UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] 15, ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2009
OR
[ ] 15, TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 333-161699
PMX COMMUNITIES, INC.
(Exact name of registrant in its charter)
NEVADA 80-0433114
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Technology Business Incubator
Research & Development Park
3701 FAU Blvd., Suite 210
Boca Raton, FL 33431
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: 561-210-5349
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common
Stock, $.0001 par value
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [x]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act
Yes [ ] No [x]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (section 232.406 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 [ ]
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 during the preceding 12 months (or such shorter period that Dale the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for at least the part 90 days.
Yes [x] No[ ]
2
Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not contained hereof, and will not be
contained, to will be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
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 definitions of "large accelerated filer,"
"accelerated file" and "smaller reporting company" in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [x]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked
price of such common equity, as of the last business day of the
registrant's most recently completed second fiscal quarter. The market
value of the registrant's voting $.0001 par value common stock held by
non-affiliates of the registrant was approximately $0.00.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. The number
of shares outstanding of the registrant's only class of common stock, as
of March 15, 2010 was 53,600,000 shares of its $.0001 par value common
stock.
No documents are incorporated into the text by reference.
3
PMX Communities, Inc.
Form 10-K
For the Fiscal Year Ended December 31, 2009
Table of Contents
Part I
ITEM 1. BUSINESS 5
ITEM 1A. RISK FACTORS 11
ITEM 1B. UNRESOLVED STAFF COMMENTS 11
ITEM 2. PROPERTIES 11
ITEM 3. LEGAL PROCEEDINGS 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
Part II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 12
ITEM 6. SELECTED FINANCIAL DATA 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 13
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 38
ITEM 9A. CONTROLS AND PROCEDURES 38
ITEM 9B. OTHER INFORMATION 38
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, CONTROL
PERSONS AND CORPORATE GOVERANCE; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT 39
ITEM 11. EXECUTIVE COMPENSATION 41
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDERS MATTERS 41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE 43
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 44
Part IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 46
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this report contain or may contain forward-looking
statements that are subject to known and unknown risks, uncertainties
and other factors which may cause actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. These forward-looking statements were based on various
factors and were derived utilizing numerous assumptions and other
factors that could cause our actual results to differ materially from
4
those in the forward-looking statements. These factors include, but are
not limited to, our ability to implement our business plan and generate
revenues, economic, political and market conditions and fluctuations,
government and industry regulation, U.S. and global competition, and
other factors. Most of these factors are difficult to predict
accurately and are generally beyond our control. You should consider the
areas of risk described in connection with any forward-looking
statements that may be made herein. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as
of the date of this report. Readers should carefully review this in its
entirety, including but not limited to our financial statements and the
notes thereto. Except for our ongoing obligations to disclose material
information under the Federal securities laws, we undertake no
obligation to release publicly any revisions to any forward-looking
statements, to report events or to report the occurrence of
unanticipated events.
5
PART I
ITEM 1. BUSINESS
PMX Communities, Inc. was organized under the laws of the State of
Nevada. PMX Communities was incorporated under the name Merge II, Inc.
on December 29, 2004 in the State of Nevada. From December 29, 2004
until February 10, 2009, the company was inactive and conducted no
business.
On February 10, 2009, by Unanimous Written Consent, the board of
directors authorized an amendment to its Certificate of Incorporation to
change the name of the corporation to PMX Communities, Inc. PMX
Communities also authorized an amendment to amend the articles of
Incorporation from 25,000,000 to 100,000,000 common shares authorized.
The amendments were filed on June 30, 2009.
The registrant is in the developmental stage and intends to conduct
business as an advertising and social networking portal. Since its
inception, the registrant has had no significant business activity.
The registrant currently has a total of five online portals in different
stages of development targeting the Stem Cell, Biotechnology, Gold
Mining, Green Energy Technology and Fine Art industries. The registrant
intends to ramp up operations for these sites and develop new sites in
other areas of interest using the same software technology and marketing
development plan.
Operations
----------
The registrant's social networking portals provide social networking
tools to its' members for free; the objective is to create a community
networking environment that generates interest within each the targeted
industry's portals. It is against this backdrop of activity that the
registrant intends to generate advertising revenue streams.
