Ankam, Inc. 10-K Analysis & Summary – 3/14/2025

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Ankam, Inc.

10-K

Annual report

Filing date:

03/14/2025

TLDR:

ELI5:

Ankam, Inc., a mobile app company, made more money this year, but they’re still losing money overall and might not be able to stay in business. They also have some problems with how they manage their finances, so it’s a risky investment.

Accession #:

0001683168-25-001603

Published on

March 16, 2025

Analyst Summary

Ankam, Inc. experienced a 284% increase in revenue, driven by its Mei Sheng Corporation Limited subsidiary in the Asia Pacific region.
The company’s net loss decreased by 51%, but it remains unprofitable with a net loss of $(136,846).
Operating expenses increased by 22% due to software development and professional fees.
The company faces a liquidity crisis with a critically low cash balance of $57.
There is a growing accumulated deficit of $(497,739), raising concerns about long-term viability.
The company relies heavily on related party funding, with $499,338 due to a director.
The independent auditor has raised substantial doubt about the company’s ability to continue as a going concern.
Material weaknesses exist in internal controls over financial reporting, including inadequate segregation of duties and lack of an audit committee.
Gross Profit Margin is 100%, which is unusual and may indicate a lack of cost of goods sold.
The company’s Current Ratio is 0.15, indicating potential liquidity issues.
The company’s Debt-to-Equity Ratio is -1.55, and Debt-to-Assets Ratio is 2.81, indicating high leverage.
The company’s Revenue Growth is 284.32%, and Net Income Growth is 50.98%.

Opportunities and Risks

Risk: Critically low cash balance poses a significant threat to the company’s operations (Liquidity Risk).
Risk: Auditor’s going concern opinion indicates a high risk of business failure (Going Concern Risk).
Risk: Material weaknesses in internal controls increase the risk of financial misstatements and fraud (Internal Control Weaknesses).
Risk: Reliance on related party funding creates uncertainty about the company’s long-term financial stability (Related Party Risk).
Risk: The company operates in a competitive industry and faces the risk of technological obsolescence and changing market conditions (Market Risk).
Opportunity: Increase in revenue from Mei Sheng Corporation Limited presents an opportunity for further expansion in the Asian market (Revenue Growth).
Opportunity: The company’s focus on mobile app development aligns with the growing demand for mobile solutions (Mobile App Development).

Potential Implications

Company Performance

The company’s ability to continue as a going concern is highly uncertain due to its financial condition and auditor’s opinion.
Material weaknesses in internal controls could lead to financial misstatements and regulatory scrutiny.
Reliance on related party funding may not be sustainable in the long run, impacting the company’s financial stability.
The company needs to address its liquidity crisis and strengthen its internal controls to improve its long-term viability.

Stock Price

The going concern uncertainty and material weaknesses in internal controls are likely to negatively impact the company’s stock price.
The company’s heavy reliance on related party funding and low cash balance could further erode investor confidence.
The ‘sell’ recommendation suggests a potential decline in the stock price.

SEC Filing Report: Ankam, Inc. (10-K) – Fiscal Year Ended November 30, 2024

Executive Summary

This report analyzes Ankam, Inc.’s Form 10-K filing for the fiscal year ended November 30, 2024. The company, a technology firm focused on mobile application development, shows increased revenue but continues to operate at a net loss. Significant changes in ownership and management occurred during the year. A critical going concern uncertainty exists, as highlighted by the independent auditor. Material weaknesses in internal controls over financial reporting are also noted. Given the accumulated deficit, reliance on related party funding, and material weaknesses, a sell recommendation is warranted. Investors should exercise extreme caution.

Company Overview

Ankam, Inc. (ANKM) is a technology company specializing in the development of mobile applications, primarily Expense Minder and MoneySaverApp. The company operates in the competitive software development industry. Recent developments include the acquisition of Apex Intelligence LLC, the establishment of a new subsidiary (Mei Sheng Corporation Limited) focused on the Asian market, and a significant change in ownership with a new investor group acquiring a controlling stake. The company’s common stock is listed on the OTC Markets.

