PMX COMMUNITIES INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
NOTE 1 DESCRIPTION OF BUSINESS
PMX Communities, Inc. "PMX" was organized under the laws of the State of Nevada on December 29, 2004 under the name Merge II, Inc. and changed its name to PMX Communities, Inc. effective February 10, 2009. PMX's year end is December 31.
On September 28, 2010, PMX formed PMX Gold, LLC, (PMX Gold) a Florida limited liability company as a wholly owned subsidiary of the Company to assist with evaluating and pursuing opportunities within the Gold Mining and Retail Gold Sales Industries.
On September 28, 2011, PMX formed PMX Gold Bullion Sales Inc. (PMX Bullion), a Florida corporation as a wholly owned subsidiary of the Company.
PMX, (through its wholly owned subsidiaries PMX Gold, LLC and PMX Gold Bullion Sales Inc.) focuses on the development of leveraged opportunities within the Retail Gold Sales and Gold Mining Industries.
PMX Communities, Inc. and its wholly-owned subsidiaries are hereafter referred to as the Company.
On July 18, 2016, the Board of Directors approved an increase in the number of shares available for issuance through the 2011 stock awards plan from 10,000,000 common shares to 17,700,000 common shares.
NOTE 2 - GOING CONCERN
The accompanying condensed unaudited consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. As reflected in the accompanying condensed unaudited consolidated financial statements, the Company had a net loss of $131,672 and $120,584 for the nine months ended September 30, 2016 and 2015, respectively. The Company has a working capital deficit of $327,953 and a stockholders' deficit of $307,405 at September 30, 2016.
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Based on the above considerations, there is a substantial doubt about the ability of the Company to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to further implement its business plan and generate future profits or attain working capital through debt or equity financing. Management hopes that the continued placement of precious metals machines in the U.S.A. and the potential of a global rollout of additional dispensing terminals will bring sufficient revenues and investment into the Company to sustain its growth and operations. Furthermore, management believes organic growth through a new strategy in the Companys subsidiaries will assist the Company in achievement of its goals. There is no assurance that this series of events will be satisfactorily completed. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Our financial statements are stated in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP").
Interim Financial Statements
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. While we believe that the disclosures presented herein are adequate and not misleading, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated filed with the SEC in our Form 10K on April 19, 2016. Operating results for the interim periods presented are not necessarily indicative of the results for the full year.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the period presented.
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We make our estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available. We believe that our significant estimates, assumptions and judgments are reasonable, based upon information available at the time they were made. Actual results could differ from these estimates, making it possible that a change in these estimates could occur in the near term.
Principles of Consolidation
The consolidated financial statements include the accounts of PMX Communities, Inc. and its wholly-owned subsidiaries, PMX Gold, LLC and PMX Gold Bullion Sales, Inc. All inter-company transactions have been eliminated
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.
Financial Instruments and Fair Value
The Companys balance sheet includes certain financial instruments, including accounts payable, accrued expenses and notes payable. 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.
ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entitys own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
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Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities
Level 2
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3
Inputs that are both significant to the fair value measurement and unobservable.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.
Equipment
Equipment is stated at cost, less accumulated depreciation. Depreciation is provided using the straight line method over the estimated useful life of five years for equipment, seven years for molds and seven years for furniture and fixtures.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of long-lived assets and the related estimated remaining useful lives when events or circumstances lead management to believe that the carrying value of an asset may not be recoverable and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amounts. In such circumstances, those assets are written down to estimated fair value. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset's estimated fair value and its book value. During the nine months ended September 30, 2016, the Company recorded an impairment loss of $20,548.
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Common Stock, Common Stock Options and Warrants
The Company uses the fair value recognition provision of ASC 718, "Compensation-Stock Compensation," which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments. The Company uses the Black-Scholes option pricing model to calculate the fair value of any equity instruments on the grant date.
The Company also uses the provisions of ASC 505-50, "Equity Based Payments to Non-Employees," to account for stock-based compensation awards issued to non-employees for services. Such awards for services are recorded at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50.
