Profit Planners Management, Inc.
The accompanying unaudited condensed consolidated financial information of Profit Planners Management, Inc. (the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.
The condensed consolidated financial information for the three months and six months ended November 30, 2013 include the accounts of the Company and its wholly-owned subsidiaries and all intercompany balances and transactions have been eliminated in consolidation.
The balance sheet at May 31, 2013 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
The unaudited interim financial information should be read in conjunction with the Company’s Form 10-K, which contains the audited consolidated financial statements and notes thereto, together with Management’s Discussion and Analysis, for the year ended May 31, 2013. The interim results for the period ended November 30, 2013 are not necessarily indicative of the results for the full fiscal year.
The Company’s revenues are derived from management, financial and accounting advisory service fees and, beginning October 2013, sales of products from the Company’s Organic Innovations subsidiary’s e-commerce sites. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement that the services have been rendered to the customer, the sales price is fixed or determinable, and collectability is reasonably assured.
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were 314,816 and -0- potentially dilutive shares outstanding as of November 30, 2013 and November 30, 2012, respectively.
As reflected in the accompanying condensed consolidated financial statements, the Company had net loss of $206,052 for the six months ended November 30, 2013 and the Company has minimal historical evidence of positive earnings as evidenced by the accumulated deficit of $472,057 at November 30, 2013. The historical trend of losses raises substantial doubt about the Company’s ability to continue as a going concern.
Management believes that the actions presently being taken and the success of future operations will be sufficient to enable the Company to continue as a going concern. These actions include continuing to grow the Company’s revenues sufficient to support its cost structure through existing and new clients. In addition, management intends to obtain capital in the near future through additional private placement offerings. In August 2013, the Company obtained $70,500 through private placement offerings.
There can be no assurance that anticipated revenue growth and the raising of equity will be successful nor is there assurance that the Company’s anticipated financing will be available in the future, at terms satisfactory to the Company. Failure to achieve revenue growth and the equity and financing at satisfactory terms and amounts could have a material adverse effect on the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements
The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” “anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.
The following discussion and analysis should be read in conjunction with our accompanying financial statements and the notes to those financial statements included in this filing. The following discussion includes forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this filing.
Operation
We are a Nevada Corporation founded in January 2009 with offices in New York, California and Florida.
Our current operations are divided into the following revenue streams:
| | ● | CFO, Accounting and Tax Services |
| | ● | Insurance and Healthcare Insurance Services |
| | ● | Organic Innovations, Inc. |
| | ● | Management Services |
Our CFO, Accounting and Tax Services business continues to be our main revenue generator with more than 85% of our revenues coming from these services. In the future, we expect this percentage to decrease as our other businesses gain traction in the market place.
Our Management Services business caters to the financial management needs of sports and entertainment professionals. Although presently the operation is small, we intend to grow this portion of our business by concentrating more resources to it.
Organic Innovations, Inc. has developed and will continue to expand its organic product e-commerce platform. Organic Innovations offers “organic” and health-care related products and potential services to the consumer by creating a consumer friendly on-line experience through our “Organically Crafted” branded website. In October 2013 we added a product line of products for the aging population under the e-commerce name Golden Age Medical. The products on the Golden Age Medical brand website meet the growing demand from consumers for health related products for the aging population.
Marketing
Our marketing focus depends on the business and consumer market. For our CFO, Accounting and Tax Services business, our marketing efforts are targeted at small to midsized companies that are known to, located or identified by our finders’ network. We also utilize our contacts with other professional service firms (law firms, investment bankers, venture capital firms and CPA audit firms) that provide services to the small and middle market sector for referrals of potential clients. We plan to expand and leverage our current clientele in our CFO, Accounting and Tax services group for potential leads and referrals. We also intend to explore alliances or potential acquisitions of small accounting, or other consulting firms, to access their customer lists so that we can expand our client base.
Although our target market has been on companies that have sales of less than $100 million and are based in North America, we plan to expand to larger companies as our consulting staff grows. Our industry focus is professional services and products related to our businesses. Although we focus on these industries we will look at opportunities in other industries if it makes economic sense.
For our Organic Innovations business, our marketing efforts target the health conscious consumer regardless of age for our Organically Crafted brand and the aging senior population and their support providers for our Golden Age Medical brand. Both brands are primarily focused on the North American consumer at the present time, but we plan to expand the brands to select global markets as the business grows. We utilize e-mail campaigns, social media and promotional opportunities utilizing consumer lists and contacts.
We currently own and operate the various web-sites, and the following are the more prominent ones:
| | ● | www.profitplannersmgt.com |
| | ● | www.organicinnovations.com |
| | ● | www.organicallycrafted.com |
| | ● | www.twinpeaksplus.com |
| | ● | www.profitplannersinsurancegroup.com |
| | ● | www.goldenagemedical.com |
We use these web-sites as part of our marketing strategy. In addition, we work to expand our communications through various channels of social and business media that include our web-sites, other sites such as LinkedIn, Facebook and Twitter, and through press releases and articles.
