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EX-32 - EXHIBIT 32 - PMX Communities, Inc.pmx10q3q11ex32.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q



(Mark One)

[X]

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2011


[   ]

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to ________.


Commission File Number: 333-161699


PMX COMMUNITIES, INC.AND SUBSIDIARY

(Exact name of Registrant as specified in its charter)



Nevada

 

80-0433114

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)




7777 West Glades Road, Suite 100

 

 

Boca Raton, FL 33434

 

(561) 210-5349

(Address of Principal Executive Offices)

 

(Registrant's telephone number)


Securities registered pursuant to Section 12(b) of the Act: None


Securities registered pursuant to section 12(g) of the Act: Common Stock


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.         Yes [ ]    No  [x]   


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes [ ]    No [x]


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [x]

No  [ ]




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files).                         Yes [ ]             No  [ ]


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer [ ]

 

Accelerated filer                     [ ]

Non-accelerated filer   [ ]

 

Smaller reporting company   [x]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes [ ]    No [x]


As of November 18, 2011, there were 74,000,000 shares of registrant’s common stock issued and outstanding.




DOCUMENTS INCORPORATED BY REFERENCE


  None.


2




Part I.  Financial Information

 

 

Page

Item 1.  Financial Statements (Unaudited)

 

 

Consolidated Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010 (Audited)

 

4

Unaudited Consolidated Statements of Operations - For the Three and Nine Months Ended September 30, 2011 and 2010

 

5

Unaudited Consolidated Statements of Cash Flows - For the Nine Months Ended September 30, 2011 and 2010

 

6

Notes to Unaudited Consolidated Financial Statements

 

8

Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations

 

18

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

25

Item 4.  Controls and Procedures

 

25


Part II.  Other Information

Item 1.  Legal Proceedings

 

27

Item 1a.  Risk Factors

 

27

Item 2.  Unregistered Sales of Equity Securities and Proceeds

 

27

Item 3.  Defaults Upon Senior Securities

 

28

Item 4.  Submission of Matters to a Vote of Security Holders

 

28

Item 5.  Other Information

 

28

Item 6.  Exhibits

 

28

 

 

 

SIGNATURES

 

29


3



PMX Communities, Inc. and Subsidiary

Consolidated Balance Sheets

 

 

September

 

December

 

 

30, 2011

 

31, 2010

 

 

(Unaudited)

 

(Audited)

Assets

 

 

 

 

Current assets

 

 

 

 

  Cash and cash equivalents

 

$     13,104

 

$   47,181

  Inventory

 

11,039

 

92,922

  Prepaid expenses

 

3,277

 

23,083

  Prepaid deposits

 

83,603

 

83,603

  Security deposits

 

            939

 

       2,939

Total current assets

 

11,962

 

249,728

Fixed assets

 

 

 

 

  Property and equipment, net

 

         1,187

 

       1,469

Other assets

 

 

 

 

  Construction in progress

 

51,493

 

-

  Restricted cash

 

                 -

 

     40,372

 

 

       51,493

 

     40,372

Total assets

 

$   164,642

 

$291,569

 

 

========

 

=======

Liabilities and Stockholders' Deficit

 

 

 

 

Current liabilities

 

 

 

 

  Accounts payable

 

 $     68,168

 

$   81,189

  Accrued expenses

 

30,679

 

22,221

  Notes payable - Short term

 

67,329

 

44,465

  Derivative conversion liability

 

     390,655

 

   149,599

  Total current liabilities

 

556,831

 

297,474

  Notes payable - Long term

 

     177,401

 

   205,086

Total liabilities

 

734,232

 

502,560

 

 

 

 

 

Stockholders' deficit

 

 

 

 

Common stock, $.0001 par value; authorized 100,000,000

  shares; issued and outstanding 74,000,000 shares issued

  and outstanding

 

7,400

 

5,915

  Additional paid-in capital

 

1,457,445

 

188,970

  Accumulated deficit

 

(2,034,435)

 

 (405,876)

Total stockholders' deficit

 

   (569,590)

 

 (210,991)

Total liabilities and stockholders' deficit

 

$   164,642

========

 

$291,569

=======


See accompanying notes to unaudited consolidated financial statements.

4



PMX Communities, Inc. and Subsidiary

Consolidated Statement of Operations

For the Three and Nine Months Ended September 30, 2011 and 2010

(Unaudited)


 

 

Three Months ended September 30,

 

Nine Months ended September 30,

 

 

2011

 

2010

 

2011

 

2010

Net sales

 

$               -

 

$             -

 

$157,200

 

$             -

Cost of sales

 

                  -

 

                -

 

162,140

 

               -

Gross profit

 

-

 

-

 

(4,940)

 

-

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

Amortization

 

-

 

250

 

-

 

750

Depreciation

 

94

 

95

 

282

 

284

Selling, general and administrative expenses

 

    1,159,462

 

     58,149

 

    1,429,101

 

     84,598

 

 

    1,159,556

 

     58,494

 

    1,429,383

 

     85,632

Loss from operations

 

(1,159,556)

