10-Q: Mag Mile Capital Reports Mixed Results in Q3 2024 Amidst Market Headwinds

Mag Mile Capital experienced a decrease in revenue and a net loss in the third quarter of 2024, impacted by challenging market conditions and increased commission expenses.

Summary

• Mag Mile Capital reported a net loss of $450,515 for the three months ended September 30, 2024, compared to a net loss of $83,919 for the same period in 2023.
• Revenue decreased by 32.4% to $254,550 in Q3 2024 from $376,800 in Q3 2023, due to slower deal activity attributed to market conditions and rising interest rates.
• Commission expenses increased significantly, with a 110% rise to $216,453 and a 601% increase in related party commission expenses to $250,594 in Q3 2024.
• For the nine months ended September 30, 2024, the company had a net loss of $35,428, a significant improvement compared to a net loss of $2,759,098 for the same period in 2023.
• Revenue for the first nine months of 2024 increased by 37.6% to $2,051,443, driven by several new large loans originated through CMBS.
• The company's gross profit for the nine months ended September 30, 2024 was $721,614, compared to $498,051 for the same period in 2023.
• The company had cash of approximately $15,600 and working capital of approximately $241,500 as of September 30, 2024.

Sentiment

Score: 4

Explanation: The document presents a mixed picture with significant improvements over the nine months but a concerning downturn in Q3. The identified internal control weaknesses and going concern risks further dampen the sentiment.

Positives

• Revenue for the first nine months of 2024 increased by 37.6% compared to the same period in 2023.
• The company's net loss significantly improved for the nine months ended September 30, 2024, compared to the same period in 2023.
• Gross profit for the nine months ended September 30, 2024, increased compared to the same period in 2023.
• Professional fees decreased by 87.3% for the nine months ended September 30, 2024, compared to the same period in 2023.
• Payroll expenses decreased by 13% for the nine months ended September 30, 2024, compared to the same period in 2023.
• General and administrative expenses decreased by 46.8% for the nine months ended September 30, 2024, compared to the same period in 2023.

Negatives

• Revenue decreased by 32.4% in Q3 2024 compared to Q3 2023.
• The company experienced a net loss of $450,515 in Q3 2024.
• Commission expenses increased significantly in Q3 2024.
• The company had a negative gross profit of $212,497 for the three months ended September 30, 2024.
• The company's internal control over financial reporting was deemed not sufficient as of September 30, 2024.

Risks

• The company's ability to continue as a going concern is dependent on generating future profitable operations or obtaining necessary financing.
• The company has identified material weaknesses in its internal control over financial reporting.
• The company is dependent on a third party for accounting consulting services.
• Challenging market conditions and rising interest rates are impacting deal activity and revenue.
• The company's revenue is concentrated with a few key customers.

Future Outlook

The company expects to use the exercise of warrants to meet its needs for growth for more than twelve months from the date of issuance of these financial statements.

Management Comments

• Management believes the decrease in revenue in Q3 2024 was due to challenging market conditions leading up to the U.S. Presidential Elections and rapid rise in interest rates.
• Management states that the increase in commission expense was due to the timing of revenue receipts for which the commissions were paid on.
• Management states that the related party commission expense increased due to the timing of revenue receipts for which the commissions were paid on.
• Management states that the decrease in professional fees was due to better management of the expenses and running efficient operations.
• Management states that the decrease in payroll expense was due to a bonus expense in the prior period that was not incurred in the current period.
• Management states that the increase in revenue for the nine months ended September 30, 2024 was due to several new large loans originated through the Commercial Mortgage Backed Securities (CMBS).
• Management states that the decrease in related party commission expense was due to a new commission agreement that lowered the percentage to 55% of all closed deals.

Industry Context

The company operates in the commercial real estate mortgage banking industry, which is sensitive to economic conditions, interest rate changes, and market sentiment. The reported decrease in revenue and increased commission expenses reflect the challenges faced by the industry during the period.

Comparison to Industry Standards

• The company's performance is mixed when compared to industry standards. While the company has shown significant revenue growth over the nine months, the Q3 results show a decline.
• The company's reliance on a few key customers is a risk, as is the high commission expense, which is not uncommon in the industry but needs to be managed effectively.
• The company's use of technology like CapLogiq is a positive step, but its effectiveness needs to be demonstrated through consistent financial performance.
• The company's internal control weaknesses are a concern and need to be addressed to meet industry standards for financial reporting.
• Compared to larger, more established commercial real estate finance companies like CBRE Capital Markets or JLL Capital Markets, Mag Mile Capital is still in a growth phase and faces challenges in terms of scale and operational efficiency. These larger companies often have more diversified revenue streams and more robust internal controls.

Related Party Transactions

• The company has a loan payable due to Mag Mile Capital LLC of $110,000 as of September 30, 2024.
• The company has an office lease with 1141 W. Randolph, LLC, a company owned and controlled by Rushi Shah, CEO.
• Rushi Shah earned commissions of $250,594 and $522,749 for the three and nine months ended September 30, 2024, respectively.

Stakeholder Impact

• Shareholders may be concerned about the net loss in Q3 2024 and the identified internal control weaknesses.
• Employees may be affected by the company's financial performance and any potential restructuring.
• Customers may be impacted by the company's ability to provide consistent services due to financial challenges.
• Creditors may be concerned about the company's ability to repay its debts given the current financial situation.

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 using its public company status.

Key Dates

Keywords

commercial real estate, mortgage banking, revenue, net loss, commission expense, financial results, internal control, CMBS, real estate financing