10-K: Mag Mile Capital Reports Full Year 2023 Results Following Reverse Merger

Mag Mile Capital reports a net loss for 2023, impacted by non-cash warrant expenses and a decrease in revenue due to rising interest rates, following a reverse merger.

Summary

• Mag Mile Capital, formerly Myson, Inc., completed a reverse merger with Megamile Capital, Inc. on March 30, 2023.
• The company experienced a 42.2% decrease in revenue, from $3,321,837 in 2022 to $1,919,243 in 2023, primarily due to rising interest rates and reduced transaction activity.
• Commission expenses also decreased by 35.9%, from $1,250,920 to $802,464, aligning with the revenue decline.
• However, related party commission expenses increased by 36.9%, from $495,625 to $678,750, due to a new commission agreement.
• The company's gross profit decreased significantly from $1,575,292 in 2022 to $438,029 in 2023.
• A substantial non-cash expense of $1,582,072 was incurred due to the issuance of warrants.
• Professional fees increased significantly to $590,607 in 2023, up from $38,123 in 2022, mainly due to legal fees associated with the acquisition.
• Payroll expenses rose by 47.6% to $360,341 due to an increase in the CEO's salary and new hires.
• General and administrative expenses increased by 28.2% to $549,628.
• The company reported a net loss of $3,115,490 for 2023, compared to a net income of $864,190 in 2022.
• As of December 31, 2023, the company had approximately $56,000 in cash and $220,000 in working capital.
• The company used $367,869 of cash in operating activities during 2023.
• The company's financial statements have been prepared on a going concern basis, with substantial doubt about its ability to continue as a going concern.

Sentiment

Score: 3

Explanation: The document presents a concerning financial picture with a significant net loss, decreased revenue, and a going concern warning. The company also has material weaknesses in internal controls. While there are some positives, the overall tone is negative from an investment perspective.

Positives

• The company has developed a commercial real estate origination software platform named CapLogiq.
• Mag Mile Capital has a national platform with experienced capital markets specialists.
• The company leverages a wide variety of lending relationships and equity capital connections.
• The company utilizes historic tax credits and federal and state new markets tax credits to originate creative financing alternatives.

Negatives

• The company experienced a significant decrease in revenue and gross profit.
• The company incurred a substantial net loss of $3,115,490 for the year.
• The company has a limited cash position of approximately $56,000.
• The company's financial statements have been prepared on a going concern basis, with substantial doubt about its ability to continue as a going concern.
• The company has identified material weaknesses in its internal control over financial reporting.

Risks

• The company's performance is significantly related to general economic, political, and regulatory conditions.
• Adverse developments in the credit markets may materially harm the company's business.
• The company faces intense competition in the commercial mortgage banking business.
• The company may need to raise additional funds, which may not be available on favorable terms.
• The company's growth and financial performance will depend on future accretive acquisitions.
• The company's brand and reputation are key assets and may be affected by negative perceptions.
• The company relies on third parties, and a failure by them could result in economic and reputational harm.
• The company's success depends upon the retention of senior management and qualified employees.
• Infrastructure disruptions may disrupt the company's ability to conduct business.
• Failure to maintain and execute information technology strategies could materially and adversely affect the company.
• Interruption or failure of the company's information technology systems could impair its ability to provide services.
• Failure to maintain the security of the company's information and technology networks could materially adversely affect the company.
• The company is subject to complex and evolving laws and regulations regarding privacy, data protection, and cybersecurity.
• The company is subject to various litigation and regulatory risks.
• The company is subject to evolving corporate governance and public disclosure regulations.
• If the company is unable to implement and maintain effective internal control over financial reporting, investors may lose confidence.
• The company's goodwill and other intangible assets could become impaired.
• The company's financial condition and results of operations are likely to fluctuate on a quarterly basis.
• The company will incur significant increased expenses and administrative burdens as a public company.
• Privacy concerns and laws may adversely affect the company's business.
• Concentration of ownership among existing executive officers, directors, and their affiliates may prevent new investors from influencing significant corporate decisions.
• There is no active trading market for the company's shares of common stock.
• The company's common stock is subject to the Penny Stock Rules of the SEC.
• The company is an emerging growth company and will not be required to comply with certain reporting requirements.
• The company's stock price will be volatile.
• The Financial Industry Regulatory Authority (FINRA) sales practice requirements may also limit the ability to buy and sell the company's common stock.
• The company has no current plans to pay cash dividends on its common stock.
• If securities or industry analysts do not publish or cease publishing research or reports about the company, the price and trading volume of its securities could decline.

Future Outlook

The company intends to invest in sales and marketing, pursue strategic acquisitions, and commercialize its CapLogiq software product. The company's ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations.

Management Comments

• Management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

Industry Context

The company operates in the commercial real estate mortgage banking industry, which is sensitive to economic conditions and interest rate changes. The decrease in revenue and gross profit reflects the impact of rising interest rates on transaction activity in the real estate market. The company faces competition from other commercial mortgage origination firms, some of which may have greater financial resources.

Comparison to Industry Standards

• The company's revenue decline of 42.2% is significant and indicates a challenging year compared to industry averages, which have seen a slowdown but not to this extent.
• The company's net loss of $3,115,490 is concerning, especially when compared to peers who have managed to remain profitable or have smaller losses.
• The company's cash position of $56,000 is very low compared to industry standards, where companies typically maintain a higher cash reserve to manage operational expenses and potential downturns.
• The company's reliance on related party transactions, particularly the commission agreement with the CEO, is higher than what is typically seen in the industry and may raise concerns about potential conflicts of interest.
• The company's internal control weaknesses are a significant concern, as most public companies in the financial sector have robust internal controls to ensure accurate financial reporting.
• The company's going concern warning is a serious issue, as it indicates a high risk of financial distress, which is not typical for established companies in the industry.

Management Changes

Corporate Governance

Legal Proceedings

• There are no material claims, actions, suits, proceedings, or investigations that are currently pending or, to the Company's knowledge, threatened by or against the Company or respecting its operations or assets, or by or against any of the Company's officers, directors, or affiliates.

Related Party Transactions

• The company has an office lease with 1141 W. Randolph, LLC, a company owned and controlled by Rushi Shah.
• The company has a loan payable due to Mag Mile Capital LLC.
• Rushi Shah received commissions of $678,750 and $495,625 for the years ended December 31, 2023 and 2022, respectively.
• Reddington Partners LLC, a majority shareholder, advanced the Company $23,256 to pay for general operating expenses, which was later forgiven.

Stakeholder Impact

• Shareholders may experience a decline in the value of their investment due to the company's net loss and going concern warning.
• Employees may be affected by potential cost-cutting measures or restructuring due to the company's financial difficulties.
• Customers may be impacted by potential changes in service quality or availability due to the company's financial challenges.
• Suppliers and creditors may face increased risk of non-payment due to the company's financial instability.

Next Steps

• The company intends to continue to attract new customers through an increase in the number of salespeople.
• The company intends to explore potential high-quality acquisition opportunities.
• The company intends to license CapLogiq to prospective acquisition targets as well as to other companies in the industry.

Key Dates

Keywords

commercial real estate, mortgage banking, reverse merger, real estate financing, capital markets, debt placement, equity arrangements, CapLogiq, financial results, risk factors