Notes to the Financial Statements
(Unaudited)
For the three months ended March 31, 2014 and 2013
1.
Background Information
Real Estate Contacts, Inc. ("The Company") was formed on March 10, 2005 as a Florida Corporation and is based in Parrish, Florida. The Company engages in the ownership and operation of two real estate advertising portal websites. Real Estate Contacts, Inc. provides a comprehensive online real estate search portal that consists of an advertising and marketing platform for real estate professionals. Our company also provides and sells video real estate websites to real estate professionals. The company has developed a national online real estate video listings portal that provides consumers the opportunity to view real estate in their local markets all in a video format.
The company provides consumers the opportunity to view real estate listings and homes for sale in their local markets.
The company also provides real estate professionals the opportunity to reach consumers interested in buying or selling property in their respective geographic area and in most markets and cities throughout the United States.
We enable real estate professionals to better promote themselves and their listings and connect with transaction-ready consumers through our online websites and marketing website products. Our current real estate search website and our new real estate video website product enable real estate professionals to increase their visibility and promote their listings.
The Companys business is conducted solely within the Internet and the Online Video arena.
2.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information and with the instructions to Form 10-Q and Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2014 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2014.
For further information, refer to Real Estate Contacts, Inc.s (the Company) audited financial statements and footnotes thereto included in the year ended December 31, 2013 Form 10K filed with the Securities and Exchange Commission.
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Our most significant estimates are for potential credit card chargeback's and refunds based on our historical chargeback and refund experience. We evaluate our estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. Sales are reduced by the amount of these estimates.
Financial Instruments
The Companys balance sheets include the following financial instruments: cash, accounts payable, accrued expenses, deferred revenues, convertible notes payable and payables to a shareholder. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization. The carrying values of the payable to shareholder approximates fair value based on borrowing rates currently available to the Company for instruments with similar terms and remaining maturities. Convertible debt has been valued to fair market value in consideration of the fair value of the potential future consideration that may be required upon settlement.
Cash and Cash Equivalents
The majority of cash is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed on demand and, therefore, bear minimal risk. The Company considers all highly liquid investments purchased with an original maturity of three months or less to
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be cash equivalents.
Accounts Receivable
The Company currently does not issue credit on services provided, therefore there are no accounts receivable. No allowance for doubtful accounts is considered necessary to be established for amounts that may not be recoverable, since there has been no credit issued.
Property and Equipment
In accordance with FASB ASC No. 350,
Intangibles, Goodwill and Other
, the Company requires that intangible assets with a finite life be amortized over their life and requires that goodwill and intangible assets be reviewed for impairment annually or more frequently if impairment indicators arise.
Deferred Revenue
Deferred revenues are derived from the unearned portion of advertising subscriptions. Advertising revenue is generated primarily from annual subscription transactions. Revenue is earned ratably over the expired portion of the subscription term. The unearned portion is deferred until earned through the passage of time based on the subscription term.
Revenue Recognition
The Company recognizes revenue on arrangements in accordance with FASB ASC No. 605,
Revenue Recognition.
In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured.
Consideration for future advertising services are made by customers in advance of those services being provided. Advertising revenue is recognized ratably over the period that the services are subscribed, generally a one year period. The unearned portion of the advertising revenue is deferred until future periods in which the subscription is earned.
The Company has not issued guarantees or other warrantees on the advertising subscription success or results. The Company has not experienced any refund requests or committed to any adjustments for terminated subscriptions. The Company does not believe that there is any required liability.
Stock Based Compensation
In December 2004, the FASB issued FASB ASC No. 718,
Compensation Stock Compensation
(ASC 718). Under ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.
Equity instruments (instruments) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB ASC 718. FASB ASC No. 505,
Equity Based Payments to Non-Employees
(ASC 505) defines the measurement date and recognition period for such instruments. In general, the measurement date is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the ASC 505.
Advertising
The costs of advertising are expensed as incurred. Advertising expense was $2,335 and $6,365 for the three months ended March 31, 2014 and 2013, respectively.
Income Taxes
The Company accounts for income taxes under the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No. 740,
Income Taxes
(ASC 740). Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
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Earnings Per Share
Basic income per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC No. 260,
Earnings Per Share
.
