Notes
to Condensed Consolidated Financial Statements
November
30, 2016
(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 (GAAP) 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 and six months ended November 30, 2016, 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, 2016, has been derived from the audited consolidated financial statements at that date, but does not
include all of the information and footnotes required by GAAP 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, 2016. The interim results for the six months ended November 30, 2016, are not necessarily indicative of the results for
the full fiscal year.
NOTE
2 - RECENT ISSUED ACCOUNTING PRONOUNCEMENTS
In
May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09: Revenue from Contracts
with Customers. The standard and its subsequent amendment, 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,
as amended, is effective for annual reporting periods beginning after December 15, 2017, including interim periods within
that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016,
including interim periods within that reporting period. The Company has not yet made a determination as to the method of application
(full retrospective or modified retrospective). The Company has not yet determined the effect this new standards will have on
its current policies for revenue recognition.
In
February 2016, the FASB issued ASU 2016-02: Leases (Topic 842). ASU 2016-02 supersedes FASB ASC Topic 840, Leases, and makes confirming
amendments to GAAP. ASU 2016-02 requires, among other changes to the lease accounting guidance, lessees to recognize most leases
on the balance sheet via a right of use asset and lease liability, and additional qualitative and quantitative disclosures. ASU
2016-02 is effective for public business in fiscal years beginning after December 15, 2018, including interim periods within that
reporting period. The Company is currently evaluating the effect this new standard will have on it’s consolidated financial statements.
The Company does not expect the adoption of any other recently issued accounting standards to have a material impact on its consolidated
results of operations, financial position or cash flows.
NOTE
3 - NET INCOME PER COMMON SHARE
Basic
net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during
the period. Diluted net income per share is computed by dividing net income by the weighted average number of shares of common
stock and potentially outstanding shares of common stock during each period. There were no potentially dilutive shares outstanding
as of November 30, 2016, and November 30, 2015, respectively.
NOTE
4 - RELATED PARTY TRANSACTIONS
The
Company has accrued officer’s compensation expense payable to the CEO, who has a controlling ownership interest in the Company.
The compensation obligations owed to the CEO totaled $621,347 and $592,210 as of November 30, 2016 and May 31, 2016, respectively.
NOTE
5 - INCOME TAXES
For
tax purposes as of November 30, 2016, the Company has United States federal and state (New York and Florida) net operating loss
(NOL) carryovers which are available to offset future taxable income. The Company has not recorded any income tax expense or benefit
for the six months ended November 30, 2016. Any taxable income will be offset by NOL carryovers 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
benefits of the NOL carryovers; accordingly, a valuation allowance has been established to offset the asset.
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 condensed consolidated 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 and Florida.
Our
Business
Our
operations are focused on the following major business areas:
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CFO,
Accounting and Tax Services;
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Insurance
Services;
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Advisory
Consulting Services;
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Management
Services
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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
Services
Our
Insurance division, PPMT Group, is a licensed insurance brokerage. We offer a wide array of insurance and insurance related products
such as life insurance and annuities. Our 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.
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 consisted of 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:
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www.profitplannersmgt.com
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www.profitplannersinsurancegroup.com
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www.ppmtgroup.com
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We
use these websites 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 websites, other sites such as LinkedIn, Facebook and Twitter, and through
press releases and articles. We will continue to maintain all of our websites.
Our
marketing costs for the six months ended November 30, 2016, related to our continuing business operations were approximately $4,509.
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 trade obligations from customers that are subject to normal trade collection terms, without discounts. 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 November 30, 2016, an allowance for doubtful accounts of $61,015
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 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
income per common share
Basic
net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during
the period. Diluted net income per share is computed by dividing net income by the weighted average number of shares of common
stock and potentially outstanding shares of common stock during each period. There were 5,430,279 shares outstanding as of November
30, 2016, and November 30, 2015.
Results
of Operations
Three
Months Ended November 30, 2016 and 2015
Continuing
Operations
For
the three months ended November 30, 2016 and 2015, we had revenue of $280,278 and $346,943, respectively, and interest income
of $452 for the three months ended November 30, 2016. Cost of revenues for the three months ended November 30, 2016 and 2015 totaled
$127,861 and $154,702, respectively. Selling, general and administrative expenses for three months ended November 30, 2016 and
2015 totaled $113,621 and $121,777, respectively, resulting in a net income of $39,248 and $70,464, respectively.
Revenue
for the three months ended November 30, 2016, consisted of CFO, Accounting and Tax Services of $280,278. For the comparable three
months ended November 30, 2015, consulting service income consisted of CFO, Accounting and Tax Services of $346,943. The decrease
in revenue relates to timing of projects completion in 2016 and more projects being completed during the same time period in 2015.
