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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________


FORM 10-Q

Amendment 1

_______________

(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, 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

  

593800845

(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 o 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 November 14, 2012, there are 190,681,078 shares par value $0.00001 of the issuer’s common stock issued and outstanding.

 



  

1



  


 

REAL ESTATE CONTACTS, INC.


QUARTERLY REPORT ON FORM 10-Q

September 30, 2012


TABLE OF CONTENTS




 

PAGE

PART 1 - FINANCIAL INFORMATION

 

 

 

 

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.

Mine Safety Disclosures

16

Item 5.

Other Information

16

Item 6.

Exhibits

16

 

 

 

SIGNATURES

 

16

 




XBRL EXPLANATORY NOTE

The purpose of this Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 is to submit Exhibit 101 in accordance with Rule 405 of Regulation S-T. Exhibit 101 consists of the Interactive Data Files relating to this Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012.



  

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,” 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 September 30, 2012 (unaudited) and December 31, 2011 (audited)

5

  

 

Statements of Operation for the three and nine months ended September 30, 2012 and 2011 (unaudited)

6

 

 

Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 (unaudited)

7

  

 

Notes to Financial Statements (unaudited)

8

 










  

4







Real Estate Contacts, Inc.

Balance Sheets

 

 

 

 

 

 

September 30,

 

 

 

December 31,

 

 

 

 

 

 2012

 

 

 

 2011

 

 

 

 

 

 (unaudited)

 

 

 

 (audited)

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash

 

 

$

21,863

 

 

$

                1,151

Total current assets

 

 

 

21,863

 

 

 

                1,151

 

 

 

 

 

 

 

 

 

 

Website development costs, net of accumulated

 

 

 

 

 

 

 

 

 

amortization of  $2,083 and $1,583, respectively

 

 

 

               17,667

 

 

 

                3,417

Total assets

 

 

$

                39,530

 

 

$

                4,568

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

$

27,567

 

 

$

              30,626

 

Accrued expenses

 

 

 

68,648

 

 

 

              53,079

 

Deferred revenue

 

 

 

2,404

 

 

 

                1,333

 

Derivative liability

 

 

 

126,961

 

 

 

-

 

Due to shareholder

 

 

 

190,686

 

 

 

            189,275

 

Notes payable - shareholder

 

 

 

22,500

 

 

 

              17,000

 

Convertible note payable - shareholder

 

 

 

22,777

 

 

 

                1,500

Total current liabilities

 

 

 

461,543

 

 

 

            292,813

Total liabilities

 

 

 

            461,543

 

 

 

            292,813

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

 

Preferred Stock A $.0001 par value, 10,000,000 shares

 

 

 

 

 

 

 

 

 

   authorized; none issued and outstanding

 

 

 

                      -   

 

 

 

                      -   

 

Preferred Stock B $.001 par value, 90,000,000 shares

 

 

 

 

 

 

 

 

 

   authorized; none issued and outstanding

 

 

 

                      -   

 

 

 

                      -   

 

Common Stock, $0.00001 par value, 900,000,000 shares

 

 

 

 

 

 

 

 

 

   authorized; 188,485, 000 and 55,130,000 shares

 

 

 

 

 

 

 

 

 

   issued and outstanding, respectively

 

 

 

                1,857

 

 

 

                   551

 

Additional paid-in capital

 

 

 

         3,027,013

 

 

 

         2,058,169

 

Accumulated deficit

 

 

 

        (3,450,883)

 

 

 

        (2,346,965)

Total stockholders' deficit

 

 

 

           (422,013)

 

 

 

           (288,245)

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Deficit

 

 

$

                39,530

 

 

$

                4,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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




  

5







Real Estate Contacts, Inc.

Statement of Operations

(unaudited)

 

 

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

 

 

 

September 30,

 

 

September 30,

 

 

 

 

 

 

 

2012

 

 

 

2011

 

 

 

2012

 

 

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

$

         1,162

 

 

$

        1,379

 

 

$

          3,379

 

 

$

           5,404

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

 

 

            926

 

 

 

        243

 

 

 

        1,984

 

 

 

         1,744

 

 

 

Compensation

 

 

 

     16,170

 

 

 

      15,071

 

 

 

       57,829

 

 

 

         48,083

 

 

 

Professional

 

 

 

        6,926

 

 

 

       14,374

 

 

 

      21,316

 

 

 

         29,299

 

 

 

Rents and overhead

 

 

 

         300

 

 

 

          300

 

 

 

           900

 

 

 

             900

 

 

 

General and administrative

 

 

 

       (7,198)

 

 

 

       1,018

 

 

 

         7,336

 

 

