UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 FORM 10-Q

  

þ    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: August 31, 2014

 

or

 

o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from: ______ to ______

 

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PROFIT PLANNERS MANAGEMENT, INC.

(Exact name of registrant as specified in its charter) 

 

---

  

Nevada

(State or other Jurisdiction of

Incorporation or Organization)

 

350 Madison Avenue, 8th Floor, New York, New York 10017

(Address of Principal Executive Offices)    (Zip Code)

 

(646) 837-0351

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address and former fiscal year, if changed since last report)

 

---

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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  þ No o

 

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 þ No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large Accelerated Filer ☐ Accelerated Filer ☐     Non-Accelerated Filer ☐   Smaller Reporting Company þ

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes o     No þ

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of the issuer's common stock, as of the latest practical date: As of October 1, 2014, the issuer had 54,052,788 outstanding shares of Common Stock

 

 

Profit Planners Management, Inc.

 

TABLE OF CONTENTS

 

	PART I	Page
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of August 31, 2014 (Unaudited) and May 31, 2014 (Audited)	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended August 31, 2014 and 2013 (Unaudited)	2
	Condensed Consolidated Statements of Cash Flows for the three months ended August 31, 2014 and 2013 (Unaudited)	3
	Notes to the Condensed Consolidated Financials (Unaudited)	4
Item 2.	Management’s Discussion and Analysis or Plan of Operation	7
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13
Item 4T	Controls and Procedures	13
	PART II
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults Upon Senior Securities	14
Item 4.	Submission of Matters to a Vote of Security Holders	14
Item 5.	Other Information	14
Item 6.	Exhibits	14
SIGNATURES		15

  

 

  

PART I.

 

ITEM 1. FINANCIAL INFORMATION

 

Profit Planners Management, Inc.

Condensed Consolidated Balance Sheets

   

		(Unaudited)
		August 31, 2014				May 31, 2014
Assets
Current assets:
Cash		$	30,211			$	39,982
Accounts receivable (net of allowance of $19,795 )			77,804				99,940
Note receivable			72,000				72,000
Other current assets			24,523				39,590
Total current assets			204,538				251,512
Property and equipment:
Property and equipment			13,172				13,172
Less: accumulated depreciation			(7,937	)			(6,839	)
Net property and equipment			5,235				6,333
Total Assets		$	209,773			$	257,845
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses		$	46,761			$	46,357
Accounts payable and accrued expenses - related parties			74,282				66,700
Accrued expenses - employee compensation			130,000				130,000
Accrued expenses - officer's compensation			417,779				373,925
Deferred revenue			5,000				20,000
Total Liabilities			673,822				636,982
Commitments and contingencies (Note 7)			-				-
Stockholders' Deficit
Preferred stock - $.001 par value; 50,000,000 shares authorized;
none and none issued and outstanding in 2014 and 2013, respectively			-				-
Common stock - $.001 par value; 500,000,000 shares authorized;
54,052,788 shares issued and outstanding			54,052				54,052
Additional paid-in capital			248,144				248,144
Accumulated deficit			(766,245	)			(681,333	)
Net Stockholders' Deficit			(464,049	)			(379,137	)
Total Liabilities And Stockholders' Deficit		$	209,773			$	257,845

  

See accompanying notes to the condensed consolidated financial statements

 

 

Profit Planners Management, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

 

		Three				Three
		Months Ended				Months Ended
		August 31, 2014				August 31, 2013
Revenues - consulting and management services fees		$	135,968			$	188,883
Cost of revenues - personnel and overhead costs			106,628				148,058
Gross Profit			29,340				40,825
Selling, general and administrative expenses:
Corporate management			69,356				33,594
Consulting and professional expenses			15,092				29,708
Other operating expenses			29,804				68,726
Total selling, general and administrative expenses			114,252				132,028
Net loss and comprehensive loss from continuing operations			(84,912	)			(91,203	)
Discontinued operations (Note 3)
Net loss and comprehensive loss from operations of Organics Innovations, Inc.			-				(33,685	)
Net loss and comprehensive loss		$	(84,912	)		$	(124,888	)
Net (loss) income per weighted-average shares common stock - basic and diluted:
Continuing operations		$	(0.00	)		$	(0.00	)
Discontinued operations			-				(0.00	)
Net loss		$	(0.00	)		$	(0.00	)
Weighted-average number of shares of common stock to be issued and outstanding - basic and diluted:			54,052,788				51,657,809

