Filing identity and reporting period
Important discrepancy: The request identifies Mama’s Creations, Inc., but the supplied Form 10-Q is for Mascot Properties, Inc. (Commission File No. 000-28629). It covers the quarter ended September 30, 2012, and was signed November 13, 2012. The filing describes Mascot as a development-stage real estate property management company focused primarily on student housing. Its interim financial statements are unaudited.
Financial results and position
| Metric | Quarter ended September 30, 2012 | Comparable 2011 quarter |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | Net credit of $1,712, after a $4,000 expense refund | $12,160 |
| Net income (loss) | $1,712 | $(12,160) |
| Net cash used in operations | $(2,831) | $(12,160) |
| Cash at period end | $1,550 | $78 |
At September 30, 2012, total assets were $1,550, consisting entirely of cash. Current liabilities were $49,935: $46,725 owed to related parties and $3,210 of accounts payable and accrued expenses. Stockholders’ deficit was $48,385; accumulated development-stage deficit was $109,105. The related-party notes have no definitive repayment terms and bear no interest. No interest or income taxes were paid in the quarter. No gross margin is meaningful because the company had no revenue.
Quarterly financing consisted of $4,300 in proceeds from related-party notes. Cash increased by $1,469 from $81 at June 30, 2012. The filing reports no investing activity and no off-balance-sheet arrangements. Common shares outstanding were 104,208,000, unchanged during the quarter.
Changes versus the prior comparable period
The company moved from a $12,160 loss in the 2011 quarter to reported income of $1,712, primarily because of a $4,000 refund of prior-period transfer-agent fees. It still generated no revenue and used cash in operations. Cash rose from $81 at June 30, 2012, while related-party debt increased from $42,425 to $46,725; accounts payable and accrued expenses fell from $7,753 to $3,210.
Outlook, risks, and unusual items
- Management estimated it needed at least $39,000 over the next 12 months to pursue its plans, including $24,000 of anticipated travel/operating costs and $15,000 of marketing costs. Elsewhere, the filing says operating expenses are not expected to exceed $49,000; the basis for the difference is not clearly reconciled.
- Plans included securing management contracts for at least ten properties and establishing ten strategic alliances within 12 months. The company reported only preliminary discussions and had no property management or outside-vendor contracts. It anticipated management fees generally of 10%–15% of gross monthly rents, contingent on obtaining contracts.
- The founder and majority shareholder, who owned 77% and served as president, committed to cover cash shortfalls for specified planned expenses. The company also said it might seek additional financing; no institutional or private lending sources had been identified. Equity financing could dilute shareholders.
- Management and the filing’s going-concern note cited substantial doubt about the company’s ability to continue as a going concern, dependent on shareholder support, financing, and achieving profitable operations. The filing warns operations could be suspended or ceased if funding or revenue targets are not achieved.
- An employment agreement provides for an annual salary of $85,000 plus benefits only after a $300,000 revenue milestone; no salary or benefits had been accrued or paid because the milestone was unmet.
- Management concluded disclosure controls and procedures were not effective at quarter end. It reported no material changes in internal control over financial reporting during the quarter. No material litigation or subsequent events requiring disclosure were reported.
Key facts for investors to verify
- Confirm the issuer: this filing is for Mascot Properties, Inc., not Mama’s Creations, Inc.
- Verify the reported $1,712 quarterly income and cash-flow presentation against the underlying statements: the income reflects an expense refund, while operating cash flow was negative.
- Assess the company’s ability to fund operations, the founder’s stated support commitment, and the terms and repayment expectations for related-party notes.
- Check whether management contracts, strategic alliances, and planned financing were subsequently obtained; none existed at the filing date.
- Reconcile the stated $39,000 funding need with the separate $49,000 expense estimate, and consider the disclosed ineffective controls and going-concern uncertainty.