Diluted income per share includes the dilutive effects of stock options, warrants, and stock equivalents. To the extent stock options, stock equivalents and warrants are anti-dilutive; they are excluded from the calculation of diluted income per share. As of March 31, 2014 there were approximately 3,501,000,000 share equivalents, resulting from the issuance of convertible notes.
Recently Issued Accounting Pronouncements
We have reviewed the FASB issued Accounting Standards Update (ASU) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporations reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
3.
Going Concern
The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern.
The Company has a history of losses and has incurred net loss for the three month period ending March 31, 2014. Additionally, the Company has an accumulated deficit, negative net worth and negative operating cash flows for the three months ended March 31, 2014. These conditions raise substantial doubt about the Companys ability to continue as a going concern. The Company depends upon capital to be derived from future financing activities such as subsequent offerings of its common stock or debt financing in order to operate and grow the business. There can be no assurance that the Company will be successful in raising such capital. The key factors that are not within the Company's control and that may have a direct bearing on operating results include, but are not limited to, acceptance of the Company's business plan, the ability to raise capital in the future, the ability to expand its customer base, and the ability to hire key employees to build and maintain websites and to provide services and support to its customers and users. There may be other risks and circumstances that management may be unable to predict.
The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
4.
Related Party Transactions
On March 4, 2013, we entered into an employment agreement with Robert DeAngelis, our Chief Executive Officer. The employment agreement is for a period of three years and can be cancelled upon written notice by either employee or employer (if certain employee acts of misconduct are committed).The total minimum aggregate annual amount due under the employment agreement is approximately $120,000 plus bonuses.
The Company issued 3,650,000,000 shares of common stock to the Chief Executive Officer in exchange for services during the three months ending March 31, 2014. These shares were valued at the fair market value of the stock at the date of grant, resulting in the recognition of $1,295,000 in compensation expense.
The majority shareholder has advanced funds and has deferred contractual salaries since inception, for the purpose of financing working capital and product development. Advances and deferrals amounted to $87,426 and $111,426 as of March 31, 2014 and December 31, 2013, respectively. There are no repayment terms to these advances and deferrals. In the absence of a formal agreement or stated interest rate, the Company is accruing interest at a minimal variable rate, currently 2%. Management will periodically adjust this rate following guidelines of applicable federal rates.
The controlling shareholder has pledged his support to fund continuing operations; however there is no written commitment to this effect. The Company is dependent upon the continued support of this shareholder.
The Company has minimal needs for facilities and operates from office space provided by the majority shareholder. There are no
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lease terms. Rent has been calculated based on the limited needs at a fair market value of the space provided. Rent expense was $300and $300 for the three month periods ended March 31, 2014 and 2013, respectively.
The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.
5.
Website Development Costs
|
|
|
|
|
|
|
|
|
|
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March 31, 2014
|
|
|
December 31, 2013
|
|
Website Under Development
|
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$
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80,542
|
|
|
$
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68,542
|
|
Developed Website
|
|
|
20,000
|
|
|
|
20,000
|
|
Less accumulated amortization
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|
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15,542
|
|
|
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11,703
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Property and equipment, net
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$
|
85,000
|
|
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$
|
76,839
|
|
Amortization of website costs was $3,839 and $750 for the three month periods ending March 31, 2014 and 2013, respectively.
6.
Debt Obligations
The notes outstanding are summarized by their terms below:
Schedule of Debt
|
|
|
|
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March 31,
2014
|
|
December 31,
2013
|
Notes payable, issued to individual(s), various origination dates, all maturing within one year, at interest rate of 10%-12%
|
$ 5,000
|
|
$ 5,000
|
Convertible promissory notes, maturing at variable dates ranging from 180 days to one year from origination date, 8-10% interest, convertible at discount to trading price (40-49%) based on various measurements of prior trading, at face value of remaining original note principle outstanding, net of unamortized debt discounts, attributable to beneficial conversion features of convertible debt, and deferred financing costs in the amount of $155,253 and $145,584, respectively
|
160,988
|
|
199,816
|
Total
|
$ 165,988
|
|
$ 204,816
|
Derivative Liability
The Company evaluated the terms of the convertible notes, in accordance with ASC Topic No. 815 - 40,
Derivatives and Hedging - Contracts in Entitys Own Stock
and that the underlying common stock is indexed to the Companys common stock. The Company determined that the conversion features meet the definition of a liability and therefore bi-furcated the conversion feature and accounted for it as a separate derivative liability. The Company evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the note and was deemed to be less than the market value of underlying common stock at the inception of the note. The Company recognized a debt discount on the notes as a reduction (contra-liability) to the Convertible Notes Payable. The debt discounts are being amortized over the life of the notes and charged to income as finance costs. The Company recognized financing costs for charges by the lender for original issue discounts and other applicable administrative costs, normally withheld from proceeds, which are being amortized as finance cost over the life of the loan.
