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 March 31, 2012

or

 

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to______.

REAL ESTATE CONTACTS, INC.

(Exact name of registrant as specified in charter)

 

Florida		333-174905		59-3800845
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S Employer Identification No.)

240 Windsor Ridge #36

New Castle, Pennsylvania 16105

 (Address of principal executive offices)

_______________

(724) 656-8886

 (Registrant’s telephone number, including area code)

_______________

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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 o

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

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

Large Accelerated Filer o     Accelerated Filer o     Non-Accelerated Filer o (Do not check if a smaller reporting company)    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 o No x

As of May 9, 2012: 173,330,000 shares, par value $0.00001, of the issuer’s common stock are issued and outstanding.

 

1

---

 

 

REAL ESTATE CONTACTS, INC.

QUARTERLY REPORT ON FORM 10-Q

March 31, 2012

TABLE OF CONTENTS

PART 1 - FINANCIAL INFORMATION
		PAGE
Item 1.	Financial Statements (Unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13
Item 4.	Controls and Procedures	14
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	16
Item 1A.	Risk Factors	16
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	(Removed and Reserved)	16
Item 5.	Other Information	16
Item 6.	Exhibits	16
SIGNATURES

 

2

---

 

 

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

CERTAIN TERMS USED IN THIS REPORT

When this report uses the words “we,” “us,” “our,” “RECI,” and the “Company,” they refer to Real Estate Contacts, Inc.  “SEC” refers to the Securities and Exchange Commission.

 

3

---

 

 

PART I—FINANCIAL INFORMATION

Item 1.                 Financial Statements.

Index to Financial Statements

Real Estate Contacts, Inc.

Contents

 

Financial Statements:	Page Number
Balance Sheets, as of March 31, 2012 (unaudited) and December 31, 2011 (audited)	F-1
Statements of Operation for the three months ended March 31, 2012 and 2011 (unaudited)	F-2
Statements of Stockholders' Deficit, as of March 31, 2012 (unaudited)	F-3
Statements of Cash Flows for the three months ended March 31, 2012 and 2011 (unaudited)	F-4
Notes to Financial Statements (unaudited)	F-5

 

4

---

 

REAL ESTATE CONTACTS, INC.

Balance Sheets

The accompanying notes are an integral part of these financial statements.

5

---

 

REAL ESTATE CONTACTS, INC.

Statements of Operations

(unaudited)

				For the Three Months Ended
				March 31,
					2012				2011
Revenues				$	1,017			$	2,296
Operating expenses:
	Selling expenses				644				878
	Compensation				25,489				17,516
	Professional				1,150				19,850
	Rents and overhead				300				300
	General and administrative				1,677				1,042
	Stock-based compensation				298,250				1,042
	Amortization				250				250
	Total operating expenses				327,760				40,878
Net loss from operations					(326,743)				(38,582)
Other expenses:
	Interest expense				(1,022)				(769)
	Loss on extinguishment of debt				(111,000)				(769)
Net loss before provision for income taxes					(438,765)				(40,120)
	Provision for income taxes				-				-
Net loss				$	(438,765)			$	(40,120)
Loss per share, primary and dilutive				$	(0.00)			$	(0.00)
Weighted average shares outstanding
	primary and dilutive			125,409,668				52,946,814
The accompanying notes are an integral part of these financial statements.

6

---

 

REAL ESTATE CONTACTS, INC.

Statements of Stockholders' Deficit

(unaudited)

									Additional					Stock-
			Preferred			Common			Paid in		Accumulated			Holders'
			Shares	Par		Shares	Par		Capital		Deficit			Deficit
Balance at December 31, 2010			-	$    -		51,395,000	$   514		$ 2,013,506		$  (2,188,609)			$ (174,589)
	Common shares sold for cash,
	January 25, 2011 for $0.005		-	-		2,000,000	20		9,980					10,000
	March 11, 2011 for $0.10		-	-		15,000	-		1,500					1,500
	March 31, 2011 for $0.01		-	-		500,000	5		4,995					5,000
	April 05, 2011 for $0.10		-	-		20,000	-		2,000					2,000
	May 23, 2011 for $0.01		-	-		1,000,000	10		4,990					5,000
	Common shares issued for services
	January 07, 2011 for $0.10		-	-		100,000	1		9,999					10,000
	December 30, 2011 for $0.10		-	-		100,000	1		9,999					10,000
	In kind contribution of rent								1,200					1,200
	Net loss										(158,356)			(158,356)
Balance at December 31, 2011			-	-		55,130,000	551		2,058,169		(2,346,965)			(288,245)
	Common shares issued:
	for cash					5,000,000	50		12,450					12,500
	for services					119,300,000	1,193		297,057					298,250
	exchange for debt					45,000,000	450		112,050					112,500
	In kind contribution of rent								300					300
	Net loss										(438,765)			(438,765)
Balance at March 31, 2012			-	$    -		224,430,000	$ 2,244		$2,480,026		$ (2,785,730)			$ (303,460)
The accompanying notes are an integral part of these financial statements.