 

 

See accompanying notes to the condensed consolidated financial statements

  

 

Profit Planners Management, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

		Three Months Ended				Three Months Ended
		August 31, 2014				August 31, 2013
Net cash used in operating activities		$	(9,771	)		$	(82,284	)
Net cash used in investing activities			-				(6,545	)
Net cash provided by financing activities			-				70,500
Net change in cash			(9,771	)			(18,329	)
Cash, beginning of period			39,982				127,984
Cash, end of period		$	30,211			$	109,655

 

See accompanying notes to the condensed consolidated financial statements

 

  

Profit Planners Management, Inc.

Notes to Condensed Consolidated Financial Statements

August 31, 2014

(Unaudited)

 

 

NOTE 1 - BASIS OF PRESENTATION

 

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 ended August 31, 2014 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, 2014 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, 2014. The interim results for the three months ended August 31, 2014 are not necessarily indicative of the results for the full fiscal year.

  

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Revenue recognition

 

The Company’s revenues are derived from management, financial and accounting advisory service fees. The Company recognizes 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.

 

Net 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. There were 0 and 314,816 potentially dilutive shares outstanding as of August 31, 2014 and August 31, 2013, respectively. Due to the loss for the periods presented, the shares are not included in the calculation as they would be anti-dilutive.

 

Reclassifications

 

Certain amounts in the prior period presented have been reclassified to conform to the current period classification. These reclassifications have no effect on the previously reported net loss.

 

Going Concern

As reflected in the accompanying audited financial statements, the Company has had a net loss and comprehensive loss from continuing operations of $84,912 and $124,888 for the three months ended August 31, 2014 and August 31, 2013, respectively; and an accumulated deficit of $766,245 at August 31, 2014.  These factors raise 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 to sufficiently support its cost structure through existing and new clients while actively seeking channels to develop business. Management may seek additional financing using equity or debt instruments in the future through additional private placement offerings.  

 

There can be no assurance that the actions taken and raising of equity will be successful or that the Company’s anticipated financing will be available in the future, at terms satisfactory to the Company. Failure to achieve 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.

  

Recently Issued Accounting Pronouncements

 

In August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this ASU provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. It is too early to assess the impact of the adoption of this new guidance on the Company’s financial position.

 

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09: Revenue from Contracts with Customers. The standard outlines a five-step model for revenue recognition with the core principle being that a company should recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Companies can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. Under the modified approach, financial statements will be prepared for the year of adoption using the new standard but prior periods presented will not be adjusted. Instead, companies will recognize a cumulative catch-up adjustment to the opening balance of retained earnings. This new guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company has not yet made a determination been made as to the method of application (full retrospective or modified retrospective). It is too early to assess whether the impact of the adoption of this new guidance will have a material impact on the Company's results of operations, financial position or cash flows.

  

NOTE 3 – DISCONTINUED OPERATIONS

 

On May 9, 2014, the Company completed the sale of assets of its Organic Innovations subsidiary that consisted of to three domain names, trademarks, websites and customer lists, to a third party pursuant to the terms of the Asset Purchase Agreement between the parties dated as of May 7, 2014 for an aggregate purchase price of $115,000. The purchase price was paid in cash of $19,000, the assumption of a Company obligation to the CEO for $25,000 and a promissory note for $72,000 carrying an interest rate of 8% per annum that matures on May 6, 2015. As of August 31, 2014, interest income of $1,831 accrued on the promissory note.

 

 

As a result of the sale of its Organic Innovations business, management has reclassified the related activities to discontinued operations. For the three months ended August 31, 2014 and 2013, the business incurred expenses of $0 and $33,685, respectively. For the three months ended August 31, 2013, development costs totaling $33,685, have been reclassified under discontinued operations on the condensed consolidated statement of operations and comprehensive loss.