A derivative liability, in the amount of $1,010,032 has been recorded, as of March 31, 2014, related to the above convertible notes. The derivative value was calculated using the Black-Scholes method. Assumptions used in the derivative valuation were as follows:
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Weighted Average:
|
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Dividend rate
|
0.0%
|
Risk-free interest rate
|
.07%
|
Expected lives (years)
|
.480
|
Expected price volatility
|
478.7%
|
Forfeiture Rate
|
0.0%
|
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7.
Equity
The Company issued 3,650,000,000 shares of common stock to the Chief Executive Officer in exchange for services during the three months ending March 31, 2014. These shares were valued at the fair market value of the stock at the date of grant, resulting in the recognition of $1,295,000 in compensation expense.
In the three month period ending March 31, 2014, the Company converted notes of $148,659 and accrued interest of $8,856 into 2,867,597,250 of common stock, in accordance with terms of the agreements. The conversion price, per agreement, was discounted to the fair market trading value. The Company recorded the exchange at the fair market value of the shares converted, the excess of which was charged against the derivative liability. The fair market value of the stock was $1,027,555, of which $870,041 off set the existing derivative liability.
During the three month periods ended March 31, 2014 and 2013 the Company recorded in-kind contributions for rent expense in the amount of $300 and $300, respectively.
Amendment to the Articles of Incorporation
On April 17, 2014, the Company amended its Articles of Incorporation. The total number of shares this corporation is authorized to issue is 50,000,000,000 (fifty billion), allocated as follows among these classes and series of stock:
Schedule of Stock by Class
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Designation
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Par value
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Shares
|
Common
|
$0.00001
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49,900,000,000
|
Preferred Stock Class, Series A
|
$0.0001
|
10,000,000
|
Preferred Stock Class, Series B
|
$0.001
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90,000,000
|
No preferred shares have been issued and have not been defined for the preferences.
There are no warrants or options currently outstanding.
8.
Commitments and Contingencies
Management believes that there are no known or potential matters that would have a material effect on the Companys financial position or results of operations.
9.
Subsequent Events
The Company follows the guidance in Sections 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.
Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
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Subsequent to March 31, 2014, the Company:
·
Amended its articles of incorporation on April 17, 2014, as described in the Equity footnote, above;
·
Received proceeds from convertible note agreements in the amount of $109,566;
·
Pursuant to the terms of the executive employment agreement, 8,000,000,000 shares were issued to our sole officer and director; and
·
In accordance with terms of underlying convertible note agreements, issued 1,445,783,881 shares of its common stock in cancellation of $140,000 of debt.
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Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Report. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.
The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
Plan of Operations
Our plan of operation is to operate the most definitive online real estate video listings website and search engine portal website for real estate. We want to position our company as the first of its kind national real estate search engine/social community/media video network that matches buyers, sellers, brokers, and professionals anywhere in the world through rich and social media.
Our real estate search website allows real estate professionals and consumers to interact through the internet as a business medium. The Companys operating strategy is to feature real estate professionals websites and current listings on the
RealEstateContacts.com
portal website in the areas that they service and work enabling potential home buyers to view real estate listings and homes that are for sale and featured on the real estate professionals website. This format is called a lead generation program for real estate professionals that are on the RealEstateContacts.com portal website and the RealEstateVideoChannels.com video portal website.
Our company will offer and sell real estate video websites to offices, brokers, agents and all real estate professionals.
Our business strategy is an ease of use approach which allows the consumer to view listings of homes from of their local real estate office, broker or agent. This service is provided from our real estate search website: (
www.realestatecontacts.com
) and our video website channel: (
www.realestatevideochannels.com
). In addition, our real estate search website will feature no more than five agents per territory. This policy will eliminate a substantial amount of the competition for the real estate agent, broker and office. For this reason we believe our concept will have a high level of interest from any real estate professional.
