Filing summary
Issuer and period: The supplied filing is Property Management Corporation of America’s unaudited Form 10-Q for the quarter ended November 30, 2016, not a filing identified as Fingermotion, Inc. The filing describes a real-estate management and consulting business operating under two management agreements in Virginia.
Financial results
| Metric | Three months ended Nov. 30, 2016 | Three months ended Nov. 30, 2015 | Nine months ended Nov. 30, 2016 | Nine months ended Nov. 30, 2015 |
|---|---|---|---|---|
| Revenue | $3,635 | $3,339 | $10,722 | $10,609 |
| Gross profit (reported as gross margin) | $1,999 | $1,692 | $5,897 | $5,731 |
| Operating expenses | $4,238 | $6,156 | $16,634 | $25,468 |
| Operating loss | $(2,239) | $(4,464) | $(10,737) | $(19,737) |
| Net loss | $(2,342) | $(4,552) | $(11,048) | $(19,983) |
Quarterly revenue increased $296 year over year, while nine-month revenue rose $113. Operating expenses fell in both comparisons, mainly on lower general and administrative, office, and professional costs. The nine-month 2015 comparison included $8,459 of debt-forgiveness income; no comparable income was recorded in 2016, contributing to the year-over-year change in other income and expense. Gross margin was approximately 55% for the 2016 quarter and 55% for the nine-month period.
Cash, liquidity, and debt
- At November 30, 2016, cash was $117, compared with $2,154 at February 29, 2016. Current assets were $2,549 and current liabilities were $51,253, producing negative working capital of $48,704.
- Operating activities used $2,037 of cash in the nine months; the filing reports no financing cash inflow during that period. Cash declined by $2,037.
- Related-party notes payable were $27,500, unsecured, bearing 1.5% annual interest and due on demand. Accrued interest due to the lender was $955. The lender, Washington Capital Advisors LLC, is controlled by the Chairman.
- Stockholders’ deficit was $48,704 at November 30, 2016. No meaningful liquidity cushion is evident from the reported balances.
Outlook, risks, and notable disclosures
- Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing losses, operating cash use, stockholders’ deficit, and limited cash. The filing says additional capital is necessary.
- Management estimated capital needs of approximately $150,000 over the next 18 months. Its only definitive financing source was the Chairman-controlled lender’s agreement to lend up to $50,000, reduced by outstanding loan and accrued interest balances. Further financing was not assured.
- A private placement launched in January 2016 sought up to $250,000; the filing reports no unit sales through the filing date. Planned growth included satellite offices and consideration of online real-estate investment or other business opportunities, all dependent on obtaining funding.
- All reported revenue came from two property-management contracts, and the properties were partly owned by the Chairman and the acting CEO, President, and CFO. This creates substantial customer concentration and related-party exposure.
- The company reported no legal proceedings as of January 10, 2017, no unregistered securities sales during the quarter, and no defaults upon senior securities. Management said disclosure controls were effective and reported no material change in internal control over financial reporting.
- Management’s expansion plans and expected fundraising are forward-looking and subject to execution and financing risks. The company also identified new accounting standards under evaluation.
Important facts for investors to verify
- Confirm the issuer: the supplied 10-Q names Property Management Corporation of America, which does not match the requested company, Fingermotion, Inc.
- Verify current liquidity, the status and terms of related-party funding, and the company’s ability to meet demand-payable obligations.
- Assess whether the proposed capital raise occurred and whether the company can fund its stated $150,000 need and planned expansion.
- Review the two related-party customer contracts, revenue concentration, and any changes in customer or ownership relationships.
- Reconcile reported results and cash needs with subsequent filings; this interim filing states that its results are not necessarily indicative of full-year performance.