 

          3,627

 

 

 

Stock-based compensation

 

 

 

        8,000

 

 

 

             -   

 

 

 

   306,250

 

 

 

        10,000

 

 

 

Amortization

 

 

 

        250

 

 

 

          250

 

 

 

         750

 

 

 

              750

 

 

 

Total operating expenses

 

 

 

       25,374

 

 

 

    31,256

 

 

 

   396,365

 

 

 

        94,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from operations

 

 

 

   (24,212)

 

 

 

   (29,877)

 

 

 

  (392,986)

 

 

 

     (88,999)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

      (1,434)

 

 

 

        (922)

 

 

 

      (4,504)

 

 

 

        (2,503)

 

 

 

Financing costs

 

 

 

     (26,277)

 

 

 

              -   

 

 

 

     (26,277)

 

 

 

                   -   

 

 

 

Change in derivatives

 

 

 

     (76,961)

 

 

 

              -   

 

 

 

     (76,961)

 

 

 

                   -   

 

 

 

Gain (loss) on extinguishment of debt

 

          3,060

 

 

 

               -   

 

 

 

  (603,190)

 

 

 

                 -   

 

 

Net loss before provision for income taxes

 

 

 

        (125,824)

 

 

 

         (30,799)

 

 

 

     (1,103,918)

 

 

 

            (91,502)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 

              -   

 

 

 

              -   

 

 

 

              -   

 

 

 

                  -   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

$

   (125,824)

 

 

$

   (30,799)

 

 

$

(1,103,918)

 

 

$

      (91,502)

 

 

 

 

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share, primary and dilutive

 

 

$

        (0.00)

 

 

$

      (0.00)

 

 

$

      (0.01)

 

 

$

          (0.00)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares, primary and dilutive

 

 

 

183,496,517

 

 

 

   55,030,000

 

 

 

 164,885,049

 

 

 

    54,148,065

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 



  

6







Real Estate Contacts, Inc.

Statements of Cash Flows

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended

 

 

 

 

 

September 30,

 

 

 

 

 

 

2012

 

 

 

2011

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

$

      (1,103,918)

 

 

$

           (91,502)

 

 

Adjustment to reconcile net loss to net

 

 

 

 

 

 

 

 

 

 

  cash provided by operations:

 

 

 

 

 

 

 

 

 

 

     Depreciation and amortization

 

 

 

                  750

 

 

 

                  750

 

 

     Stock based compensation

 

 

 

           306,250

 

 

 

             10,000

 

 

     In kind contribution of rent

 

 

 

                  900

 

 

 

                  900

 

 

     Loss on extinguishment of debt

 

 

 

           607,750

 

 

 

                    -   

 

 

     Amortization of debt discounts and financing costs

 

             26,277

 

 

 

 

 

 

     Change in derivative liability

 

 

 

             76,961

 

 

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

   Prepaid expenses

 

 

 

                    -   

 

 

 

               6,000

 

 

   Accounts payable

 

 

 

             (3,059)

 

 

 

                    -   

 

 

   Accrued expenses

 

 

 

             15,569

 

 

 

             12,320

 

 

   Deferred revenue

 

 

 

               1,071

 

 

 

                  646

 

 

   Shareholder advances

 

 

 

               1,411

 

 

 

             28,213

 

 

Net Cash Used by Operating Activities

 

 

 

           (70,038)

 

 

 

           (32,673)

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

 

 

   Website development costs

 

 

 

           (15,000)

 

 

 

                    -   

 

 

Net Cash Used by Investing Activities

 

 

 

           (15,000)

 

 

 

                    -   

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

 

   Proceeds from notes payable, shareholders

 

 

 

             30,500

 

 

 

               1,500

 

 

   Proceeds from convertible notes payable

 

 

 

             45,000

 

 

 

 

 

 

   Proceeds from issuance of equity

 

 

 

             30,250

 

 

 

             23,500

 

 

Net Cash Provided by Financing Activities

 

 

 

           105,750

 

 

 

             25,000

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in Cash

 

 

 

             20,712

 

 

 

             (7,673)

 

 

 

 

 

 

 

 

 

 

 

 

Cash at beginning of period

 

 

 

               1,151

 

 

 

               7,784

 

 

 

 

 

 

 

 

 

 

 

 

Cash at end of period

 

 

$

             21,863

 

 

$

                  111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

 

 

Interest paid

 

 

$

                    -   

 

 

$

                    -   

 

 

Taxes paid

 

 

$

                    -   

 

 

$

                    -   

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash disclosures

 

 

 

 

 

 

 

 

 

 

Settlement of notes in exchange for common shares

 

 

$

             25,000

 

 

$

                    -   

 

 

 

 

 

 

 

 

 

 

 

 

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





  

7



  


REAL ESTATE CONTACTS, INC.