Our marketing costs for the six months ended November 30, 2013 were inherent in our development expenses of $33,685 incurred in the first quarter and also include corporate communication expenses of $3,730. Development expenses included the development of the Organically Crafted brand name, logo, web-site, relationships with suppliers and consisted of web development costs and staff and consulting cost. Other ongoing marketing expenses consisted of e-mails, promotions and use of social media to communicate to potential customers.
We believe that these strategies will provide the best results given our limited marketing budget.
Recent Developments
During the six months ended November 30, 2013, we completed the development of our Organic product e-commerce platform and launched a web-site that offers on-line ordering of products categorized under our “organically crafted” brand. In October 2013, we acquired a domain name and site for Golden Age Medical, an e-commerce platform that resells health related products for the senior community using an on-line web-site. Both web-sites are managed under our Organic Innovations, Inc. subsidiary and complement each other. Although both web-sites are relatively new, Organic Innovations, Inc. already has some sales, even if relatively small amounts. Although we have established suppliers and distribution channels for these products, we are continuing to evaluate the product offerings for each web-site. We will utilize marketing, product offering and potentially acquisitions of similar business as a continuous way to improve and grow the businesses.
Development of the organic product e-commerce platform was completed using both in-house and external resources. Costs for this platform for the three and six months ended November 30, 2013 were -0- and $33,685, respectively. These development costs included development of the brand, its logo, the web-site, product decisions and product placement on the web-site. Costs to acquire the Golden Age domain name and site totaled $4,000 in the quarter and there were only incidental costs to operate it. This amount was capitalized and will be depreciated over its useful life.
Critical Accounting Policies
Accounts receivable
Accounts receivable represents open invoices from customers. The Company periodically evaluates the collectability of its accounts receivable and considers the need to record or adjust an allowance for doubtful accounts based upon historical collection experience and specific customer information. Actual amounts could vary from the recorded estimates. The Company has determined for the six months ended November 30, 2013, an allowance for doubtful accounts of $60,173 was required as a result of the Company believing certain receivables for consulting services will no longer be collected either fully or partially. The Company does not require collateral to support customer receivables.
Revenue recognition
The Company’s revenues are derived from management, financial and accounting advisory services, and online retail operations. The Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement that the services have been rendered to the customer, the sales price is fixed or determinable, and collectability is reasonably assured.
Product sales represent revenue from the sale of products and related shipping fees. Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers. Return allowances, which reduce revenue, are estimated are based on management’s judgment. Revenue from product sales is recorded net of sales taxes. Current discount offers, when accepted by our customers, are treated as a reduction to sales revenues.
Net income (loss) per common share
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period.
Results of operations
Three Months Ended November 30, 2013 and 2012
For the three months ended November 30, 2013 and 2012, we had revenue of $183,405 and $202,410, respectively. Cost of revenues for the three months ended November 30, 2013 and 2012 totaled $128,528 and $142,475, respectively. Selling, general and administrative expenses for the three months ended November 30, 2013 and 2012 totaled $136,041 and $100,688, respectively, resulting in a net loss of $81,164 and $40,753, respectively.
Consulting service income for the three months ended November 30, 2013 consisted of CFO, Accounting and Tax Services of $151,131 and Management Services of $25,392. Product sales from the Organic Innovations businesses totaled $6,882 for the quarter ended November 30, 2013. For the comparable three months ended November 30, 2012, consulting service income consisted of CFO, Accounting and Tax Services of $138,410 and Management Services of $64,000. The changes in service income are attributable to fluctuations in the client base, the completion of non-recurring projects and the timing of acquiring new clients.
Cost of revenues for the three months ended November 30, 2013 comprised of personnel and overhead costs of $123,700 and product costs $4,828. The personnel and overhead costs were comprised of salaries and compensation expenses of $109,720 and other overhead expenses of $13,980. All products sold were purchased for resale upon the order and receipt of payment from the customer. Cost of revenues for the three months ended November 30, 2012 comprised of personnel and overhead costs of $142,475. The personnel and overhead costs were comprised of salaries and compensation expenses of $138,315 and other overhead costs of $4,160.
Selling, general and administrative expenses for the three months ended November 30, 2013 was $136,041, comprised of net compensation expense for corporate management of $53,912, consulting and professional expenses of $16,905, rent expense of $16,712, bad debt expense of $33,196, travel-related expenses of $5,431, and other expenses of $9,885. Selling, general and administrative expenses for the three months ended November 30, 2012 was $100,688, comprised of net compensation expense for corporate management of $22,784, consulting and professional expenses of $38,078, rent expense of $10,484, travel-related expenses of $4,276, and other expenses of $25,066. Fluctuations in consulting and professional expenses and the corporate management for the comparative periods result from time spend on general and administrative duties versus working directly on client accounts.