 

The discontinued operations are in a net operating loss position and any taxable income generated would be offset by the losses incurred. Since management cannot determine if the operation will be able to generate sufficient taxable income to realize any tax benefits a valuation allowance has been established to offset the asset.

  

NOTE 4 – GOING CONCERN

 

As reflected in the accompanying condensed consolidated financial statements, the Company had a net loss and comprehensive loss from continuing operations of $84,912 for the three months ended August 31, 2014 and the Company has minimal historical evidence of positive earnings as evidenced by the accumulated deficit of $766,245 at August 31, 2014. 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 while actively seeking channels to develop business. Management may seek additional financing using equity or debt instruments in the future through additional private placement offerings.

 

There can be no assurance that the actions taken and raising of equity will be successful or that the Company’s anticipated financing will be available in the future, at terms satisfactory to the Company. Failure to achieve 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.

 

NOTE 5 – RELATED PARTY

 

The Company had accrued officer’s salary expense payable to the CEO, who has a controlling ownership interest in the Company. The net compensation owed to the CEO totaled $417,779 and $373,925 as of August 31, 2014 and May 31, 2014, respectively.

 

The Company had accrued compensation expense payable to a Director of the Company for providing legal counsel services for $1,000 per month. The compensation obligations owed to the Director totaled $19,000 and $16,000 as of August 31, 2014 and May 31, 2014, respectively.

  

NOTE 6 – INCOME TAXES

 

The Company has not recorded any income tax expense or benefit for the three months ended August 31, 2014. Any taxable income generated will be offset by net operating losses (“NOL”) generated in previous years. At the present time, management cannot determine if the Company will be able to generate sufficient taxable income to realize the benefit of the NOL carryforwards; accordingly, a valuation allowance has been established to offset the asset.

  

NOTE 7 – CONTINGENT EMPLOYEE BONUS

 

On January 1, 2013, the Company entered into a compensation agreement with an employee that provides for a bonus based upon certain performance requirements. Since inception of the compensation agreement, management has evaluated the results of the employee’s performance and determined that the likelihood of payment would be remote as the employee did not meet the minimum performance requirements.

 

The employee and management are in negotiations to finalize the previous and future compensation, however, management estimates that it is probable the Company will settle with the employee for a $130,000 bonus for past services.

 

As a result of the expected settlement, the Company expensed $130,000 during 2014 in conjunction with the bonus. No amounts have been paid out related to the bonus as of August 31, 2014. 

 

 

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.

 

Operations

 

We are a Nevada Corporation founded in January 2009 with offices in New York, California and Florida.

 

Our Business

 

Our operations are focused on the following major business areas:

 

	●	CFO, Accounting and Tax Services;
	●	Insurance and Healthcare Insurance Services;
	●	Advisory Consulting Services;
	●	Management Services

 

CFO, Accounting and Tax Services

 

Our CFO, Accounting and Financial Services division provides management, staffing, payroll, human resources, billing and tax services to our clients. We provide short-term engagements of outside management services to help companies complete certain transactions or restructurings. Additionally, we provide monthly accounting, payroll, tax and billing services to businesses that do not have those departments.

 

Clients are billed either on an hourly basis for the accounting and financial services we provide or under a monthly retainer, if the engagement is to be for an extended period of time. The hourly rates that we charge our clients for these services depends on the complexity of the work being done and the experience level of the persons assigned to the work.

 

Our CFO, Accounting and Tax Services division is currently our main revenue generator with more than 90% of our revenues coming from these services. In the future, we expect this percentage to go down as our other business divisions gain traction in the market place.

 

 

Insurance and Healthcare Insurance Services

 

Our Insurance and Healthcare Insurance division, Profit Planners Insurance Group, is a licensed insurance brokerage. We offer a wide array of insurance and insurance related products such as life insurance, annuities, health insurance, healthcare discount benefit cards and programs as well as self-funded health insurance accounts. Our Insurance and Healthcare Insurance division offers insurance services to our corporate clients as part of our consulting services. It also sells insurance products and services directly to individuals and companies that have not engaged us for other consulting services.

 

We receive commission from the insurance carrier based on the premium of the product being purchased.