7

---

 

REAL ESTATE CONTACTS, INC.

Statements of Cash Flows

(unaudited)

				For the Three Months Ended
				March 31,
					2012				2011
Cash Flows from Operating Activities:
	Net loss			$	(438,765)			$	(40,120)
	Adjustment to reconcile net loss to net
	cash provided by operations:
	Depreciation and amortization				250				250
	Stock based compensation				298,250				10,000
	In kind contribution of rent				300				300
	Extinguishment of debt				111,000				-
	Changes in assets and liabilities:
	Prepaid expenses				-				6,000
	Accounts payable				(8,684)				3,292
	Accrued expenses				11,516				-
	Deferred revenue				1,534				604
	Shareholder advances				7,400				6,475
	Net Cash Used by Operating Activities				(17,199)				(13,199)
Cash Flows from Financing Activities:
	Proceeds from notes payable-shareholder				8,000				-
	Proceeds from issuance of equity				12,500				16,500
	Net Cash Provided by Financing Activities				20,500				16,500
Net increase (decrease) in Cash					3,301				3,301
Cash at beginning of period					1,151				7,784
Cash at end of period				$	4,452			$	11,085
Supplemental cash flow information:
	Interest paid			$	-			$	-
	Taxes paid			$	-			$	-

The accompanying notes are an integral part of these financial statements.

8

---

 

REAL ESTATE CONTACTS, INC.

Notes to the Financial Statements

(unaudited)

For the three months ended March 31, 2012 and 2011

1.                   Background Information

 Real Estate Contacts, Inc. (“RECI” or the “Company") was formed on March 10, 2005 as a Florida Corporation and is based in New Castle, Pennsylvania. The Company engages in the ownership and operation of a real estate advertising website that provides an online real estate advertising, marketing and real estate video television company that offers real estate professionals the opportunity to reach consumers interested in buying or selling property in their respective geographic area.

Along with our comprehensive real estate search engine portal we plan to launch and operate the most definitive online real estate television network with a focus on foreclosures, bank owned REO's, and short sale opportunities in the hottest and most dynamic markets.RealEstateContacts.com provides a service that enables real estate professionals to capture, cultivate, and convert leads which cater to prospective home buyers and sellers from our Real Estate Search engine website and our Real Estate Video Television Channel.The Company’s business is conducted solely within the Internet and the Online Television Video arena. Our company is the first of its kind real estate search engine, social community and media network that matches buyers, sellers, brokers and professionals anywhere in the world through rich online media.

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 of America 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 normal recurring adjustments necessary for a fair statement of (a) the result of operations for the three month periods ended March 31, 2012 and 2011; (b) the financial position at March 31, 2011; and (c) cash flows for the three month periods ended March 31, 2012 and 2011, have been made.

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, 2011 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 Company’s balance sheets include the following financial instruments: cash, accrued expenses, deferred revenues, convertible note payable – shareholder 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.

Cash and Cash Equivalents

The majority of cash is maintained with a major financial institution in the United States.  As of March 31, 2012 and December 31, 2011, deposits with this bank did not exceed the amount of insurance provided on such deposits. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

9

---

 

REAL ESTATE CONTACTS, INC.

Notes to the Financial Statements

(unaudited)

For the three months ended March 31, 2012 and 2011

2.            Summary of Significant Accounting Policies (continued)

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 $70 and $300 for the three months ended March 31, 2012 and 2011, 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.

10

---

 

REAL ESTATE CONTACTS, INC.

Notes to the Financial Statements

(unaudited)

For the three months ended March 31, 2012 and 2011

2.            Summary of Significant Accounting Policies (continued)

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. For the three months ended March 31, 2012 and 2011 there were no share equivalents.

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 losses for the three month periods ending March 31, 2012 and 2011, additionally, the Company has an accumulated deficit, negative net worth and negative operating cash flows for the three months ended March 31, 2012. As of March 31, 2012 the Company had insufficient cash with which to satisfy future cash requirements. These conditions raise substantial doubt about the Company’s 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.            Recently Issued Accounting Pronouncements

Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification™ (“ASC”) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company.  Management has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on the Company's present or future financial statements.

5.            Equity

The Company has issued 5,000,000 and 3,535,000 common shares for cash proceeds of $12,500 and $23,500 for the three months ended March 31, 2012 and for the year ended December 31 2011, respectively.

