FingerMotion, Inc. — Form 10-Q Summary
Reporting period: Unaudited quarter and nine months ended November 30, 2017. The company changed its name from Property Management Corporation of America in June 2017 and completed a reverse acquisition of Hong Kong-based Finger Motion Company Limited (FMCL) in July. FMCL became the accounting acquirer; the business focus shifted from property management to mobile-game operations and publishing.
Financial performance and position
| Metric | Three months ended Nov. 30, 2017 | Prior-year period | Nine months ended Nov. 30, 2017 | Prior-year period |
|---|---|---|---|---|
| Revenue | $162,859 | $15,517 | $233,297 | $67,734 |
| Cost of revenue | $125,923 | $12,721 | $252,881 | $52,737 |
| Gross profit (loss) | $36,936 | $2,796 | $(19,584) | $14,997 |
| Operating expenses | $502,702 | $37,290 | $851,600 | $173,391 |
| Net loss | $(465,859) | $(34,494) | $(871,189) | $(158,394) |
| Basic and diluted loss per share | $(0.03) | $(0.01) | $(0.09) | $(0.06) |
Quarterly gross margin was approximately 22.7%, versus 18.0% a year earlier; nine-month gross margin was approximately negative 8.4%, versus positive 22.1%. Revenue rose substantially from the reported prior-year periods, which management attributed to a game launched in August 2017. Operating expenses increased sharply, primarily from consulting and contract labor tied to new operations and financing activities. Nine-month cost of revenue exceeded revenue.
Cash flow and liquidity: Cash used in operations was $983,499 for the nine months; investing activities used $201,739, including $200,000 for licenses. Financing activities provided $1,608,423, including $1,354,000 from stock sales and $270,000 in subscriptions. Cash at November 30 was $436,531, compared with $13,346 at February 28. Current assets were $787,783 and current liabilities $160,492, yielding working capital of $627,291. Total liabilities were $160,492; the balance sheet lists no debt. Total shareholders’ equity was $627,291, compared with a deficit of $157,193 at February 28. Accumulated deficit was $1,029,582.
Changes, outlook and risks
- The former property-management revenue stream ended following the change in control; before that change, all revenue came from contracts involving two properties, partly owned by the former CEO and other former officers.
- FMCL reported three game licenses, with worldwide distribution rights except China, and a strategic alliance with a Chinese game-development studio. Management said it planned to progressively launch the games within six months and expected the Dragon Samurai launch within two months. These are management plans, not quantified financial guidance.
- The company disclosed substantial doubt about its ability to continue as a going concern, citing operating losses and dependence on obtaining additional financing and achieving profitable operations. Future equity or debt financing may dilute shareholders or carry restrictive covenants or high interest costs.
- Disclosure controls and procedures were reported ineffective because of a previously disclosed control weakness. Management said no material change in internal control occurred during the quarter and that controls would remain deficient until it completed a merger or acquisition of an operating business.
- The company identified reliance on a cloud-hosting provider as a potential near-term operating risk. It reported no material litigation, operating leases at quarter-end, off-balance-sheet arrangements, or significant subsequent events.
- No formal financial forecast or numeric guidance was provided. The filing cautions that forward-looking statements are subject to risks including competition, growth execution, integration, regulation, business disruption, and difficulty forecasting results.
Important facts for investors to verify
- Share-count disclosures differ: the cover reports 17,146,753 common shares outstanding as of January 12, 2018, while the balance sheet reports 17,262,753 shares at November 30, 2017. Confirm the subsequent share count and any intervening issuances.
- The MD&A calls $627,291 a “stockholders’ deficit,” although the balance sheet reports shareholders’ equity of $627,291; confirm the correct description.
- The cash-flow statement labels its periods August 31 in the heading, while the surrounding filing presents nine-month results through November 30. Confirm the cash-flow period and figures.
- Amortization disclosures appear inconsistent: the statements report $64,583 for nine months, while the intangible-asset note describes $14,583 as nine-month amortization. Confirm the correct expense and schedule.
- Assess the sustainability and collection of revenue, game-launch execution and related costs, the need and terms for additional financing, and remediation of the disclosed control weakness.