Bieber, Kanye West, Elton John, Mike Posner, blackbear, Lil Nas X, Lil Yachty, DaBaby, Stunna 4 Vegas, Miley Cyrus, Lil Wayne, XXXTentacion, BlueFace, The Game, Jeremih, Ty Dolla $ign, Eric Bellinger, Ne-Yo, MoneyBagg Yo, Halsey, Desiigner, DaniLeigh, Rihanna, and numerous others.

Forward-Looking Statements:

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that, all forward-looking statements involve risks and uncertainties, including without limitation, the ability of Music Licensing, Inc. & Pro Music Rights, Inc. to accomplish its stated plan of business. Music Licensing, Inc. & Pro Music Rights, Inc. believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by Pro Music Rights, Inc., Music Licensing, Inc., or any other person.

Non-Legal Advice Disclosure:

This press release does not constitute legal advice, and readers are advised to seek legal counsel for any legal matters or questions related to the content herein.

Non-Investment Advice Disclosure:

This communication is intended solely for informational purposes and does not in any way imply or constitute a recommendation or solicitation for the purchase or sale of any securities, commodities, bonds, options, derivatives, or any other investment products. Any decisions related to investments should be made after thorough research and consultation with a qualified financial advisor or professional. We assume no liability for any actions taken or not taken based on the information provided in this communication

Contact: investors@ProMusicRights.com

SOURCE: Music Licensing, Inc.

FAQ

What were Music Licensing Inc.'s (SONG) Q3 2024 revenue and losses?

SONG reported Q3 2024 revenues of $7.54 million, with an operating loss of $2.8 million and a net loss of $2.83 million.

How much did SONG's total assets decrease in Q3 2024 compared to Q3 2023?

Total assets decreased from $55.67 million in Q3 2023 to $19.32 million in Q3 2024, a reduction of approximately 65%.

What is SONG's new strategic direction announced in Q3 2024?

SONG is shifting from public performance rights operations to focus on acquiring royalty-generating intellectual property stakes, with acquisition targets valued between $36-250 million for 2025.

What are the terms of SONG's convertible note arrangement?

SONG has a $20.36 million convertible note arrangement with Jake P. Noch Family Office, that accrues no interest, carries no default risk, and is reduced through block trade transactions.

How much was SONG's bad debt expense in Q3 2024?

SONG reported bad debt expenses of $7.24 million during Q3 2024.