Notes to the Consolidated Financial Statements
(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, 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 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, 2016. The interim results
for the three months ended August 31, 2016 are not necessarily indicative of the results for the full fiscal year.
NOTE 2 – RECENT ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2015, the Financial
Accounting Standards Board issued Accounting Standards Update (ASU) 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, 2017, including interim periods within that reporting period (as amended in August 2015 by ASU 2015-14,
Deferral of the
Effective Date
). 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). 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.
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 tis 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 (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 no potentially dilutive shares outstanding as of
August 31, 2016 and August 31, 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 $610,162 and $592,210 as of August 31, 2016 and May 31, 2016, respectively.
NOTE 5 - INCOME TAXES
For tax purposes as of August 31, 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 three months ended August
31, 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, annuities. Our Insurance 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 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:
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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 three months ended August 31, 2016 related to our continuing business operations were approximately $2,804.
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 August 31, 2016, an allowance for doubtful accounts of $60,705
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 (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 5,430,279 shares
outstanding as of August 31, 2016 and August 31, 2015.
Results
of Operations
Three
Months Ended August 31, 2016 and 2015
Continuing
Operations
For
the three months ended August 31, 2016 and 2015, we had revenue of $297,499 and $264,082, respectively. Additionally, we had interest
income of $453 for the three months ended August 31, 2016 and none during the three months ended August 31, 2015. Cost of revenues
for the three months ended August 31, 2016 and 2015 totaled $149,571and $119,073, respectively. Selling, general and administrative
expenses for the three months ended August 31, 2016 and 2015 totaled $144,131 and $151,965, respectively, resulting in a net income
(loss) of $4,250 and ($6,956), respectively.
Consulting
services income for the three months ended August 31, 2016, consisted of CFO, Accounting and Tax Services of $297,499. For the
comparable three months ended August 31, 2015, consulting service income consisted of CFO, Accounting and Tax Services of $264,082.
The changes in services income are attributable to growth in our client base and increased billing on our current clients.
Cost
of revenues for the three months ended August 31, 2016, were comprised of personnel and overhead costs of $149,571. The personnel
and overhead costs were comprised of salaries and compensation expenses of $86,694 and other overhead expenses of $62,877. Cost
of revenues for the three months ended August 31, 2015 were comprised of personnel and overhead expenses of $119,073. The personnel
and overhead costs were comprised of salaries and compensation expenses of $78,026 and other overhead expenses of $41,047.
Selling,
general and administrative expenses for the three months ended August 31, 2016, was $144,131 comprised of net compensation expense
for corporate management of $59,132, consulting and professional expenses of $36,180, rent expense of $19,890, office and IT related
expenses of $4,491, travel-related expenses of $10,225 and other expenses of $14,213.
Selling,
general and administrative expenses for the three months ended August 31, 2015, was $151,965 comprised of net compensation expense
for corporate management of $58,995, consulting and professional expenses of $28,019, rent expense of $19,913, office and IT related
expenses of $3,863, travel-related expenses of $5,653 and other expenses of $35,522.
For
the three months ended August 31, 2016, as compared to same period ended August 31, 2015, there was a decrease in selling, general
and administrative expenses of $7,834. Our consulting and professional fees increased primarily because our audit fees increased.
Our other operating expenses decreased primarily because bad debts decreased.
Liquidity
and Capital Resources
As
of August 31, 2016, we had cash of $290,636 as compared to cash of $270,178 as of May 31, 2016. The increase in net cash of $20,458
was the result of net cash provided by operating activities for the three months ended August 31, 2016 and was attributable to
a net income of $4,250, non-cash adjustments for depreciation of $691 and a net change in operating assets and liabilities of
$17,258. In addition, the Company purchased $1,741 in equipment.
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, 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 10-K 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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101.INS
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XBRL Instance Document.
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101.SCH
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XBRL Taxonomy Extension Schema Document.
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document.
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document.
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document.
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document.
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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:
October 11, 2016
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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 Officer,
Chief Accounting Officer and Director
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