Currently while there are other real estate directories and portals on the internet only a select few feature real estate agents on a semi-exclusive basis. We believe this approach will be attractive to real estate professionals in each locale.
We also have the technology to focus on online media, particularly video. We provide an online National Real Estate Video Listings Website that will include listings in a video format from our real estate agents video website. All real estate agents will have their own new video website to display their listings in video. Our company will design and sell individual video websites known as channels to real estate agents, brokers, offices and all real estate professionals and feature those websites on our new real estate video search portal.
Real Estate Contacts, Inc. will offer video real estate websites for local and national publishing in many areas, where our affiliate real estate partners can have their own video website channel, manage the publishing and display hundreds of video properties in a true television format through one simple tool giving real estate professionals exposure for their properties in less time and for less money.
The
RealEstateContacts.com
portal website will also feature local mortgage brokers and lenders that want more traffic and exposure to their website for potential new clients. By featuring local mortgage brokers our website allows the consumer to have access to any financial questions and can receive all the information they need quickly in their geographical area.
Our goal is to connect real estate professionals with consumers who are interested in buying or selling a home.
We generate revenues from the sales of real estate video websites and the advertising sales for real estate professionals on both of our current websites.
We plan to grow revenues in the next 12 months by undertaking the following steps:
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·
Devote greater resources to marketing and selling our services such as developing and creating a more productive advertising sales division within our company by the hiring of advertising sales account executives.
·
Focus to expand our network of advertisers and real estate professionals by increasing our online presence to include various marketing channels such as the major search engines, Google, Yahoo and Bing.
·
Expand our companys public relations by creating more brand awareness on the internet. An example would be to focus on other social media websites such as Facebook, Twitter, and LinkedIn.
·
Develop other marketing programs to efficiently increase our brand awareness such as email campaigns, newsletters, linking our website to other real estate business websites, real estate portals and directories.
·
We intend to continue, maintain and aggressively pursue to build our advertising campaign around all internet related marketing concepts, such as search engine optimization, pay per click advertising, banner advertising and social media networks to help manage and geographically target consumer traffic and lead volume.
·
Focus on driving more internet traffic and unique visitors to our websites by using these search engine marketing techniques.
·
We plan to increase our online Search Engine Marketing to create more unique users. Measuring unique users is important to us because our advertising revenues depend in part on our ability to enable our consumers to connect with real estate professionals. We define a unique user as a user who visits our website at least once during a calendar month, as measured by our analytical tools.
·
The number of real estate professionals (advertisers) on our websites is an important driver of revenue growth because each advertiser pays us a yearly fee to participate in the advertising of their services as well as a yearly membership fee for their own real estate video website.
Limited Operating History
We have generated a limited financial history and have not previously demonstrated that we will be able to expand our business through increased investment in marketing activities. We cannot guarantee that the expansion efforts described in this Registration Statement will be successful. The business is subject to risks inherent in growing an enterprise, including limited capital resources and possible rejection of our business model and/or sales methods.
Future financing may not be available to us on acceptable terms. If debt financing is not available or not available on satisfactory terms, we may be unable to continue expanding our operations. Equity financing will result in a dilution to existing shareholders.
For the three months ended March 31, 2014 compared to March 31, 2013
Results of Operation
Revenues generated were $421 and $1,749 for the three month periods ended March 31, 2014 and 2013, respectively. Billings have decreased, year over year, as the Companys management is concentrating on development and launch of the video channel. Management is aware that the real estate housing market is stabilizing and potential advertisers are considering increasing advertising expenditures. We have noted that the publics acceptance and awareness of our sites service offering is increasing as active agents are seeking additional venues to promote their services and listings. We are concentrating on developing our unique resources in order to fully participate upon revival of competition in the real estate market.
Operating expenses were $1,352,238 and $162,518 for the three month periods ended March 31, 2014 and 2013, respectively. The Company has recorded significant non-cash expenses related to compensation, in the amount of $1,295,000 in the three months ending March 31, 2014, as compared to $123,500 for the three months ended March 31, 2013. Other significant expenses incurred are related to professional expense related to the preparation of our public filing. We expect professional fees to continue to be a significant expense as our reporting requirements should be increasing, as required as a public company. We anticipate that our advertising and costs of acquiring new subscribers will increase over the future periods, as we attempt to increase our revenue base to cover future operating costs.
