Fingermotion, Inc. (metadata) — 2016 Q1 filing summary
Registrant identity: The supplied filing names Property Management Corporation of America (PMCA), not Fingermotion, Inc. Verify that this is the intended filing before relying on this summary.
Business context and reporting period
This unaudited Form 10-Q covers the three months ended May 31, 2016, compared with the three months ended May 31, 2015. PMCA provides management and consulting services to residential and commercial property owners. It reported two management-services clients, both affiliated with company directors and officers; those insiders collectively held a 55% ownership interest in the properties.
Financial results and liquidity
| Metric | Three months ended May 31, 2016 | Prior-year quarter |
|---|---|---|
| Revenue | $3,474 | $3,664 |
| Cost of revenue | $1,564 | $1,608 |
| Gross margin | $1,910 (about 55.0% of revenue) | $2,056 (about 56.1%) |
| Operating expenses | $8,039 | $7,479 |
| Operating loss | $(6,129) | $(5,423) |
| Net loss | $(6,233) | $(5,492) |
| Cash used in operations | $(1,680) | $(5,863) |
At May 31, 2016, cash was $474, total current liabilities were $44,363, and working capital was negative $43,889. Total assets were $474 and stockholders’ deficit was $43,889. Current liabilities included $16,863 of accounts payable and accrued expenses and a $27,500 related-party note. The note to Washington Capital Advisors LLC, controlled by PMCA’s chairman, bears 1.5% interest, is secured by company assets, and is due January 17, 2018. The filing separately reports $748 of accrued interest due to that lender.
No income tax provision was reported. Basic and diluted loss per share was shown as $(0.00). No cash was raised through financing in the quarter; cash fell from $2,154 to $474.
Material changes versus the prior comparable period
Revenue declined $190, or about 5%, which management attributed to lower rents at the managed properties and reduced management fees. Cost of revenue decreased $44 due to lower subcontractor fees. Operating expenses rose $560, primarily because of higher public-filing professional fees; general and administrative expense increased while professional fees declined. Net loss worsened by $741. Cash used in operations was lower than in the prior-year quarter, when the company received $6,000 in related-party loan proceeds; it received no financing proceeds in the current quarter.
Outlook, risks, and unusual items
- Going concern: Management states that the loss, operating cash outflow, and stockholders’ deficit raise substantial doubt about PMCA’s ability to continue as a going concern. The financial statements contain no adjustments for a possible inability to continue operations. The prior annual audit report also raised substantial doubt.
- Funding: Management estimated it would need approximately $150,000 over the next 18 months. Its only definitive financing source was a commitment from Washington Capital Advisors to lend up to $50,000, less existing loan and accrued-interest amounts. Management cautioned that additional funding is not assured and may not be available on acceptable terms.
- Uncompleted offering: A private placement of up to 500,000 units at $0.50 each—each comprising two common shares and a three-year warrant exercisable at $0.75—had produced no sales through the filing date. The company hoped to raise up to $250,000 for working capital and to investigate online real-estate investment opportunities.
- Business plans and risks: PMCA planned to pursue additional third-party clients, expand into nearby Virginia counties and eventually statewide, and considered opportunities outside property management. Expansion and any new venture would require additional capital; failure to raise it could delay or reduce those plans. All reported revenue came from managing two properties, and the clients and properties were related to insiders.
- Controls and contingencies: Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting. PMCA reported no legal proceedings as of July 10, 2016, no unregistered securities sales during the quarter, and no off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm the registrant: the filing is for Property Management Corporation of America, despite the request identifying Fingermotion, Inc.
- Review the company’s ability to fund near-term operations, the status and terms of the related-party lending commitment, and any subsequent financing or offering activity.
- Assess the concentration and related-party nature of revenue, including whether PMCA has added unaffiliated management clients.
- Reconcile share-count disclosures: the balance sheet lists 10,007,000 shares at February 29, 2016, while the statement of changes in stockholders’ deficit shows 10,307,000 at that date; 10,307,000 were reported at May 31, 2016.
- Check the presentation of related-party accrued interest and the reported interest expense against the underlying statements and notes.