On February 15, 2012, the Company has issued 113,000,000 common shares to the majority shareholder for association with fundraising efforts.  These shares are valued at $282,500 ($.0025 per share), the fair market value of common shares at last transaction with independent third parties.

During the quarter an additional 6,300,000 common shares were issued to a consultants for services valued at fair market value of $15,750 ($.0025 per share).

A Convertible Promissory Note, dated July 15, 2011, was issued by RECI on behalf of Abner Siegel. The principal amount of the note was $1,500. The note itself had its own conversion provision for 15,000 shares of RECI stock, converted at the price of $0.10 per share (or equaling 15,000 shares of RECI stock).    As a corollary of the debt purchase above, RECI executed the Cancellation of Debt in Exchange for Securities, also dated February 21, 2012. As a result, in a separate contract, RECI agreed to cancel the note/debt for $1,500 that Novel held (that was formerly issued to Abner Siegel) in exchange for 45,000,000 shares of RECI stock. The Company recorded this exchange as shares in exchange for debt and as a loss on debt extinguishment of $111,000, with a net increase to capital in the amount of $112,500.  Subsequent to the period, this transaction is in rescission and the shares, previously issued, have been returned to the Company and have been cancelled.  

11

---

 

REAL ESTATE CONTACTS, INC.

Notes to the Financial Statements

(unaudited)

For the three months ended March 31, 2012 and 2011

5.            Equity (continued)

During the three month periods ended March 31, 2012 and 2011 the Company recorded in-kind contributions for rent expense in the amount of $300 and $300, respectively and $1,200 for the year ended December 31, 2011.

On March 5, 2012, the Company amended its Articles of Incorporation. The total number of shares this corporation is authorized to issue is 1,000,000,000 (one billion), allocated as follows among these classes and series of stock:

Designation	Par value	Shares
Common	$0.00001	900,000,000
Preferred Stock Class, Series A	$0.0001	10,000,000
Preferred Stock Class, Series B	$0.001	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.

6.            Related Party Transactions

On March 10, 2010, 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 $60,000 plus bonuses.

The majority shareholder has advanced funds or deferred contractual salaries since inception, for the purpose of financing working capital and product development.  Advances and deferrals amounted to $196,675 and $189,275 as of March 31, 2012 and December 31, 2011, 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 Company has minimal needs for facilities and operates from office space provided by the majority shareholder. There are no lease terms. For the three months ended March 31, 2012 and 2011, rent has been calculated based on the limited needs at a fair market value of the space provided. Rent expense was $300 and $300 for the three month periods ended March 31, 2012 and 2011, 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

7.          Commitments and Contingencies

From time to time the Company may be a party to litigation matters involving claims against the Company.  We have received a claim by former legal representation that involves improperly naming that firm as the registered agent for state registration.  We are prepared to mediate any errors.  There has been no claim for fees or any other compensation or reparation and we are unaware of any monetary damages.  Management believes that any such claim is baseless and settlement, if any deemed reasonable or an obligation of the Company is determined, is considered immaterial.

 

Management believes that there are no other known or potential matters that would have a material effect on the Company’s financial position or results of operations.

12

---

 

REAL ESTATE CONTACTS, INC.

Notes to the Financial Statements

(unaudited)

For the three months ended March 31, 2012 and 2011

8.          Notes Payable

In January and February 2012 the Company received $8,000 in cash in exchange for promissory notes to five (5) current shareholders.  Total notes payable were $25,000 and $17,000 as of March 31, 2012 and December 31, 2011, respectively.  The notes outstanding are summarized by their terms below:

Origination Date	Maturity Date	Face Value	Interest Rate
October 10, 2011	May 1, 2012	$           2,000	10%
October 12, 2011	May 1, 2012	1,000	10%
October 19, 2011	January 15, 2012 a, b	5,000	12%
October 19, 2011	January 15, 2012 a	5,000	12%
November 9, 2011	May 1, 2012	1,000	10%
November 14, 2011	May 1, 2012	1,000	10%
December 10, 2011	May 10, 2012	2,000	10%
January 10, 2012	July 10, 2012	1,000	10%
January 12, 2012	July 10, 2012	2,000	10%
February 17, 2012	August 17, 2012	1,000	10%
February 17, 2012	August 17, 2012	1,000	10%
February 24, 2012	August 24, 2012	3,000	10%
Total		$         25,000

^a

Note maturity due on demand.  

^b

On April 11, 2012, subsequent to March 31, 2012, notes were exchanged into common shares at the fair value price of $.0025 per share, or 2,000,000 shares of common stock.  

9.          Subsequent Events

On April 11, 2012 the Company issued 2,000,000 shares of common stock in exchange for a promissory note in the amount of $5,000 ($.0025 per share).

On April 20, 2012 the Company issued 2,500,000 shares of common stock in exchange for $6,250 ($.0025 per share).