 

(58,494)

 

(1,434,323)

 

(85,632)

 

 

 

 

 

 

 

 

 

Other income

 

-

 

-

 

-

 

-

Interest expense

 

        (8,500)

 

    (4,129)

 

(25,264)

 

     (9,609)

Loss before income taxes

 

(1,168,056)

 

(62,623)

 

(1,459,587)

 

(95,241)

Income taxes

 

                   -

 

               -

 

                   -

 

                -

Net loss

 

$(1,168,056)

 

$(62,623)

 

$(1,459,587)

 

$(95,241)

 

 

 

 

 

 

 

 

 

Beneficial Conversion

 

       126,527

 

               -

 

       168,972

 

              -

 

 

 

 

 

 

 

 

 

Net loss attributable to Conversion

 

$(1,294,583)

 

$(62,623)

 

$(1,628,559)

 

$ (95,241)

 

 

=========

 

========

 

=========

 

========

Basic net loss per share

 

$        (0.02)

 

$      (0.00)

 

$        (0.03)

 

$     (0.00)

 

 

=========

 

========

 

=========

 

========

Weighted average shares outstanding

 

 

 

 

 

 

 

 

Basic

 

63,071,739

========

 

54,885,326

========

 

60,828,938

=========

 

54,033,150

========


See accompanying notes to unaudited consolidated financial statements.


5



PMX Communities, Inc. and Subsidiary

Consolidated Statement of Cash Flows

For the Nine Months Ended September 30, 2011 and 2010

(Unaudited)


 

 

Nine Months ended

 

 

September 30,

 

 

2011

 

2010

Cash flows from operating activities

 

 

 

 

Net loss

 

$(1,459,587)

 

$(95,241)

Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:

 

 

 

 

Issuance of common stock for services

 

940,000

 

-

Non cash stock based compensation

 

104,960

 

-

Depreciation

 

283

 

284

Amortization

 

-

 

750

Change in assets and liabilities

 

 

 

 

Restricted Cash

 

40,372

 

-

Inventory

 

81,883

 

-

Prepaid expenses

 

19,806

 

(1,000)

Security deposits

 

2,000

 

(339)

Accounts payable

 

(13,021)

 

5,721

Accrued expenses

 

           8,458

 

     (3,570)

Net cash used in operating activities

 

    (274,848)

 

   (93,395)

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Deposit of investing agreement

 

-

 

(13,209)

Construction in progress

 

     (51,493)

 

              -

Net cash (used in) investing activities

 

(51,493)

 

(13,209)

 

 

 

 

 


Continued on next page


6




Cash flows from financing activities

 

 

 

 

Proceeds from notes payable

 

244,500

 

67,500

Increase in accrued interest

 

25,264

 

9,609

Repayment of notes payable

 

(77,500)

 

-

Common stock issued for cash, net of costs

 

    100,000

 

    104,125

Net cash provided by financing activities

 

    292,264

 

    181,234

 

 

 

 

 

Net increase in cash and cash equivalents

 

(34,077)

 

74,630

Cash and cash equivalents, beginning of fiscal year

 

      47,181

 

           212

Cash and cash equivalents, end of period

 

$    13,104

 

$    74,842

 

 

========

 

========

Supplementary information:

 

 

 

 

Cash paid for:

 

 

 

 

Interest

 

$             -

=======

 

$              -

========

Income taxes

 

$             -

=======

 

$              -

========


See accompanying notes to unaudited consolidated financial statements.


7




PMX COMMUNITIES, INC. AND SUBSIDIARY

September 30, 2011 and 2010

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





NOTE 1 – DISCRIPTION OF BUSINESS


PMX Communities, Inc. (The Company) “PMX” was organized under the laws of the State of Nevada on December 29, 2004 under the name Merge II, Inc. PMX’s year end is December 31.


On February 10, 2009, by Unanimous Written Consent, the board of directors authorized an amendment to its Certificate of Incorporation to change the name of the corporation to PMX Communities, Inc.  PMX Communities also authorized an amendment to amend the articles of Incorporation from 25,000,000 to 100,000,000 common shares authorized. The amendments were filed on June 30, 2009.


On September 28, 2010, the Company 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.


PMX, (through its wholly owned subsidiary PMX Gold, LLC) focuses on the development of leveraged opportunities within the Retail Gold Sales and Gold Mining Industries. We operate from our office at West Boca Executive Suites, 7777 West Glades Road., Suite 100, Boca Raton, FL 33434.

PMX Communities, Inc. (The Company) was incorporated on December 29, 2004, in Nevada and was in the development stage through September 30, 2010. The quarter ended December 31, 2010 was the quarter during which the Company was considered an operating company and is no longer in the development stage.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of Presentation


The unaudited consolidated financial statements included in this report have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and include all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation. These financial statements have not been audited.


Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations for interim reporting.


8



PMX COMMUNITIES, INC. AND SUBSIDIARY

September 30, 2011 and 2010

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




The Company believes that the disclosures contained herein are adequate to make the information presented not misleading. However, these financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report for the year ended December 31, 2010, which is included in the Company's Form 10-K for the year ended December 31, 2010. The financial data for the interim periods presented may not necessarily reflect the results to be anticipated for the complete year ended December 31, 2011.