Detailed Analysis

Financial Statement Analysis

Key Ratios and Trends

Metric	FY 2024	FY 2023	Change	Analysis
Revenue	$104,450	$27,173	+284%	Significant increase, driven by Mei Sheng Corporation Limited’s operations in the Asia Pacific region.
Net Loss	$(136,846)	$(279,157)	+51%	Loss decreased, but the company remains unprofitable.
Operating Expenses	$395,605	$325,220	+22%	Increase due to software development and professional fees.
Cash	$57	$286	-80%	Critically low cash balance.
Accumulated Deficit	$(497,739)	$(360,893)	+38%	Growing deficit raises concerns about long-term viability.
Amount Due to Director	$499,338	$292,026	+71%	Significant reliance on related party funding.

Revenue Growth: The substantial increase in revenue is a positive sign, but it’s crucial to assess the sustainability of this growth and the profitability of the new subsidiary.

Expense Management: While the net loss decreased, operating expenses remain high. The increase in professional fees and software development expenses warrants further scrutiny.

Liquidity Crisis: The extremely low cash balance is a major red flag. The company’s ability to meet its short-term obligations is questionable.

Related Party Dependence: The significant amount due to the director highlights a heavy reliance on related party funding, which may not be sustainable in the long run.

Uncommon Metrics

The filing mentions API and Website development expenses. Tracking the ROI of these investments is crucial. Also, monitoring the performance of Mei Sheng Corporation Limited and its contribution to overall revenue and profitability is essential.

Management’s Discussion and Analysis (MD&A)

Management attributes the revenue increase to the new subsidiary, Mei Sheng Corporation Limited. They also acknowledge the need for additional capital and express confidence in their ability to raise funds. However, the auditor’s going concern opinion casts doubt on this optimism. The MD&A mentions digital marketing strategies, but the effectiveness of these strategies needs to be evaluated.

Red Flags

Going Concern Uncertainty: The independent auditor explicitly states that the company’s financial condition raises substantial doubt about its ability to continue as a going concern.
Material Weaknesses in Internal Controls: The company acknowledges material weaknesses in its internal control over financial reporting, including inadequate segregation of duties and lack of an audit committee.
Related Party Transactions: The significant amount due to the director raises concerns about potential conflicts of interest and the sustainability of the company’s funding.

Risk and Opportunity Assessment

Risks

Liquidity Risk: The critically low cash balance poses a significant threat to the company’s operations.
Going Concern Risk: The auditor’s going concern opinion indicates a high risk of business failure.
Internal Control Weaknesses: The material weaknesses in internal controls increase the risk of financial misstatements and fraud.
Related Party Risk: Reliance on related party funding creates uncertainty about the company’s long-term financial stability.
Market Risk: The company operates in a competitive industry and faces the risk of technological obsolescence and changing market conditions.

Opportunities

Revenue Growth: The increase in revenue from Mei Sheng Corporation Limited presents an opportunity for further expansion in the Asian market.
Mobile App Development: The company’s focus on mobile app development aligns with the growing demand for mobile solutions.

Conclusion and Actionable Insights

Ankam, Inc. faces significant challenges, including a going concern uncertainty, material weaknesses in internal controls, and a heavy reliance on related party funding. While the increase in revenue is a positive sign, it is not enough to offset the company’s overall financial instability. The company needs to address its liquidity crisis, strengthen its internal controls, and diversify its funding sources. Without significant improvements in these areas, the company’s long-term viability is questionable.

Recommendation: Sell. Investors should avoid investing in Ankam, Inc. due to the high level of risk and uncertainty.

Commentary

Ankam, Inc. experienced a significant increase in revenue in 2024 compared to 2023, but continues to operate at a net loss. The company’s expenses also increased substantially, offsetting the revenue gains. A notable gain on debt forgiveness helped to reduce the net loss compared to the previous year. The company’s financial statements reveal concerns about internal controls and a heavy reliance on related party transactions.

