Business context and reporting period
FingerMotion, Inc. (formerly Property Management Corporation of America) filed this Form 10-K for the fiscal year ended February 28, 2018. Although the request metadata says “2016 Q4,” the filing is for fiscal 2018, not a 2016 quarter; it does not provide standalone fourth-quarter results. The comparable period is April 6, 2016 (inception) through February 28, 2017, so the periods are not directly comparable.
In July 2017, the company completed a reverse acquisition of Hong Kong-based Finger Motion Company Limited (FMCL), shifting its stated focus from property management to operating and publishing mobile games. It reported three game licenses, with worldwide distribution rights except in China, and planned game launches. The filing’s financial statements treat FMCL as the accounting acquirer.
Financial performance and position
| Metric | Year ended February 28, 2018 | Prior inception period |
|---|---|---|
| Revenue | $453,543 | $67,734 |
| Cost of revenue | $434,717 | $52,737 |
| Gross profit | $18,826 | $14,997 |
| Operating expenses | $1,768,394 | $173,390 |
| Net loss | $1,751,121 | $158,393 |
| Basic and diluted loss per share | $0.15 | $0.06 |
| Cash used in operating activities | $1,609,479 | $13,346 provided |
Gross margin was approximately 4.2%. Revenue rose substantially, but the company remained loss-making; management attributed higher operating and revenue costs to supporting a game launched in August 2017, including marketing, outsourcing, and server hosting. The filing does not provide a clear comparable full-year growth rate because the prior period covers only the business’s initial period.
At February 28, 2018, cash was $10,551, accounts receivable $296,249, total assets $439,839, and total liabilities $542,480. All reported liabilities were current; current liabilities included $107,082 in accounts payable, $385,124 in other accrued expenses, and a $50,000 convertible note. The resulting working-capital deficit was approximately $189,652, and the current ratio approximately 0.82. Stockholders’ deficit was $102,641. The note bears 10% interest, is due January 8, 2019, and is convertible at $2.50 per share.
Financing activities provided $1,808,423, primarily from $1,624,000 of common-stock issuance, plus $150,000 in stock subscriptions and $50,000 from convertible notes. Cash declined by $2,795 over the year. No dividends were paid.
Material changes, outlook, and risks
- The company changed its name and completed a 1-for-4 reverse stock split in June 2017, then acquired FMCL in July 2017. It issued shares to FMCL shareholders, consultants, and investors; dilution and transaction accounting are material to understanding the reported results.
- The filing says games would be launched progressively over the following six months and targeted at worldwide markets outside China. This is management’s stated plan, not quantified financial guidance; no revenue or profitability forecast is provided.
- Management and the auditor stated that recurring losses, limited cash, and a net capital deficiency raise substantial doubt about the company’s ability to continue as a going concern. Additional financing is needed, with no assurance it will be available on acceptable terms; future financing could dilute shareholders or impose restrictive terms or high interest costs.
- The company relied on a cloud-hosting provider; disruption or termination could adversely affect near-term results. It reported no pending or threatened litigation and no off-balance-sheet arrangements.
- The auditor issued an unqualified opinion on the financial statements but included a going-concern explanatory paragraph. Management reported effective disclosure controls and internal control over financial reporting; the auditor was not engaged to attest to internal-control effectiveness.
Important facts for investors to verify
- Confirm actual game launch dates, user traction, monetization, and whether licensed distribution rights and the development-studio alliance remain in effect.
- Assess cash needs, financing availability, and the terms and potential dilution from the convertible note and outstanding stock subscriptions.
- Reconcile the filing’s inconsistent net-loss references: the statements report $1,751,121, while a going-concern note gives $1,741,121 for fiscal 2018.
- Reconcile share counts: the balance sheet reports 17,432,753 shares at February 28, 2018, while the cover reports 17,435,753 outstanding as of July 11, 2017; the filing also reports 17,435,753 as of July 11, 2018 elsewhere.
- Review the transition in revenue sources: the notes say all revenue before the April 2017 control change came from two properties partly owned by the former chairman, and that this revenue stream ended after the change in control.