FingerMotion, Inc. - Quarter Report: 2016 November (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of January 10, 2017, there were 10,307,000 shares of common stock, par value $0.0001 per share, outstanding.

TABLE OF CONTENTS 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Property Management Corporation of America

Nine Months ended November 30, 2016 and 2015

Notes to the Condensed Financial Statements

(Unaudited)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including, without limitation, Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains “forward-looking statements.” The forward-looking information is based on various factors and was derived using numerous assumptions. All statements, other than statements of historical fact, that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. These forward-looking statements are usually accompanied by words such as “believe,” “anticipate,” “plan,” “seek,” “expect,” “intend” and similar expressions.

Forward-looking statements necessarily involve risks and uncertainties, and our actual results could differ materially from those anticipated in the forward-looking statements due to a number of factors. These factors as well as other cautionary statements made in this Quarterly Report on Form 10-Q, should be read and understood as being applicable to all related forward-looking statements wherever they appear herein. The forward-looking statements contained in this Quarterly Report on Form 10-Q represent our judgment as of the date hereof. We encourage you to read those descriptions carefully. We caution you not to place undue reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless an earlier date is indicated) and we undertake no obligation to update or revise the statements except as required by federal securities law. Such forward-looking statements are not guarantees of future performance and actual results will likely differ, perhaps materially, from those suggested by such forward-looking statements. In this report, the “Company,” “we,” “us,” and “our” refer to Property Management Corporation of America.

Overview

Property Management Corporation of America offers management and consulting services to residential and commercial real estate property owners who rent or lease their property to third party tenants. The Company currently has two management services agreements, one with Marsh Road LLC (Bealeton, Virginia) and one with Main Street Heritage LLC (Marshall, Virginia), both mixed residential and commercial properties. Our executive officer and our directors together have a 55% ownership interest in these initial properties.

We intend to expand our services in 2017 and execute additional management services agreements with other residential and commercial property owners over the next several months. Our initial expansion and growth plans include establishing satellite offices in counties contiguous with Fauquier County, Virginia and eventually statewide.

We offer exceptional customer service and very competitive pricing, which we believe sets us apart from other property management companies. As we grow, we plan to add additional employees with specific skills to enhance our service offerings. We believe the in-house skill set will enable us to enhance our profitability as we will not need to sub-contract these services.

In addition to our real estate management and consulting services, management has been reviewing and considering other business opportunities in industries outside of the property management industry.

Results of Operations

Three Month Period Ended November 30, 2016 Compared to the Three Month Period Ended November 30, 2015

Revenue

We recorded $3,635 in revenue from operations for the three month period ended November 30, 2016 compared to $3,339 for the three month period ended November 30, 2015. The increase of $296 reflects increases in rent and the overall stability of our rental activities at the properties under management.

Our revenue is derived from our management service agreements, currently with two clients, both of which are affiliated with our directors and officer. It is our intention in the short term to seek to add additional third party clients. Management believes the local market is underserved and property management companies such as ours can successfully add new clients.

Cost of revenue

We recorded $1,636 in cost of revenue for the three month period ended November 30, 2016 compared to $1,647 for the three month period ended November 30, 2015. The decrease of $11 reflects the stability of fees paid for our sub-contracted services.

Our cost of revenue has consisted of direct costs associated with the delivery of services under our management service agreements, primarily sub-contractor costs.

Operating expenses

We recorded $4,238 in operating expenses for the three month period ended November 30, 2016 compared to $6,156 for the three month period ended November 30, 2015. The decrease of $1,918 primarily reflects lower costs associated with general and administrative and office expenses.

Our normal operating expenses consisted primarily of professional fees and administrative expenses. Future operating expenses could consist of indirect personnel costs, including fringe benefits, insurance and facility costs, travel and entertainment, depreciation and amortization, marketing and sales, professional services such as legal and accounting, and other general and administrative costs.

Other income/expenses

We recorded $103 of other expense for the three month period ended November 30, 2016 compared to $88 of other expense for the three month period ended November 30, 2015. The increase of $15 was due to additional interest expense on increased loans from our chairman during this fiscal year.

Our normal transactions included in other income and expenses are generally related to interest expense. In 2015 we recorded other income due to debt forgiveness of professional fees incurred in the initial public offering process.

Nine Month Period Ended November 30, 2016 Compared to the Nine Month Period Ended November 30, 2015

Revenue

We recorded $10,722 in revenue from operations for the nine month period ended November 30, 2016 compared to $10,609 for the nine month period ended November 30, 2015. The increase of $113 reflects increases in rent and the overall stability of our rental activities at the properties under management.

Our revenue is derived from our management service agreements, currently with two clients, both of which are affiliated with our directors and officers. It is our intention in the short term to seek to add additional third party clients. Management believes the local market is underserved and property management companies such as ours can successfully add new clients.

Cost of revenue

We recorded $4,825 in cost of revenue for the nine month period ended November 30, 2016 compared to $4,878 for the nine month period ended November 30, 2015. The decrease of $53 reflects the stability of fees paid for our sub-contracted services.

Our cost of revenue has consisted of direct costs associated with the delivery of services under our management service agreements, primarily sub-contractor costs.