The accompanying financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America.


Significant Accounting Policies


Use of Estimates


The preparation of financial statements in conformity with generally accepted accounting principles accepted in the United States of America requires Management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.


Significant estimates for the periods reported include the allowance for doubtful accounts which is based on an evaluation of our outstanding accounts receivable including the age of amounts due, the financial condition of our specific customers, knowledge of our industry segment and historical bad debt experience. This evaluation methodology has proved to provide a reasonable estimate of bad debt expense in the past and the Company intends to continue to employ this approach in our analysis of collectability.


Assumptions and estimates employed in these areas are material to our reported financial conditions and results of operations. Actual results could differ from these estimates.


Cash and Cash Equivalents


The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The credit risk associated with cash equivalents is considered low due to the credit quality of the issuers of the financial instruments.


Concentration of Credit Risk


Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.


9



PMX COMMUNITIES, INC. AND SUBSIDIARY

September 30, 2011 and 2010

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




At September 30, 2011 and December 31, 2010, the Company had no amounts in excess of FDIC insured limit. While the Company periodically evaluates the credit quality of the financial institutions in which it holds deposits, it cannot reasonably alleviate the risk associated with the sudden possible failures of such institutions.


Earnings Per Share 


The Company adopted FASB ASC 260, Earnings Per Share. Basic earnings (loss) per share is based on the weighted effect of all common shares issued and outstanding and is calculated by dividing net income (loss) available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation plus the number of common shares, if any, that would be issued assuming conversion of all potentially dilutive securities outstanding. For the periods ended September 30, 2011 and 2010, no potentially issuable shares were reflected in a diluted calculation as the inclusion of potentially issuable shares would be anti-dilutive.


Share-Based Payments


The Company recognizes share-based compensation expense in connection with our share-based awards, net of an estimated forfeiture rate and therefore only recognizes compensation cost for those awards expected to vest over the service period of the award. The Company accounts for the grant of stock and warrants awards in accordance with ASC Topic 718, Compensation – Stock Compensation (ASC 718).  ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of warrants and stock options and other equity based compensation. The Company utilizes a Black-Scholes option pricing model to estimate the fair value of our stock options. Calculating share-based compensation expense requires the input of highly subjective judgment and assumptions, including estimates of expected life of the award, stock price volatility, forfeiture rates and risk-free interest rates. The assumptions used in calculating the fair value of share-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company use different assumptions, our share-based compensation expense could be materially different in the future.


10



PMX COMMUNITIES, INC. AND SUBSIDIARY

September 30, 2011 and 2010

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




NOTE 3 – INVENTORY


The Company maintains a deposit account which is used to purchase precious metal inventory.


Inventory consists of the following:


 

 

September 30, 2011

 

December 31, 2010

Finished Goods

 

$11,039

 

$92,922

 

 

$11,039

 

$92,922


On a continuing basis, inventory quantities on hand are reviewed and an analysis of the provision for excess and obsolete inventory is performed based primarily on the Company’s sales history and anticipated future demand.


NOTE 4 – CONSTRUCTION IN PROGRESS


Construction in progress costs were $51,493 and $0, respectively at September 30, 2011 and December 31, 2010. These costs reflect costs to secure project management services from an engineering and manufacturing company to oversee full development of PMX Gold ATM terminals and network according to Company milestones.


NOTE 5 – NOTES PAYABLE


During the three month period ended September 30, 2011, The Company entered into four balloon promissory notes with four investors who also shareholders of the company for the sum of twenty two thousand five hundred dollars ($22,500). The entire amount with five percent (5%) interest is due six months (180 days) from date of issue.


At September 30, 2011 and December 31, 2010 the Company has accrued interest on the notes of $49,651 and $24,387, respectively.


11



PMX COMMUNITIES, INC. AND SUBSIDIARY

September 30, 2011 and 2010

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




Promissory notes payable consists of the following:

Balance at December 31, 2009

 

$127,647

Principal contributed

 

217,500

Add: Accrued interest

 

16,740

Less: effect of conversion

 

(112,336)

Balance at December 31, 2010

 

$249,551

=======

Principal contributed

 

244,500

Less: Repayment of principal

 

(77,500)

Add: Accrued interest

 

25,264

Less: Converted to common stock

 

(125,000)

Less: effect of conversion

 

(72,085)

Balance at September 30, 2011

 

244,730

======

Less current portion

 

    67,329

 

 

$177,401

=======


At September 30, 2011, the Company had 14 notes outstanding that were indexed to the Company’s common stock.  The beneficial conversion of that stock has resulted in a liability to our holders for $390,655.


At December 31, 2010, the Company had 14 notes outstanding that were indexed to the Company’s common stock.  The beneficial conversion of that stock has resulted in a liability to our holders for $149,599.



