Fingermotion, Inc. annual report, FY2015

Business context and reporting period

The supplied filing is a Form 10-K for Property Management Corporation of America (PMCA), not Fingermotion, Inc. It covers the fiscal year ended February 28, 2015; the company was incorporated January 23, 2014, so its prior-year comparison is only the period from inception through February 28, 2014. The filing was signed May 29, 2015.

PMCA provides residential and commercial property management and consulting services in Fauquier County, Virginia. It managed two properties, with reported recurring monthly revenue of approximately $1,120. Both customers and the properties were affiliated with company officers/directors, and the filing states that all fiscal-year revenue came from these arrangements.

Financial results and position

Financing cash flow was $45,313, comprising $50,350 from the sale of 1,007,000 shares and $5,037 of net repayments of related-party loans. Cash decreased by $1,416 over the year. At February 28, 2015, the balance sheet reported $17,500 of related-party notes payable; the narrative gives $17,801 including $301 of interest. The notes bear 1.5% interest and are due on demand.

Changes versus the prior comparable period

Revenue was $14,259 for the fiscal year, versus $1,175 from inception through February 28, 2014; net loss was $76,032 versus $14,741 for that shorter start-up period. These are not directly comparable periods. Operating expenses were $83,121, compared with $15,350 in the inception period. Management says year-over-year comparison is not informative because operations began in January 2014.

Outlook, risks and unusual items

• Management estimated approximately $75,000 of additional capital would be needed over the next 12 months to execute its business plan, and expected to seek debt financing. It disclosed no financing commitments beyond a related-party lending arrangement of up to $50,000 inclusive of the outstanding loan; management cautioned that additional financing was not assured.
• The auditor’s report and Note 3 state that recurring losses, accumulated deficit, operating cash outflows and limited cash raise substantial doubt about PMCA’s ability to continue as a going concern. The financial statements contain no adjustments that might result if the company cannot continue.
• Plans included expanding into nearby Virginia counties during 2015 and statewide in 2016–2017. Discussions in April and May 2015 concerned four additional properties (three commercial units and 26 residential units), mostly owned by officers; final agreements had not been reached.
• Related-party exposure is significant: all reported revenue was from two officer/director-affiliated properties; the company borrowed from an entity controlled by its CEO and rented its office from that entity for $350 per month. The CEO and CFO together owned 90% of outstanding shares as of May 29, 2015.
• The common stock was quoted on the OTC Pink Sheets, with reported quarterly high and low bids of $0.05 in the quarter ended February 2015 and $0.00 in the preceding listed quarters. The filing warns penny-stock rules and limited trading may make shares difficult to sell. No dividends are planned.
• The filing reports no pending or threatened lawsuits and no off-balance-sheet arrangements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not provide an internal-control opinion.

Important facts for investors to verify

• Confirm the issuer identity: the request names Fingermotion, Inc., while the supplied 10-K is for Property Management Corporation of America.
• Reconcile the $17,500 balance-sheet note payable with the narrative’s $17,801 amount including interest, and verify the terms, availability and outstanding balance of related-party financing.
• Verify the reported financial statements and cash-flow figures against the filed exhibits, including the stated net decrease in cash and the financing cash-flow reconciliation.
• Assess whether PMCA obtained the proposed additional capital and whether the four discussed property-management contracts were finalized, particularly given their officer-affiliated ownership.
• Evaluate the company’s ability to continue as a going concern, its very limited cash and negative working capital, and its dependence on related parties and future financing.
• Review the concentration and arm’s-length terms of related-party revenue, loans and office rent, as well as the company’s ability to attract unaffiliated customers and generate sustainable margins.