Operating expenses

We recorded $16,634 in operating expenses for the nine month period ended November 30, 2016 compared to $25,468 for the nine month period ended November 30, 2015. The decrease of $8,834 primarily reflects lower costs associated with general and administrative expenses, office expenses and professional fees.

Our normal operating expenses consisted primarily of professional fees and administrative expenses. Future operating expenses could consist of indirect personnel costs, including fringe benefits, insurance and facility costs, travel and entertainment, depreciation and amortization, marketing and sales, professional services such as legal and accounting, and other general and administrative costs.

Other income/expenses

We recorded $311 of other expense for the nine month period ended November 30, 2016 compared to $8,213 of other income for the nine month period ended November 30, 2015. The decrease of $8,524 was due to other income of $8,459 of debt forgiveness increased by $65 of higher interest expense in fiscal year 2017.

Our normal transactions included in other income and expenses are generally related to interest expense. In 2016 we recorded other income due to debt forgiveness of professional fees incurred in the initial public offering process.

Liquidity and Capital Resources

During the nine months ended November 30, 2016, the Company incurred a net loss of $11,048, used cash in operations of $2,037, and at November 30, 2016, had a stockholders' deficit of $48,704. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s February 29, 2016 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan.

From January 23, 2014 (inception) through November 30, 2016, we relied on funds loaned to us by Washington Capital Advisors LLC, a company controlled by our Chairman. At November 30, 2016, the outstanding loan and accrued interest amounts due Washington Capital Advisors were $27,500 and $955, respectively.

We will need to raise additional capital to carry out our business plan. We believe that our additional capital needs will be approximately $150,000 over the next 18 months to fully carry out our business plan. We expect to raise these additional funds through the issuance of debt obligations and private placements of our Common Stock; however, there can be no assurance that we will be able to raise additional capital or if we are able to raise additional capital that the terms will be acceptable to us. Currently our only definitive financing source is Washington Capital Advisors, which has agreed to loan us up to $50,000 less any currently outstanding loan and accrued interest amounts.

In January 2016, the Company initiated a Private Placement of up to 500,000 Units, each Unit consisting of two (2) shares of the Company’s Common Stock and a Common Stock warrant, to purchase one share of the Company’s Common Stock. The Units are priced at $0.50 each and the warrant is exercisable for three (3) years after the subscription date for $0.75. At November 30, 2016, and through the date of this filing, there have been no sales of Units. The Company hopes to raise up to $250,000 for general working capital purposes and to investigate the possibility of entering the on-line real estate investment industry. This industry, known to some as real estate crowd funding, has been popularized over the last couple of years and has attracted several companies. Management believes this sector is underserved and lacks a regional company to consolidate funding opportunities. Additionally, management believes it can use its property management services and experience to serve properties acquired through on-line funding.

Our current expansion and growth plans include establishing satellite offices in counties contiguous to Fauquier County, Virginia during 2017 and eventually statewide. Initially, we will seek to establish these offices in properties that we manage or alternatively focus on geographic areas we identify as in need of our services. This expansion will require additional capital. We plan to raise this additional capital through debt obligations, private placements of our common stock and possibly crowd funding as mentioned above. Failure to raise additional capital will lengthen the time and decrease the scope of our expansion and growth plans.

Also, management has considered exploring businesses opportunities outside of our current industry focus. If the Company were to find a business opportunity outside of the property management industry, management believes that additional funding would still be necessary in order for the Company to take advantage of any given opportunity.

The Company had cash on hand of $117 at November 30, 2016. Our primary needs for cash are to fund and grow our ongoing operations. However, we will require additional capital to fully carry out our business plans.

During the nine months ended November 30, 2016, the Company had a net decrease in cash of $2,037. The Company’s sources and uses of cash were as follows:

Cash Flows From Operating Activities

We used net cash of $2,037 in our operating activities during the nine months ended November 30, 2016, consisting of a net loss of $11,048, decreased by net provisions of cash totaling $9,011 due to changes in our operating assets and liabilities.

As of November 30, 2016, the Company had negative working capital of $48,704.

Off-Balance Sheet Arrangements

The Company was not a party to any off-balance sheet arrangements during the three months ended November 30, 2016.

Significant and Critical Accounting Policies and Practices and Recently Issued Accounting Pronouncements

Please refer to Note 2 in the Notes to the Financial Statements for a discussion on the Company’s Significant and Critical Accounting Policies and Practices and Recently Issued Accounting Pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide information under this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our acting principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, has concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commissions rules and forms, and is accumulated and communicated to our management, including our acting principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

During the most recently completed fiscal quarter, there has been no significant change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting as such term is defined in Rule 13a-15 and 15d-15 of the Exchange Act.

PART II. OTHER INFORMATION.

Item 1.    Legal Proceedings.

 As of January 10, 2017, we were not subject to any legal proceedings.  

Item 1A. Risk Factors.

 As a smaller reporting company, we are not required to provide information under this item.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

 During the three month period ended November 30, 2016, there were no sales of unregistered securities.

Item 3.    Defaults Upon Senior Securities.

 None.

Item 4.    Mine Safety Disclosures.

 Not applicable.

Item 5.    Other Information.

 None.

Item 6.    Exhibits

* Incorporated by reference to the exhibits filed with the Company’s Registration Statement on Form S-1 (No. 333-196503), effective June 26, 2014.

** Exhibit filed with this Quarterly Report on Form 10-Q.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

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