NOTE 6- EQUITY TRANSACTIONS


Common Stock


During the three months ended September 30, 2011, the Company issued 3,000,000 shares of common stock to a consultant who exercised stock options granted under the Company’s stock option plan valued at $0.08 per share, for a total of $98,400. The Company utilizes a Black-Scholes option pricing model to estimate the fair value of our stock options. (Note 8)


During the three months ended September 30, 2011, the Company awarded a related party one million (1,000,000) shares at $.10 of our common stock as compensation for a value of $100,000. (Note 7)


12



PMX COMMUNITIES, INC. AND SUBSIDIARY

September 30, 2011 and 2010

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




During the three months ended September 30, 2011, the Company awarded a related party two million (2,000,000) shares at $.10 of our common stock for a value of $200,000. (Note 7)


During the three months ended September 30, 2011, the Company awarded a related party six million (6,000,000) shares at $.10 of our common stock for a value of $600,000. (Note 7)


During the three months ended September 30, 2011, the Company issued 100,000 shares of common stock in exchange for services rendered to a consultant at $0.10 per share, for a total of $10,000.


During the three months ended September 30, 2011, the Company issued 100,000 shares of common stock to an employee in exchange for services rendered at $0.09 per share, for a total of $9,000.


During the three months ended September 30, 2011, the Company issued 200,000 shares of common stock to an employee who exercised stock options granted under the Company’s stock option plan valued at $0.08 per share, for a total of $6,560. The Company utilizes a Black-Scholes option pricing model to estimate the fair value of our stock options. These shares shall be issued under Regulation S-8. (Note 8)



During the three months ended September 30, 2011, the registrant sold 750,000 restricted common shares in a private placement at $.10 per common share for a total of $75,000. The registrant granted the investor piggyback registration rights whereby the registrant will include the investor's common shares in any public offering the registrant conducts. The registrant will bear all costs of the registration of investor's common shares.


For the three and nine month periods ended September 30, 2011 and 2010, the Company recorded stock-based compensation expense of $104,960 and $0 respectively.


NOTE 7 - RELATED PARTY



On August 5, 2011, Michael C. Hiler resigned as chief executive officer. As a result, the Company's board of directors appointed Mark Connell as chief executive officer and Alfredo Cortellini as chief technology officer.  Additionally, the board of directors appointed Mark Connell and Alfredo Cortellini as directors to serve until the next shareholder meeting.  The Company approved an employment agreement for the new officers.


13



PMX COMMUNITIES, INC. AND SUBSIDIARY

September 30, 2011 and 2010

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




On August 5, 2011, there was a change in control of the Company as Michael C. Hiler sold his 33,000,000 common shares to Dickinson Capital, LLC, an entity controlled by Mark B. Goldstein.


On August 5, 2011, the Company entered into a development agreement with Gold Deposit Technologies, Inc.(GDT) to assist in the development and implementation of the Company's proprietary PMX Gold ATM Terminal and associated gold bullion based financial services business plan. The plan includes the structuring and marketing of precious metals accounts for the use of its clients with potential accessibility via the internet, the PMX Gold ATM Terminals and co-branded debit cards to be issued by the Company. Under the agreement the Company shall issue three million (3,000,000) shares at $.08 of our common stock for a value of $98,400 as consideration for GDT’s contribution of work and expertise. These shares shall be issued under Regulation S-8. The shares shall be deemed paid, earned and non-assessable when issued by the Company. Additionally, within 90 days of the conclusion of fiscal year 2011 and 2012 GDT shall be paid a fee equal to 3.5% of the issued and outstanding common stock of the Company. GDT  will be paid cash compensation during the first two years of twenty thousand ($20,000) per month base monthly fee. The agreement is terminable by either party with or without cause following the expiration of two (2) years (Note 8).


Executive Compensation


During the three months ended September 30, 2011, the Company awarded Mr. McCauley one million (1,000,000) shares at $.10 of our common stock as compensation when he accepted the appointment as Vice President for Business for a value of $100,000.


During the three months ended September 30, 2011, the Company awarded Mr. Cortellini two million (2,000,000) shares at $.10 of our common stock as compensation when he accepted the appointment as Chief Technical Officer for a value of $200,000.


During the three months ended September 30, 2011, the Company has entered into new two year employment agreement with Mr. Connell, who was appointed President and Chief Executive Officer of the Company.  This agreement is effective as of August 5, 2011.  The agreement shall continue until the two (2) year anniversary of the Commencement Date.  It is provided, however, that unless either party gives written notice to the other at least 120 days prior to the expiration of the then-current Term that such party elects not to renew this Agreement, the then-current Term shall be automatically extended for additional one-year periods.  