Cost
of revenues for the three months ended November 30, 2016 was comprised of personnel and overhead costs of $127,861. The personnel
and overhead costs were comprised of salaries and compensation expenses of $88,135 and other overhead expenses of $39,726. Cost
of revenues for the three months ended November 30, 2015, comprised of personnel and overhead expenses of $154,702. The personnel
and overhead expenses were comprised of salaries and compensation expenses of $76,188 and other overhead expenses of $78,514.
The decrease is directly related to the decrease in revenue.
Selling,
general and administrative expenses for the three months ended November 30, 2016 was $113,621 comprised of net compensation expense
for corporate management of $60,430, consulting and professional expenses of $7,200, rent expense of $21,645, office and IT related
expenses of $1,442, travel-related expenses of $9,116, bad debt expenses of $310 and other expenses of $13,478.
Selling,
general and administrative expenses for the three months ended November 30, 2015 was $121,777 comprised of net compensation expense
for corporate management of $59,020, consulting and professional expenses of $7,389, rent expense of $19,898, office and IT related
expenses of $8,861, travel-related expenses of $6,709, bad debt expenses of $6,060 and other expenses of $13,840.
For
the three months ended November 30, 2016, as compared to same period ended November 30, 2015, there was a decrease in selling,
general and administrative expenses of $8,156. The decreased in selling, general and administrative expenses resulted primarily
because of a decrease in bad debts expense.
Six
Months Ended November 30, 2016 and 2015
Continuing
Operations
For
the six months ended November 30, 2016 and 2015, we had revenue of $577,777 and $611,025, respectively, and interest income of
$905 is for six months ended November 30, 2016. Cost of revenues for the six months ended November 30, 2016 and 2015 totaled $277,432
and $273,775, respectively. Selling, general and administrative expenses for six months ended November 30, 2016 and 2015 totaled
$257,752 and $273,742, respectively, resulting in a net income of $43,498 and $63,508, respectively.
Consulting
service income for the six months ended November 30, 2016 consisted of CFO, Accounting and Tax Services of $577,777. For the comparable
six months ended November 30, 2015, consulting service income consisted of CFO, Accounting and Tax Services of $611,025. The decrease
in revenue relates to timing of projects completion in 2016.
Cost
of revenues for the six months ended November 30, 2016 was comprised of personnel and overhead costs of $277,432. The personnel
and overhead costs were comprised of salaries and compensation expenses of $174,829 and other overhead expenses of $102,603. Cost
of revenues for the six months ended November 30, 2015 comprised of personnel and overhead expenses of $273,775. The personnel
and overhead expenses were comprised of salaries and compensation expenses of $154,214 and other overhead expenses of $119,561.
Selling,
general and administrative expenses for the six months ended November 30, 2016 was $257,752 comprised of net compensation expense
for corporate management of $119,562, consulting and professional expenses of $43,380, rent expense of $41,535, office and IT
related expenses of $2,998, travel-related expenses of $19,941, bad debt expenses of $310 and other expenses of $30,026.
Selling,
general and administrative expenses for the six months ended November 30, 2015 was $273,742 comprised of net compensation expense
for corporate management of $118,015, consulting and professional expenses of $35,408, rent expense of $39,812, office and IT
related expenses of $29,237, travel-related expenses of $12,360, bad debt expenses of $24,383 and other expenses of $14,527.
For
the six months ended November 30, 2016 as compared to same period ended November 30, 2015, there was a decrease in selling, general
and administrative expenses of $15,990. The decrease in selling, general and administrative expenses resulted primarily because
of a decrease in bad debts expense.
Liquidity
and Capital Resources
As
of November 30, 2016, we had cash of $276,703 as compared to cash of $270,178 as of May 31, 2016. The increase in net cash of
$6,525 was the result of net cash generated by our operating activities totaling $8,267 and $1,742 used in investing activities
totaling for the six months ended November 30, 2016.
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, 2016, 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 material legal proceedings during the period covered by this Quarterly Report.
ITEM
1A. RISK FACTORS.
Our
Annual Report on Form 10K for the fiscal year ended May 31, 2016 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.
None
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
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Description
of Exhibit
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31.1
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Certification
required by Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1
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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.
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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 4, 2017
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Profit
Planners Management, Inc.
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By:
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/s/
Wesley Ramjeet
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Wesley
Ramjeet
Chief
Executive Officer, Chief Financial,
Chief Accounting Officer, Officer and Director
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