Income Taxes
Under the asset and liability method prescribed under ASC 740, Income Taxes, the Company uses the liability method of accounting for income taxes. The liability method measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts on the financial statements. The resulting deferred tax assets or liabilities are adjusted to reflect changes in tax laws as they occur. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized.
The Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a "more-likely-than-not" threshold, the amount recognized in the financial statements is the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. As of September 30, 2016, and December 31, 2015, the Company had no uncertain tax positions. The Company recognizes interest and penalties, if any, related to uncertain tax positions as general and administrative expenses. The Company currently has no federal or state tax examinations nor has it had any federal or state examinations since its inception. The tax years for December 31, 2012-2015 remain subject to review by federal and state tax authorities.
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Revenue Recognition
The Company recognizes revenue when it is realized and realizable.
- Persuasive evidence of an arrangement exists; and
- Delivery has occurred; and
- Price is fixed or determinable; and
- Collectability is reasonably assured
Subject to these criterions, the Company recognizes revenue at the time the merchandise is purchased and the machine dispenses the relevant merchandise. The Company offers its individual customers a 14-day warranty if the item is returned and if the TEP packaging is not broken. The customer will receive their money back. The Company estimates an allowance for sales returns based on historical experience with product returns. The Company closely follows the provisions of ASC 605, Revenue Recognition, which includes the guidelines of Staff Accounting Bulletin No. 104 as described above.
Income (loss) Per Common Share
Basic income (loss) per share is calculated using the weighted-average number of common shares outstanding during each reporting period. Diluted loss per share includes potentially dilutive securities such as outstanding options and warrants, using various methods such as the treasury stock or modified treasury stock method in the determination of dilutive shares outstanding during each reporting period. No potentially dilutive debt or equity instruments were issued or outstanding during the three or nine months ended September 30, 2016 and 2015.
Recent Authoritative Accounting Pronouncement
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
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NOTE 4 PROPERTY AND EQUIPMENT
Components of property and equipment are as follows:
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| |
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September 30, 2016
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December 31, 2015
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(unaudited)
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Gold Dispensing Terminals
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$ 146,224
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$ 146,224
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Molds
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8,909
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8,909
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Office Equipment
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-
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1,600
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Office Furniture and Fixtures
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-
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3,366
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Less: Accumulated Depreciation
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(134,585)
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(97,069)
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|
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Property and Equipment, net
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$ 20,548
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$ 63,030
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Depreciation for the nine months ended September 30, 2016 and 2015 was $21,934 and $25,651, respectively. An impairment loss of $20,548 was recorded during the period ended September 30, 2016.
NOTE 5 NOTES PAYABLE
Promissory Notes carry outstanding principal balances of $157,367 and $153,367 as of September 30, 2016 and December 31, 2015, respectively. Related accrued interest was $109,674 and $92,017 as of September 30, 2016 and December 31, 2015, respectively. As of September 30, 2016, these notes are due on demand as their maturity dates have passed. These notes bear interest at a rate of 5% per annum.
NOTE 6 RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 2016 and 2015, one shareholder and his beneficial interests made aggregate loans of $4,000 and $54,133, respectively, to the Company. The loans bear interest at 5% and each has a six-month maturity.
During the nine months ended September 30, 2016, a related party shareholder paid $22,350 in expenses on the Companys behalf. The amount is included in accounts payable.
On July 1, 2016, the Board of Directors approved the issuance of the following shares: 4,000,000 shares to an officer of the Company for services and 6,000,000 shares to a related party shareholder for consulting services. The total value for the 10,000,000 shares was $42,000.
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The above related party transactions are not necessarily indicative of the terms and amounts that would have been incurred had comparable agreements been made with independent parties.
NOTE 7 SUBSEQUENT EVENTS
The Company has evaluated events and transactions subsequent to September 30, 2016 through the date of filing with the Securities and Exchange Commission (date available for issuance) that would require reporting and noted no additional items to be disclosed.
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