14



PMX COMMUNITIES, INC. AND SUBSIDIARY

September 30, 2011 and 2010

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




Under the terms of this agreement, the Company will pay him an annual base salary of $125,000.  Employee’s base salary shall be subject to an annual performance review and increases will be effective as of the first day of each fiscal year (January 1 - December 31) commencing with the fiscal year 2012, which increases (if any) shall be in amounts as the Board (or committee thereof) shall deem appropriate; provided, however, that such increases shall be in an amount at least equal to the percentage increase during the previous twelve (12) months in the Consumer Price Index for All Urban Consumers.  Upon commencement of employment, Employee was issued six million (6,000,000) shares at $.10 of our common stock in the Company as one (1) time bonus for a value of $600,000.  Such shares shall be fully paid, non-assessable, restricted and have not been registered under the Securities Act. Such shares shall be fully paid, non-assessable, restricted and have not been registered under the Securities Act.  Additionally, Employee represents and warrants that he has been advised and understands that he must continue to bear the economic risk of ownership of the Shares for an indefinite period of time because (i) the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any states and therefore cannot be sold unless it is subsequently registered under the Securities Act and the laws of such states or an exemption from such registration is available, and (ii) the Company will be under no obligation to register the Shares.


During the three month period ended September 30, 2011, The Company entered into four balloon promissory notes with four investors who also shareholders of the company for the sum of twenty two thousand five hundred dollars ($22,500). (Note 5)


NOTE 8 - STOCK OPTIONS AND WARRANTS


Stock Option Plans


Equity Compensation Plan


On August 5, 2011, the Company approved a stock awards plan dated August 5, 2011 authorizing the issuance of an aggregate of 6,000,000 common shares.  The stock awards plan must be approved by the Company's shareholders within 12 months.

On August 5 2011, the Company approved the registration under the Securities Act of 1933 of 4,500,000 common shares to be issued under the stock awards plan.


The Company recognized $104,960 and $0 in share based compensation expense for the nine months period ended September 30, 2011 and 2010, respectively. An option to purchase 200,000 shares was granted to an employee during the three months ended September 30, 2011. An option to purchase 3,000,000 shares was granted to a consultant under an agreement during the three months ended September 30, 2011 (Note 7).


15



PMX COMMUNITIES, INC. AND SUBSIDIARY

September 30, 2011 and 2010

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




The Company used the Black-Scholes option pricing model to value the options. Included in the assumptions of this calculation, the Company used a risk-free rate of 0..23% (based on the US Treasury note yield), two month maturity, volatility of 269.09% (based on the daily historical performance of a the Company’s stock over the period from December 15, 2010 to the grant date), and a strike price of $0.08 the fair value of the stock on the date of grant.


NOTE 9 - NET LOSS PER SHARE


Basic loss per common share has been calculated based on the weighted average number of shares outstanding during the period after giving retroactive effect to stock splits. There are no dilutive securities at September 30, 2011 and 2010 for purposes of computing fully diluted earnings per share.

The following reconciles amounts reported in the financial statements:


 

 

Nine month period ended September 30, 2011

 

Nine month period ended September 30, 2010

 

 

 

 

 

Net loss

 

$(1,459,587)

=========

 

$  (95,241)

========

Denominator for basic loss per share

 

 

 

 

Basic weighted average shares

 

60,828,938

 

54,033,150

Basic loss per common shares

 

$        (0.03)

=========

 

$      (0.00)

========


NOTE 10 - GOING CONCERN


As reflected in the accompanying financial statements, the Company had a net loss for the nine month period ended September 30, 2011 of $1,459,587. At September 30, 2011, the Company has 157,200 in operating revenues.  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 raise capital.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.


16



PMX COMMUNITIES, INC. AND SUBSIDIARY

September 30, 2011 and 2010

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




NOTE 11 – SUBSEQUENT EVENTS


The Company has evaluated subsequent events pursuant to ASC Topic 855.


On October 5, 2011 the Company entered into a Consulting agreement with Saul Caprio to act as a technical advisor and a consultant. In consideration for the services to be provided by the Consultant, the Consultant shall be paid by the Company five hundred thousand (500,000) shares of common stock of the Company, which are “restricted shares”, and, accordingly, have not been registered under the Securities Act. The term of the Agreement is for a period of twelve months, and is automatically renewable for additional six (6) month periods unless terminated by either party in writing upon ten (10) days prior notice.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of  Operations.


Trends and Uncertainties


Our business is centered on essentially one commodity, gold.   Our operations are currently focused on the demand for physical gold ownership by retail investors. Our expansion plans are based on developing and offering a managed gold account and related products to retail customers and investors. Any decrease in demand for gold or gold investments could materially adversely affect our revenues, profitability and general business prospects.


Demand for our products is affected by several factors including:


   -  Large sales by the official sector.  A significant portion of the aggregate world gold holdings is owned by governments, central banks and related institutions.

   -  A significant increase in gold hedging activity by gold producers. Should there be an increase in the level of hedge activity of gold producing companies, it could cause a decline in world gold prices.

   -  A significant change in the attitude of speculators and investors towards gold. Should the speculative community take a negative view towards gold, it could cause a decline in world gold prices


Results of Operations


Results of Operations for the three months ended September 30, 2011 and 2010


For the three month period ended September 30, 2011, we did not receive any revenue. Selling, general and administrative expenses were $1,159,462 and consisted of primarily of accounting fees of $4,500, legal fees of $23,475, rent expenses of $5,181, wage expenses of $24,833, non-cash stock based compensation expense of $915,560 (Note 7), consulting fees of $40,000 in cash and $98,400 in a non-cash stock based compensation award for services per technology development agreement (Note 7), $12,500 for the hiring of an outside consultant to facilitate new business ventures, consulting fees of $10,000 for the hiring of outside consultant, shareholder relations expense of $4,500 for the hiring of an outside consultant, stock , media relations expenses of $1,195 and other miscellaneous expenses of $19,318.