On April 12, 2012 the February 21, 2012 agreement which converted a $1,500 note payable that was sold to an unrelated third party and converted into 45,000,000 shares of common stock was rescinded.   The shares have been tendered and cancelled on April 11, 2012.  

13

---

 

Item 2.                 Management’s 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 video network and search engine portal 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 website allows real estate professionals and consumers to interact through the internet as a business medium. The Company’s operating strategy is to feature real estate professionals’ websites 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 agency’s website. This format is called a lead generation program for real estate professionals that are on the RealEstateContacts.com portal website.

Our business strategy is an ease of use approach which allows the consumer to view listings of homes from the website and video channel of their local real estate office or agent. In addition, our 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 will also have the technology to focus on online media, particularly video. We will provide an online National Real Estate Video Listings Network that will include rich media content including weekly and monthly shows by region which can be sold to sponsors and to affiliates by territory.

We want to position our company as the first of its kind National Real Estate Listings Video Channel. We will operate the most definitive online video network for real estate.

Real Estate Contacts, Inc. will offer affiliate territories for local publishing of online real estate video channels in many areas, where our affiliate partner can own their own network 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 also features local mortgage brokers, lenders, real estate appraisers and real estate attorneys that want more traffic and exposure to their website for potential new clients. By featuring local mortgage brokers, appraisers and real estate attorneys our website allows the consumer to have access to any financial, legal or appraisals questions and can receive all the information they need quickly in their geographical area. The driving of internet traffic is the key to any online marketing company. We intend to build our advertising campaign around all internet related marketing concepts, such as search engine optimization, pay per clicks advertising, banner advertising, email marketing, and linking up to other real estate portals and directories.

Our goal is to connect real estate professionals with consumers who are interested in buying or selling a home. We currently are aligned with over 2000 real estate offices and agents covering all 50 states.

14

---

 

We plan to grow revenues in the next 12 months by undertaking the following steps:

·	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 company’s 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.
·	Focus on driving more internet traffic and unique visitors to our website by using these search engine marketing techniques.

·	We plan to advertise on internet search engines and other websites, and supplement this advertising with other media to help manage and geographically target consumer traffic and lead volume.
·	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 subscribers (advertiser) on our website is an important driver of revenue growth because each subscriber pays us a yearly fee to participate in the advertising of their services.
·	Build, develop, market and hire national sales account advertising executives and create additional revenues by offering real estate professionals for a yearly advertising fee the opportunity to have their own real estate video channel on the internet.

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, 2012 compared to March 31, 2011

Results of Operation

Revenues generated were $1,017 and 2,296 for the three month period ended March 31, 2012 and 2011, respectively. Billings have been increasing slightly as the public’s acceptance and awareness of our site’s service offering increases and we attain renewals of service.

Operating expenses were $327,760 and $40,878 for the three month periods ended March 31, 2012 and 2011, respectively. The Company has recorded significant non-cash expenses related to salaries. 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.

15

---

 

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, 2012 the Company has cash in the amount of $4,452.  Management does not believe that is has adequate cash resources to meet current obligations, as the amount represents less than one month of operating expenses. The Company anticipates increasing revenue, which will mitigate partial 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, 2012 we have $4,452 cash on hand to meet our current obligations. As of March 31, 2012, we have a negative working capital of $306,627 and for the three months ended March 31, 2012 have used $17,199 in our operating activities.

Based upon the above, we do not believe we have enough cash to support our daily operations for the next 12 months while we are attempting to expand operations and produce revenues. We estimate the Company needs an additional $250,000 to fully implement its business plans over the next twelve months.  In addition, we anticipate we will need a minimum of $80,000 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.

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.

16

---

 

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.                 Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies

Item 4.                 Controls and Procedures

(a)

Evaluation of disclosure controls and procedures. 

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

The company is a small company with limited resources. There is insufficient staff for segregation of duties of accounting functions and for levels of review of our report filings.  Due to these constraints, management considers that a material weakness in financial reporting currently exists. Through the use of outside consultants, management is taking actions to remediate this deficiency, including attaining new or additional Board members for oversight.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) auditing standard) or combination of control deficiencies that result in more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

(b)

Changes in internal control over financial reporting. 

There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

17

---

PART II - OTHER INFORMATION

Item 1.                 Legal Proceedings.

None.

Item 1A.                 Risk Factors.

Smaller reporting companies are not required to provide the information required by this item.

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

None.

Item 3.                 Defaults Upon Senior Securities.

None.

Item 4.                 Mine Safety Disclosure.

None.

Item 5.                 Other Information.

None.

Item 6.                 Exhibits.

 

Exhibit Number		Description
31.1		Certification  by the Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification by the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350 pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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.

 

18