Notes to the Financial Statements

(unaudited)

For the three and nine months ended September 30, 2012 and 2011



1.

Background Information

Real Estate Contacts, Inc. ("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 channel network 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 national real estate video channel network.  Our new video channel will consist of all real estate listings in a live video or video tour program.

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 Channel.

The Company’s business is conducted solely within the Internet and the Online Video arena.  Our company is the first of its kind real estate search engine, social community and video media network that matches buyers, sellers, brokers and professionals anywhere in the world through rich online media.


Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information and with the instructions to Form 10-Q and Regulation S-K.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.


In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included.  Operating results for the nine month periods ended September 30, 2012 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2012.


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.





2.

Summary of Significant Accounting Policies 



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 September 30, 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.




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



  

8



  


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 $742 and $16,300 for the nine months ended September 30, 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.




Earnings Per Share

Basic income per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC No. 260, Earnings Per Share.


Diluted income per share includes the dilutive effects of stock options, warrants, and stock equivalents.  To the extent stock options, stock equivalents and warrants are anti-dilutive; they are excluded from the calculation of diluted income per share. As of September 30, 2012 and 2011 there were 15,000 share equivalents, resulting from the issuance of a convertible note.



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



  

9



  


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.




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 nine month periods ending September 30, 2012 and 2011, additionally, the Company has an accumulated deficit, negative net worth and negative operating cash flows for the nine months ended September 30, 2012.  As of September 30, 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.

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 $190,686 and $189,275 as of September 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 controlling shareholder has pledged his support to fund continuing operations; however there is no written commitment to this effect.  The Company is dependent upon the continued support of this shareholder.


The Company has minimal needs for facilities and operates from office space provided by the majority shareholder.  There are no lease terms.  For the three months ended September 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, $300, $900 and $900 for the three and nine month periods ended September 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.




5.

Notes Payable


 The notes outstanding are summarized by their terms below:


 

September 30, 2012

 

December 31, 2011

Notes payable, issued to individuals, various origination dates, all maturing within one year, at interest rate of 10%

$      22,500

 

$      17,000

Convertible promissory note, dated July 15, 2011, maturing July 15, 2012, extended by mutual agreement, 10% interest, convertible into 15,000 shares of common stock

1,500

 

1,500

Convertible promissory notes (2), dated August 3, 2012 and September 5, 2012, face value of $50,000, maturing 180 days from origination date, 8% interest, convertible at a 49% discount to the lowest average trading price during the previous 90 day period, net of unamortized debt discounts and deferred financing costs of $ 28,723 (a)

21,277

 

 

Total

$      45,277

 

$      18,500


(a)

The Company evaluated the terms of the two (2) convertible notes, totaling $50,000, in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and determined that the underlying common stock is indexed to the Company’s common stock. The Company determined that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. The Company evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the note and was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, the Company recognized a debt discount on the notes in the amount of $50,000 on the origination date. The debt discount was recorded as reduction (contra-liability) to the Convertible Notes Payable. The debt discount is being amortized over the life of the notes.  The Company recognized financing costs in the amount of $23,927.  Additionally, the notes called for an immediate withholding of $5,000 for service charges, which has been treated as an original issue discount or deferred financing costs, a contra-liability charge, which is to be amortized as finance cost over the life of the loan.  Expense, in the amount of $2,305 was recognized for the period ended September 30, 2012.  


A derivative liability, in the amount of $126,961 has been recorded, as of September 30, 2012, related to the above note.  The derivative value was calculated using the Black-Scholes method.  Assumptions used in the derivative valuation were as follows:

Weighted Average:

 

   Dividend rate

0.0%

   Risk-free interest rate

.08%

   Expected lives (years)

.5625

   Expected price volatility

175.4%

   Forfeiture Rate

0.0%





5.

Equity


The Company has issued 10,800,000 and 3,535,000 common shares for cash proceeds of $30,250 and $23,500 for the nine months ended September 30, 2012 and 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 nine months ended September 30, 2012, an additional 3,100,000 shares were issued for service, valued at $23,750.   In the comparative nine month period ended September 30, 2011, there were a total of 100,000 shares issued for services, valued at $10,000.

 

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.  The agreement was rescinded and the shares, previously issued, have been returned to the Company and have been cancelled.  