For the three months ended September 30, 2010, we did not receive any revenue.  Selling, general and administrative expenses were $58,149 and consisted of primarily of accounting fees of $1,370, rent expenses of $2,667, wage expenses of $26,230, consulting fees of $22,500 for the hiring of an outside consultant to facilitate new business ventures and other miscellaneous expenses of $5,382.


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Interest expense for the three months ended September 30, 2011 was $8,500 an increase of $4,371 from interest expense of $4,129 for the three month period ended September 30, 2010. The increase was due to the interest on the notes payable.


For the three month period ended September 30, 2011, we had a net loss of ($1,168,056) an increase of $1,230,679 from net loss for the three month period ended September 30, 2010 of ($62,623) due to the factors above.


Results of Operations for the nine months ended September 30, 2011 and 2010


For the nine month period ended September 30, 2011, the registrant received $157,200 in revenue. Cost of goods sold was $162,140.  Gross profit was ($4,940).  


For the nine month period ended September 30, 2011, selling, general and administrative expenses were $1,429,101 and consisted of primarily of accounting fees of $14,058, legal fees of $49,690, rent expenses of $20,324, wage expenses of $72,480, non-cash stock based compensation expense of $915,560 (Note 7), consulting fees of $40,000 in cash and $98,400 in a non-cash stock based compensation award for services per technology development agreement (Note 7), consulting fees of $80,000 for the hiring of an outside consultant to facilitate new business ventures, consulting fees of $20,000 for the hiring of outside consultant, shareholder relations expense of $22,500 for the hiring of an outside consultant, stock transfer fee of $7,600, media relations expenses of $21,245, promotion and advertising expenses of $17,535 and other miscellaneous expenses of $49,709.


For the nine months ended September 30, 2010, we did not receive any revenue.  Selling, general and administrative expenses were $84,598 and consisted of primarily of accounting fees of $4,515, rent expenses of $6,948, wage expenses of $33,330, consulting fees of $22,500 for the hiring of an outside consultant to facilitate new business ventures, stock transfer fee of $10,488 and other miscellaneous expenses of $6,817.


Interest expense for the nine months ended September 30, 2011 was $25,264 an increase of $15,655 from interest expense of $9,609 for the nine month period ended September 30, 2010. The increase was due to the interest on the notes payable.


For the nine month period ended September 30, 2011, we had a net loss of ($1,459,587) an increase of $1,364,346 from net loss for the nine month period ended September 30, 2010 of ($95,241) due to the factors above.


Liquidity and Capital Resources


As at September 30, 2011, we had cash and cash equivalents of $13,104.


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For the nine month period ended September 30, 2011, the registrant paid $51,493 for construction in progress. As a result, the Company had net cash used in investing activities of $51,493.


Comparatively, the registrant for the nine month period ended September 30, 2010 paid a deposit of $13,209 on an investment agreement with Ex Orient Lux AG.


For the nine month period ended September 30, 2011, the registrant received proceeds from notes payable of $244,500 and had an increase in accrued interest of $25,264. Additionally, the Company received proceeds of $100,000 from the sale of common stock. The registrant repaid $77,500 to three note holders. As a result, the registrant had net cash provided by financing activities of $292,264 for the nine month period ended September 30, 2011.


Comparatively, the registrant for the nine month period ended September 30, 2010, received proceeds from notes payable of $67,500 and had an increase in accrued interest of $9,609. Additionally, for the nine months ended September 30, 2010, the Company received a credit for costs incurred to file registration statement of $1,000 and received proceeds of $103,125 from the sale of common stock. As a result, the Company had net cash provided by financing activities of $181,234 for the nine months ended September 30, 2010.


Plan of Operation


Our internal and external sources of liquidity have included proceeds raised from subscription agreements, private placements and advances from related parties.   Our capital strategy is to increase our cash balance through financing transactions, including the issuance of debt and/or equity securities.


To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, the registrant will have to raise additional working capital.  No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the registrant


We are an entrepreneurial company having launched the first gold bullion vending machine in the United States. We are leveraging our expertise and know-how in the gold business by developing proprietary technology and infrastructure to meet retail and institutional demand for gold investments and gold transactions.


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During the period from December 17, 2010 through March 23, 2011, we test marketed and operated one (1) gold bullion vending machine at the Town Center at Boca Raton(r), a retail shopping mall located in South Florida, and vended a total of 699 .999 Pure Credit Suisse Gold Bullion Bars and American Eagle Gold Coins in cash only sales transactions in the aggregate amount of $266,256.