 

As the operation has yet to generate any revenues, we are re-evaluating our approach.

 

Advisory Consulting Services

 

Our Advisory Consulting Services Practice, PPMT Strategic Group, supplies strategic and financial consulting services to companies looking to raise capital in the debt and equity markets. Our knowledge and access to experienced personnel can provide the planning, financial modeling and advice to middle market companies.

 

Clients are billed either on an hourly basis for these services we provide or under a monthly retainer, if the engagement is to be for an extended period of time. The hourly rates that we charge our clients for these services depends on the complexity of the work being done and the experience level of the persons assigned to the work.

 

Management Services

 

Our Management Services division provides budgeting and asset allocation and control advice to professional athletes, entertainers and other high earning individuals. The services that our Management Services division provides include reviewing a client’s current earnings and expenses and advising on what changes need to be made to create long-term financial stability. The main goal of our Management Services division is to create a solid long-term financial plan for these high earning individuals and to create the budgeting discipline needed for these clients to retire comfortably.

 

The Management Services that we provide are billed either on an hourly basis or under a monthly retainer depending on the length of the engagement. We may also generate revenue from the sale of insurance products to our Management Services clients if such products are needed as part of the long-term financial plan that has been created.

 

Growth and Profitability Strategy

 

Our objective is to increase our revenue, profitability and cash flow by offering our clients a wide array of essential services in a “one-stop-shopping” framework. By doing so we can simplify the logistics of our client’s purchases of these essential services, eliminate redundant services and streamline the business operations of our corporate clients.

 

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. We also focus our efforts on Private Equity and Investment Banking firms, who generally require the skill base we possess for some of their investments. 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.

 

We currently own and operate various web-sites, with the following being the more prominent ones:

 

	●	www.profitplannersmgt.com
	●	www.profitplannersinsurancegroup.com
	●	www.ppmtgroup.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. We will continue to maintain all of our web-sites.

 

Our marketing costs for the three months ended August 31, 2014 related to our continuing business operations were approximately $1,671. 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.

 

 

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 that as of the three months ended August 31, 2014, an allowance for doubtful accounts of $19,975 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.  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.

 

For discontinued operations, 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 using historical experience. 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. There were 0 and 314,816 potentially dilutive shares outstanding as of August 31, 2014 and August 31, 2013, respectively. Due to the loss for the periods presented, the shares are not included in the calculation as they would be anti-dilutive.

 

Reclassifications

 

Certain amounts in the prior period presented have been reclassified to conform to the current period classification. These reclassifications, which relate to discontinued operations, have no effect on the previously reported net loss.

 

Going Concern

 

As reflected in the accompanying audited financial statements, the Company has had a net loss and comprehensive loss from continuing operations of $84,912 and $124,888 for the three months ended August 31, 2014 and August 31, 2013, respectively; and an accumulated deficit of $766,245 at August 31, 2014.  These factors raise 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 to sufficiently support its cost structure through existing and new clients while actively seeking channels to develop business. Management may seek additional financing using equity or debt instruments in the future through additional private placement offerings.  

 

There can be no assurance that the actions taken and raising of equity will be successful or that the Company’s anticipated financing will be available in the future, at terms satisfactory to the Company. Failure to achieve 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.

 

Recently Issued Accounting Pronouncements

 

In August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this ASU provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. It is too early to assess the impact of the adoption of this new guidance on the Company’s financial position.

 

 

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09: Revenue from Contracts with Customers. The standard outlines a five-step model for revenue recognition with the core principle being that a company should recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Companies can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. Under the modified approach, financial statements will be prepared for the year of adoption using the new standard but prior periods presented will not be adjusted. Instead, companies will recognize a cumulative catch-up adjustment to the opening balance of retained earnings. This new guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company has not yet made a determination been made as to the method of application (full retrospective or modified retrospective). It is too early to assess whether the impact of the adoption of this new guidance will have a material impact on the Company's results of operations, financial position or cash flows.