During the nine months ended September 30, 2012 the Company negotiated settlement of nine notes payable, in the aggregate amount of $19,000, in exchange for a total of 3,455,000 shares of common stock.  The notes did not specify any conversion features and therefore the Company discounted the shares offered in exchange.  The notes were converted at a share price ranging from $.003 to $.02.   The fair market value of the shares, at the time of negotiated conversion, ranged $.14 to $.15.  The Company recorded a loss on settlement of debt in the amount of $495,250, the difference in the fair market value of the shares exchanged.


During September 2012, promissory notes, $6,000 in aggregate, held by three individuals, were purchased by an unrelated third party.  The notes were immediately converted into 196,078 shares of common stock at a conversion rate of $.0306, the average trading price at the date of conversion.  No gain or loss was recognized with this conversion.




  

11



  


During the three month and nine month periods ended September 30, 2012 and 2011 the Company recorded in-kind contributions for rent expense in the amount of $300, $300, $600 and $600, respectively.


Amendment to the Articles of Incorporation

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:


Schedule of Stock by Class

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.

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.



7.

 Subsequent Events


In October, 2012 the Company issued 10,000,000 shares of common stock in exchange for $5,000 ($.002 per share).




  

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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 professional’s 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 video 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.

 

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



  

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·  

Devote greater resources to marketing and selling our services such as developing and creating a more productive advertising sales division within our company by the hiring of advertising sales account executives.

·  

Focus to expand our network of advertisers and real estate professionals by increasing our online presence to include various marketing channels such as the major search engines, Google, Yahoo and Bing.


·  

Expand our companys public relations by creating more brand awareness on the internet.  An example would be to focus on other social media websites such as Facebook, Twitter, and LinkedIn.

·  

Develop other marketing programs to efficiently increase our brand awareness such as email campaigns, newsletters, linking our website to other real estate business websites, real estate portals and directories.


·  

We intend to continue, maintain and aggressively pursue to build our advertising campaign around all internet related marketing concepts, such as search engine optimization, pay per click advertising, banner advertising and social media networks.

·  

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 and nine months ended September 30, 2012 compared to June 30, 2011


Results of Operation


Revenues generated were $1,162, $1,379, $3,379 and $5,404 for the three and nine month periods ended September 30, 2012 and 2011, respectively.  Billings have decreased slightly as the real estate housing market continues in the depression and potential advertisers are postponing expenditure. We have noted that the public’s acceptance and awareness of our sites service offering is increasing as active agents are seeking additional venues to promote their services and listings.


Operating expenses were $25,374, $31,256, $396,365 and $94,401 for the three and nine month periods ended September 30, 2012 and 2011, respectively.  The Company has recorded significant non-cash expenses related to compensation, in the amount of $306,250 for the nine months ended September 30, 2012, as compared to $10,000 for the nine months ended September 30, 2011.  Other significant expenses incurred are related to professional expense related to the preparation of our public filing.  We expect professional fees to continue to be a significant expense as our reporting requirements should be increasing, as required as a public company.  We anticipate that our advertising and costs of acquiring new subscribers will increase over the future periods, as we attempt to increase our revenue base to cover future operating costs.


Other expenses increased during the current three and nine month period due to debt related charges.  We have recorded $603,190 of losses on the settlement of debt through the issuance of our common stock.  Issuances were recorded at the fair value of the common stock. The difference between the stock value and the extinguished debt resulted in a loss.




  

14



  


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 September 30, 2012 the Company has cash in the amount of $21,863.  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 September 30, 2012 we have $21,863 cash on hand to meet our current obligations.  As of September 30, 2012, we have a negative working capital of $439,680 and for the nine months ended September 30, 2012 have used $70,038 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.




  

15



  


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


Evaluation of Disclosure 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.



  

16



  


 

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.  

Filed on November 14, 2012 as Exhibit 31.1 to the issuer’s Form 10-Q for the period ended September 30, 2012 and incorporated herein by reference.

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.

Filed on November 14, 2012 as Exhibit 32.1 to the issuer’s Form 10-Q for the period ended September 30, 2012 and incorporated herein by reference.

101*

 

Financial statements from the quarterly report on Form 10-Q of Vision Industries Corp. for the quarter ended September 30, 2012, formatted in XBRL: (i) the Balance Sheet, (ii) the Statement of Income, (iii) the Statement of Cash Flows and (iv) the Notes to the Financial Statements.

Filed herewith


Pursuant to Rule 406T of Regulation S-T, the XBRL files contained in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections. 

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.



  

REAL ESTATE CONTACTS, INC.

  

  

Dated: November 15, 2012

By:

/s/ROBERT DEANGELIS

  

  

Robert DeAngelis

 

 

President,

 

 

Principal Executive Officer, Principal Financial Officer

Principal Accounting Officer and Director




  

17