As of the date of this filing, we have completed our test marketing and are currently developing the first American made Gold ATM Terminals. Rather than attempting to simply vend gold bullion products, our machines are being designed integrate seamlessly with the International

Banking System and function as part of a gold bullion based financial services network to capitalize on the emergence of gold as a potential parallel currency and modern medium of exchange.


The registrant believes the following milestones need to be met to successfully complete its business plan.


Milestones


1. Item:   Import simple gold bullion vending machine to perform test marketing and gauge US public acceptance of accessing gold bullion products from an unmanned terminal. Establish agreement with suppliers, hedging transaction facilitators and other required sources. Obtain gold

bullion inventory and initiate retail gold sales.


Status: Completed.


Cost:   Approximately $280,000-$300,000 including equipment, leases, inventory and hedging deposits.



2. Item:    Develop preliminary business plan and design infrastructure to operate PMX Gold Bullion Account System. Secure project management services from engineering and manufacturing company to develop gold dispensing technology and oversee full development and manufacture of PMX Gold ATM terminals and network.


Status:  Omnitech Automation has completed the initial technology design and development for operation of the physical dispensing units within the PMX Gold ATM terminals. Formal Project management services agreement with Omnitech has subsequently been entered into to oversee development and manufacture of PMX Gold ATM terminals and network.


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Costs: Approximately $120,000.00 in costs currently expended between Omnitech payments and in house expenses.


3. Item: Acquire initial intellectual property rights for foundation of business method patent and development of technology necessary to run business. Secure agreement with entity to oversee and consult with PMXO regarding development of business plan to jointly develop further intellectual property rights; retain exclusive worldwide rights to both business plan and methodology as it relates to gold business.


Status: Agreement reached with Gold Deposit Technology (GDT) to acquire access to previously submitted business method provisional patent and to jointly develop technology and further intellectual property with exclusive worldwide rights as it applies to gold and precious metals being awarded to PMX subject to certain milestones.


Costs: Annual contract budget for first 2 year of approximately $240,000.00* per year, success bonuses based on ATMs deployed/accounts under management as well as stock incentives. Annual budget/payments targeted to increase slightly thereafter but are also cancelable without financial penalty if business model or value of intellectual property proves undesirable.


*Approximately 50% of these fees included in Initial Prototype

Manufacture & Gold ATM/Network Development Budget figures.


4. Item:   Establish relationship with ATM manufacturer and develop contract for acquisition of international banking system compliant hardware and software to interface with gold bullion delivery mechanism to be designed and developed by technology partners. Develop specifications and requirements for prototype to be built and software to run network.  Secure defined costs for project development, software design and supply, and initial prototype manufacture.


Status: Currently have initial manufacturing plans and engineering drawings for unique aspects of manufacturing. Have signed NDAs and engaged in significant talks with ATM manufacturers, Kiosk Designers and Financial Services Software/ Network Specialists. Initial "First to Market" manufacturer expected to be confirmed within 2 months. If proposed schedule is adhered to and financing obtained we should have prototype design complete within 2 months and Phase I manufacturing initiated 1 month thereafter.


22





Cost:   Costs for initial design, manufacture and debugging of stage 1 prototypes, system software and consulting services estimated at $800,000. Final ATM cost currently budgeted at $50,000 per unit (includes nationwide coordinated release and ramp-up of network).


5. Item:  Construct website to offer both initial gold bullion products for sale via Internet as precursor to bundled services via PMX Gold Bullion Accounts. Obtain merchant services approval for acceptance of debit/credit cards. Negotiate agreement with supplier for product supply, back office support and infrastructure.


Cost:   Approximately $25-50,000.00; management oversight part of gold bullion sales is also part of GDT contract.


Status:  Currently in development, approximately 30-60 days from completion.


6. Item:   Expand Online Sales to PMX Gold Bullion Account services to include PMX Gold Debit Card. Negotiate agreement with debit card provider for branded debit card. Negotiate agreement with debit card provider supplier for back office support, service platform and infrastructure.


Cost:   Initial cost of approximately $25-50,000.00 includes first 10,000 co-branded card order, starting deposit with issuing bank and varied level of marketing costs.


Status: Have received detailed proposal from substantial debit card provider(s); awaiting final proposal(s). Approximately 90 days required from signing of agreement until network can be active and debit cards in use.


7. Item:   Manufacture, launch and deploy the first wave of machines (6- 30 depending on funding level received) and complete development of network to integrate PMX Gold Bullion Account features.


Cost:   Currently budgeted at line item of $50,000.00 per unit, subject to final options. Costs/ out-of-pocket cash outlays could be significantly offset through advertising initiatives or potential

cobranding agreement or leasing/finance arrangements from manufacturer(s).


Status: All steps above must be completed. Approximate timeline to Phase I rollout of machines to populate and support full scale launch of PMX Gold Bullion Network is estimated to be prior to end of calendar year 2011.


8. Item:   Bring on additional corporate officers, board of directors members, advisors and consultants to assist with development of operations and fulfillment of business plan.


23





Cost:   Board members have been engaged to serve in exchange for restricted stock issuance from Treasury. Officers, employees, advisors and consultants have been identified that will provide services partly in exchange for cash and equity.