 

Results of Operations

 

Three Months Ended August 31, 2014 and 2013

 

Continuing Operations

 

For the three months ended August 31, 2014 and 2013, we had revenue of $135,968 and $188,883, respectively. Cost of revenues for the three months ended August 31, 2014 and 2013 totaled $106,628 and $148,058, respectively. Selling, general and administrative expenses for the three months ended August 31, 2014 and 2013 totaled $114,252 and $132,028, respectively, resulting in a net loss from continuing operations of $84,912 and $91,203, respectively.

 

Consulting service income for the three months ended August 31, 2014 consisted of CFO, Accounting and Tax Services of $135,968. For the comparable three months ended August 31, 2013, consulting service income consisted of CFO, Accounting and Tax Services of $163,425 and Management Services of $25,458. 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 August 31, 2014 comprised of personnel and overhead costs of $106,628. The personnel and overhead costs were comprised of salaries and compensation expenses of $100,307 and other overhead expenses of $6,321. Cost of revenues for the three months ended August 31, 2013 comprised of personnel and overhead expenses of $148,058. The personnel and overhead expenses were comprised of salaries and compensation expenses of $129,381 and other overhead expenses of $18,677.

 

Selling, general and administrative expenses for the three months ended August 31, 2014 was $114,252 comprised of net compensation expense for corporate management of $69,356, consulting and professional expenses of $15,092, rent expense of $9,584, office and IT related expenses of $7,587, travel-related expenses of $4,759 and other expenses of $7,874.

 

Selling, general and administrative expenses for the three months ended August 31, 2013 was $132,028, comprised of net compensation expense for corporate management of $33,594, consulting and professional expenses of $29,708, bad debt expense of $26,977, rent expense of $13,353, office and IT related expenses of $12,553, travel-related expenses of $7,516 and other expenses of $8,327.

 

 

For the three months ended August 31, 2014 as compared to same period ended August 31, 2013, there was a decline in selling, general and administrative expenses of $17,776. Corporate management expenses, as compared to the prior year, increased as management increased the time spent on business development and administration rather than servicing clients. Additionally, certain functions that previously were outsourced where brought in-house resulting in an increase in corporate management costs while reducing professional and consulting costs. Bad debt expenses have declined year over year as we have instituted new procedures to minimize the risk of unpaid client accounts.

 

Discontinued operations

 

In February 2014, our management reached a decision to sell the assets of its Organic Innovations Inc. business. Organic Innovations, Inc. consisted primarily of two e-commerce platforms and websites branded under the “Golden Age Medical” and “Organically Crafted” names. On May 9, 2014, we completed the sale of assets of its Organic Innovations subsidiary to a third party pursuant to the terms of the Asset Purchase Agreement between the parties dated as of May 7, 2014.

 

For the three months August 31, 2014 and 2013 we had expenses related to discontinued operations of $0 and $33,685, respectively. The expenses of discontinued operations totaling $33,685 were for development expense for the Organic Innovation e-commerce platform to sell “organic” products. It consisted of salaries and compensation of $12,250, consulting and professional fees of $18,000 and other web-development expenses of $3,435.  The Organic Innovation business started development in the quarter ended August 31, 2013.

 

The Organic Innovations, Inc. business operations, assets and liabilities have been reclassified as discontinued operations on the financial statements.

 

 

Liquidity and Capital Resources

 

As of August 31, 2014, we had cash of $30,211 as compared to cash of $39,982 as of May 31, 2014. The decrease in net cash of $9,771 was the result of net cash used in operating activities for the three months ended August 31, 2014 and was attributable to a net loss of $84,912, non-cash adjustments for depreciation of $1,098 and a net change in operating assets and liabilities of $74,043.

 

For the three months ended August 31, 2013, net cash used in operating activities was attributable to a net loss of $124,888, non-cash adjustments for depreciation expense of $1,460, stock compensation expense of $37,583 and a net change from the change in operating assets and liabilities of $3,561. Cash used in investing activities totaled $6,545. Cash provided by financing activities totaled $70,500 from 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 August 31, 2014, 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, 2014 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: October 10, 2014	Profit Planners Management, Inc.
	By: /s/ Wesley Ramjeet
	Wesley Ramjeet Chief Executive Officer, Chief Financial , Chief Accounting Officer, Officer and Director

 

 

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