Six Months Ended November 30, 2013 and 2012
For the six months ended November 30, 2013 and 2012, we had revenue of $372,288 and $453,210, respectively. Cost of revenue for the six months ended November 30, 2013 and 2012, totaled $276,586 and $266,994, respectively. Selling, general and administrative expenses for the six months ended November 30, 2013 and 2012, totaled $301,754 and $168,216, resulting in a net loss of $206,052 and a net profit of $18,000, respectively.
Consulting service income for the six months ended November 30, 2013 consisted of CFO, Accounting and Tax Services of $314,082 and Management Services of $51,324. Product sales from the Organic Innovations business totaled $6,882 for the six months ended November 30, 2013. For the comparable six months ended November 30, 2012, consulting service income consisted of CFO, Accounting and Tax Services of $389,210 and Management Services of $64,000. The changes in service income are attributable to changes in the client base and the completion of non-recurring projects. As clients grow or change, certain functional responsibilities are brought in-house and our services are no longer necessary.
Cost of revenues for the six months ended November 30, 2013 totaled $276,586 and was comprised of personnel and overhead costs of $271,758 and product costs $4,828. The personnel and overhead costs were comprised of salaries and compensation expenses of $239,101 and other overhead expenses of $32,657. All products sold were purchased for resale upon the order and receipt of payment from the customer. Cost of revenues for the six months ended November 30, 2012 comprised of personnel and overhead costs of $266,994. The personnel and overhead costs were comprised of salaries and compensation expenses of $257,425 and other overhead costs of $9,569.
Selling, general and administrative expenses for the six months ended November 30, 2013 was $301,754, comprised of development expense of $33,685, net compensation expense for corporate management of $87,506, consulting and professional expenses of $46,613, rent expense of $30,065, bad debt expense of $60,173, travel-related expenses of $12,947, and other expenses of $30,765. The development expenses for the Organic Innovation e-commerce platform to sell “organic” products consisted of salaries and compensation of $12,250, consulting and professional fees of $18,000 and other web-development expenses of $3,435. Selling, general and administrative expenses for the six months ended November 30, 2012 was $168,216, comprised of net compensation expense for corporate management of $49,071, consulting and professional expenses of $44,878, rent expense of $21,061, travel-related expenses of $12,399, and other expenses of $40,807. In the first two quarters of 2013, certain former client accounts have had difficulty in meeting their obligations to us and we have conservatively recorded an allowance against our accounts receivables, while we continue to pursue collection for our services.
Liquidity and Capital Resources
As of November 30, 2013, we had cash of $52,317 as compared to cash of $127,984 as of May 31, 2013. The decrease in net cash of $75,667 was the result of net cash used in operating activities totaling $135,622, used in investing activities totaling $10,545 and provided by financing activities totaling $70,500 for the six months ended November 30, 2013.
For the six months ended November 30, 2013, net cash used in operating activities was attributable to a net loss of $206,052, non-cash adjustments for depreciation expense of $3,077 and stock compensation expense of $50,086, and a net increase from the change in operating assets and liabilities of $17,267.
For the six months ended November 30, 2012, net cash generated from operating activities was attributable to net income of $18,000, non-cash adjustments for depreciation expense of $625 and stock compensation expense of $7,135, offset by the net change in operating assets and liabilities of $20,285.
Net cash provided by financing activities for the six months ended November 30, 2013 resulted from $70,500 received for 2,350,000 restricted shares of common stock purchased through private placement.
In order for us to execute our business plan we will need to raise at least $500,000 in debt or equity. The funds are needed for building out the management team, sales and marketing and working capital. There can be no assurance that we will be able to raise the funds needed to execute our business plan.
If we are unable to satisfy our cash requirements we may be unable to proceed with our plan of operations. We do not anticipate the purchase or sale of any significant equipment. The foregoing represents our best estimate of our cash needs based on current planning and business conditions. In the event we are not successful in reaching our initial revenue targets, additional funds may be required, and we may not be able to proceed with our business plan for the development and marketing of our core services. Should this occur, we will suspend or cease operations.
We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
N/A
ITEM 4T. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our President, Chief Financial Officer and Secretary, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our President, Chief Financial Officer and Secretary concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Changes in Internal Control Over Financial Reporting. During the most recent quarter ended November 30, 2013, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
ITEM 1. LEGAL PROCEEDINGS.
We were not a party to any legal proceedings as of the date of filing of this Quarterly Report.
ITEM 1A. RISK FACTORS.
Our Annual Report on Form 10K for the fiscal year ended May 31, 2013 contains a description of the risk factors relating to our operations and to an investment in our common stock.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
We did not issue or sell any equity shares during the fiscal quarter covered by this Quarterly Report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS
| Exhibit Number | | Description of Exhibit |
| | | |
| 31.1 | | Certifications required by Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | | |
| 32.1 | | Certification of Chief Executive Officer and Principal Accounting Officer pursuant to 18 U.S.C.§ 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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.
| Date: January 13, 2014 | Profit Planners Management, Inc. |
| | |
| | By: | /s/ Wesley Ramjeet |
| | | Wesley Ramjeet Chief Executive Officer, Chief Financial , Chief Accounting Officer, Officer and Director |