Status: New Company President hired with substantial marketing and business development experience. Chief Technical Officer with substantial manufacturing, design and technical background appointed. Both Officers also serve on Board. Technology Consultants and Advisors

Omnitech Automation, Inc. and Gold Deposit Technologies have been retained. PMX is currently evaluating several other additions as well.


9. Item:   Review properties for precious metals and mining exploration and development through joint venture with Goldex Capital or others.


Cost:   Projects for participation/acquisition present range from approximately $25,000 to in excess of $5,000,000.


Status: The registrant is currently reviewing multiple projects with the assistance of Mervyn Gervis, vice president and director of PMX as well as through various consultants and potential project partners.


Milestones 1, 2 and 3 have been accomplished.

Milestone 4 is in progress.

Milestone 5 and 6 are in progress and can be completed independent of

all other milestones but will help with milestone 7.


Milestone 7 is dependent on milestone 4.

Milestone 8 has been partially fulfilled but is still in progress

Milestone 9 is independent of all others.


Going Concern

The registrant has incurred net losses for the Nine month period ended September 30, 2011 of $1,459,587.  Because of these losses, the registrant will require additional working capital to develop its business operations.


Off-Balance Sheet Arrangements

The registrant had no material off-balance sheet arrangements as of September 30, 2011.


Critical Accounting Policies and Estimates

Management’s discussion and analysis of its financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.


24





The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses and the valuation of our assets and contingencies. We believe our estimates and assumptions to be reasonable under the circumstances. However, actual results could differ from those estimates under different assumptions or conditions. Our financial statements are based on the assumption that we will continue as a going concern. If we are unable to continue as a going concern we would experience additional losses from the write-down of assets.


The registrant uses the fair value recognition provision of ASC 718, “Compensation-Stock Compensation,” which requires the registrant 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 registrant uses the Black-Scholes option pricing model to calculate the fair value of any equity instruments on the grant date.


The registrant 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.


New Accounting Pronouncements

The registrant has adopted all recently issued accounting pronouncements.  The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the registrant.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk


Not applicable


Item 4. Controls and Procedures


During the period ended September 30, 2011, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


25





Evaluation of Disclosure Controls and Procedures


Under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of September 30, 2011.  Based on this evaluation, our chief executive officer and principal financial officers have concluded such controls and procedures to be effective as of September 30, 2011 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.


26





Part II.  Other Information


Item 1. Legal Proceeding


The Company is not a party to, and its property is not the subject of, any material pending legal proceedings.


Item 2. Unregistered Sales Of Equity Securities and Use of Proceeds


During the three months ended September 30, 2011, the Company awarded Michael W. McCauley, a related party one million common shares at $.10 per common share as compensation for an aggregate value of $100,000.


During the three months ended September 30, 2011, the Company awarded Alfred Cortellini, a related party two million common shares at $.10 per common share for an aggregate value of $200,000.


During the three months ended September 30, 2011, the Company awarded Mark Connell, a related party six million common shares at $.10 per common share for an aggregate value of $600,000.


During the three months ended September 30, 2011, the Company issued 100,000 common shares in exchange for services rendered to Michael P Schumacher, a consultant at $0.10 per common share, for an aggregate value of $10,000.


During the three months ended September 30, 2011, the Company issued 100,000 common shares to Samuel D. Shapiro, an employee in exchange for services rendered at $0.09 per share, for a total of $9,000.


During the three months ended September 30, 2011, the registrant sold 250,000 restricted common shares in a private placement at $.10 per common share for a total of $25,000 to Dan and Karen Young, unaffiliated sophisticated investors. The registrant granted the investors piggyback registration rights whereby the registrant will include the investor's common shares in any public offering the registrant conducts. The registrant will bear all costs of the registration of investor's common shares.


During the three months ended September 30, 2011, the registrant sold 500,000 restricted common shares in a private placement at $.10 per common share for a total of $50,000 to Mark Kaiser, an unaffiliated sophisticated investor. The registrant granted the investors piggyback registration rights whereby the registrant will include the investor's common shares in any public offering the registrant conducts. The registrant will bear all costs of the registration of investor's common shares.


27





All of the above common share issuances were made pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933 to sophisticated investors.


Item 3. Defaults Upon Senior Securities


None


Item 4. (Removed and Reserved)


Item 5. Other Information


None


Item 6. Exhibits


The following documents are filed as a part of this report:


Exhibit 31* - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32* - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS**   XBRL Instance Document

101.SCH**   XBRL Taxonomy Extension Schema Document

101.CAL**   XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB**   XBRL Taxonomy Extension Label Linkbase Document

101.PRE**   XBRL Taxonomy Extension Presentation Linkbase Document

*  Filed herewith

**XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.


28





SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



PMX COMMUNITIES, INC.


/s/ Mark Connell

Mark Connell

Chief Executive Officer

Dated: November 18, 2011


/s/Michael C. Hiler

Michael C. Hiler

Chief Financial Officer

Dated: November 18, 2011


29