Financial Ratio and Metric Analysis

Profitability

Metric	2024	2023	Trend	Industry Comparison
Gross Profit Margin	100%	100%	0%	Software industry averages range from 60-80%. A 100% margin is unusual and may indicate a lack of cost of goods sold.
Operating Profit Margin	(278.75%)	(1096.86%)	71.85%	The software industry averages around 20-30%. Negative margins indicate operational inefficiencies.
Net Profit Margin	(131.01%)	(1027.33%)	87.24%	The software industry averages around 10-20%. Negative margins indicate the company is not profitable.
Return on Assets (ROA)	(76.57%)	(257.71%)	70.21%	The software industry averages around 5-10%. Negative ROA indicates the company is not effectively using its assets to generate profit.
Return on Equity (ROE)	42.22%	85.84%	-50.81%	The software industry averages around 15-25%.
EPS (Basic)	($0.03)	($0.06)	50%	Varies widely by company. Negative EPS indicates the company is losing money per share.

Liquidity

Metric	2024	2023	Trend	Industry Comparison
Current Ratio	0.15	0.20	-25%	A healthy current ratio is typically between 1.5 and 2. A ratio below 1 indicates potential liquidity issues.
Quick Ratio	0.15	0.20	-25%	A healthy quick ratio is typically around 1. A ratio below 1 indicates potential liquidity issues.
Cash Ratio	0.0001	0.0007	-85.71%	A healthy cash ratio is typically above 0.5. A very low ratio indicates the company has very little cash to cover its current liabilities.

Solvency/Leverage

Metric	2024	2023	Trend	Industry Comparison
Debt-to-Equity Ratio	-1.55	-1.33	16.54%	The software industry averages around 0.5-1. Negative ratios are due to negative equity.
Debt-to-Assets Ratio	2.81	4.00	-29.75%	The software industry averages around 0.2-0.4. High ratios indicate high leverage.
Interest Coverage Ratio	N/A	N/A	N/A	Since there was no interest expense, this ratio is not applicable.

Activity/Efficiency

Metric	2024	2023	Trend	Industry Comparison
Asset Turnover	0.58	0.25	132%	The software industry averages around 0.5-1.0.
Days Sales Outstanding (DSO)	0	287.81	-100%	The software industry averages around 30-60 days.
Days Payable Outstanding (DPO)	12.19	113.03	-89.22%	The software industry averages around 30-45 days.
Inventory Turnover	N/A	N/A	N/A	Not applicable as the company does not appear to have significant inventory.

Valuation

Metric	2024	2023	Trend	Industry Comparison
Price-to-Earnings Ratio (P/E)	Negative	Negative	N/A	Not applicable due to negative earnings.
Price-to-Book Ratio (P/B)	Negative	Negative	N/A	Not applicable due to negative book value.
Price-to-Sales Ratio (P/S)	21.78	83.98	-74.07%	The software industry averages around 5-10. A high ratio may indicate overvaluation.
Enterprise Value to EBITDA (EV/EBITDA)	Negative	Negative	N/A	Not applicable due to negative EBITDA.

Growth Rates

Metric	2024	2023	Trend	Industry Comparison
Revenue Growth	284.32%	N/A	N/A	Varies widely by company.
Net Income Growth	50.98%	N/A	N/A	Varies widely by company.
EPS Growth	50%	N/A	N/A	Varies widely by company.

Other Relevant Metrics

Related Party Transactions: The company has significant related party transactions, particularly with its director. The amount due to the director is substantial ($499,338 in 2024 and $292,026 in 2023). This raises concerns about potential conflicts of interest and the fairness of these transactions.
Internal Control Weaknesses: The company acknowledges material weaknesses in its internal control structure, including a lack of segregation of duties, no independent audit committee member, and a lack of IT controls. These weaknesses increase the risk of errors or fraud in financial reporting.
Non-Cash Investing and Financing Activity: In 2023, the company had a significant non-cash investing and financing activity related to an operating lease liability and right-of-use asset ($51,052). This indicates the company entered into a lease agreement.