Other expenses increased during the current three month period due to debt related charges. We have recorded losses on the settlement of debt through the issuance of our common stock and have recognized the obligation costs associated with financing through convertible notes (resulting in the recognition of derivative liabilities and expense).
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Capital Resources and Liquidity
The Company is currently financing its operations primarily through loans, equity sales and advances from shareholders. These advances are being made to supplement any cash generated by the operating revenue. We believe we can currently satisfy our cash requirements for the next twelve months with our current expected increase in revenue, and the expected capital to be raised in private placement and sales of our common stock. Additionally, we will begin to use our common stock as payment for certain obligations and secure work to be performed. Management plans to increase revenue in order to sustain operations for at least the next twelve months.
At March 31, 2014 the Company has cash in the amount of $150,748. Management does not believe that is has adequate cash resources to meet the requirements to develop certain aspects of our business plan, however, should be sufficient to meet our current obligations, as the amount represents approximately six months to one year of our run rate of operating expenses. The Company anticipates increasing revenue, which will partially mitigate cash flow deficiencies, however at the present time our revenues will not cover our cash requirements. Management believes that financial support from the majority shareholder to pay minimal and necessary incurred expense will allow the Company to benefit from advertising revenue streams, currently in-place, to produce the anticipated cash flow necessary to support operations.
As of March 31, 2014 we have $150,748 cash on hand to meet our current obligations. As of March 31, 2014, we have a negative working capital of $1,233,582 and, for the three months ended March 31, 2014, we have used $72,995 in our operating activities.
Based upon the above, we do believe we have enough cash to support our daily operations beyond the next 12 months while we are attempting to expand operations and produce revenues. Although we believe we have adequate funds to maintain our current operations for the near term, we do not believe that we have the required funding to expand our product offering (web channel and other possible alternative service offerings). We estimate the Company needs an additional $200,000 to fully implement its business plans over the next twelve months. In addition, we anticipate we will need an additional minimum of $150,000 to cover operational and administrative expenses for the next twelve months. The majority shareholder has committed to cover any cash shortfalls of the Company, although there is no written agreement or guarantee. If we are unable to satisfy our cash requirements we may be unable to proceed with the Offering and our plan of operations.
Future financing for our operations may not be available to us on acceptable terms. To raise equity will require the sale of stock and the debt financing will require institutional or private lenders. We do not have any institutional or private lending sources identified. If debt financing is not available or not available on satisfactory terms, we may be unable to continue expanding our operations. Equity financing will result in a dilution to existing shareholders.
The foregoing represents our best estimate of our cash needs based on current planning and business conditions. In the event we are not successful in reaching our initial revenue targets, additional funds may be required, and we may not be able to proceed with our business plan for the development and marketing of our core services. Should this occur, we will suspend or cease operations.
We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.
Recent Accounting Pronouncements
The Financial Accounting Standards Board and other standard-setting bodies issued new or modifications to, or interpretations of, existing accounting standards during the year. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation's reported financial position or operations in the near term. These recently issued pronouncements have been addressed in the footnotes to the financial statements included in this filing.
Critical Accounting Policies and Estimates
Deferred Revenue
Deferred revenues are derived from the unearned portion of advertising subscriptions. Advertising revenue is generated primarily from annual subscription transactions. Revenue is earned ratably over the expired portion of the subscription term. The unearned portion is deferred until earned through the passage of time based on the subscription term.
Revenue Recognition
The Company recognizes revenue on arrangements in accordance with FASB ASC No. 605,
Revenue Recognition.
In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured.
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Consideration for future advertising services are made by customers in advance of those services being provided. Advertising revenue is recognized ratably over the period that the services are subscribed, generally a one year period. The unearned portion of the advertising revenue is deferred until future periods in which the subscription is earned.
The Company has not issued guarantees or other warrantees on the advertising subscription success or results. The Company has not experienced any refund requests or committed to any adjustments for terminated subscriptions. The Company does not believe that there is any required liability.
Off-Balance Sheet Arrangements
The company does not have any off-balance sheet arrangements.
Item 3.