Intended Scope of Operations; Strategy and Implementation Summary
-----------------------------------------------------------------
Through our portals, the registrant offers a platform through which
companies, real and intellectual property owners; potential buyers and
industry professionals can network and communicate with each other
through the site's unique social networking environment. The portals
provides an environment in which social networking tools are provided to
members for free; the objective is to create a community networking
environment that supports a membership base which may potentially have
an interest in viewing the advertising that we will attempt to sell.
The intent is to create a large database of individuals and companies in
each targeted industry. This database will be the source in which the
Company will seek to market its marketing mediums, such as listings and
advertising. The registrant intends to generate advertising revenues
from private and public companies and others who desire to sell their
property, or otherwise profile their services, company or ideas as they
pertain to the portal's targeted industry.
6
Marketing Strategy
------------------
The registrant will offer the necessary social networking tools and
content to build the appropriate online community specific to the
industry for which potential clients wish to display their advertising.
The establishment of a social networking climate/community will
strengthen the contacts that promote word of mouth marketing and
networking, with the goal of assembling a substantial membership base to
target our advertising to. Our marketing strategy includes:
1. Advertising
The registrant intends to advertise through other websites in our
targeted industries. This will encourage individuals and companies to
visit the portal and become members of the networking environment thus
increasing the membership database and the potential prospecting list
for the registrant.
2. Emailing Campaign.
An email campaign will be sent out to opt-in email prospects with a
concentration on potential respondents that should have an interest in
our various portals. The purpose of the email campaign is to get
companies and individuals to click on and visit the portal and for them
to become members of the community, thus increasing the potential
customer base needed to generate income.
3. Free networking tools to Users/Advertisers.
PMX intends to make available to the members and advertisers of its
online communities various communication tools free of charge.
Invisosoft is a software developer of a proprietary and copyrighted
audio video software product known as Invisosoft Live Communicator Suite
that enables VOIP/Audiovisual conferencing. The term of the agreement
is for five years. On June 23, 2009, the registrant acquired an initial
100 Activation Seats of the Invisosoft Live Communicator Suite Software.
The seats were acquired for $50 per seat. Dennis Carrasquillo, a former
officer and director of the registrant has been vice president of
Invisosoft, Inc. since 2005. For the first two years,
The registrant shall have the right to increase the number of activator
seats at anytime via a one time payment of $50 per seat up to a maximum
of one hundred thousand seats.
The registrant intends to offer software free of charge to its website
users; it may also explore charging a nominal user fee for
upgraded/premium service.
4. Sales Strategy for PMX Portals.
The registrant plans to implement its initial marketing strategy
targeting the gold mining industry by calling on mine property owners
who currently have their properties listed in other mediums of
advertising or on other websites on the internet. The registrant also
intends to contact publicly traded mining companies to sell them a
corporate profile page on the portal. Advertising banners will be
offered to companies and mining professionals in the industry.
7
For the portals under development such as the stem cell and
biotechnology industries, The registrant intends to pursue public and
private companies, patent owners, research scientists, laboratories and
other entities/individuals that would have an interest in showcasing
their work, projects or intellectual properties.
The registrant intends to proceed in this fashion to develop the portal
for the green energy technology industry and the fine art industry. To
date, The registrant has registered the following internet domain names:
- www.pmxcommunities.com,
- www.goldminingopportunities.com,
- www.goldminingcommunities.com,
- www.stemcellcommunities.com,
- www.biotechcommunities.com,
- www.greenenergycommunities.com, and
- www.fineartcommunities.com.
The registrant intends to pursue this same marketing strategy as it
looks to develop other social networking based portals for unique
audiences and market shares throughout the online community, with the
goal of creating additional sources of advertising revenue for the
company.
Third Party Providers
---------------------
We depend upon third parties for several critical elements of our
business, including various technology, infrastructure, content
development, and software and distribution components.
We rely on private third-party providers for our principal Internet
connections, co-location of a significant portion of our data servers
and network access. Any disruption in the Internet or network access or
co-location services provided by these third-party providers or any
failure of these third-party providers to handle current or higher
volumes of use could significantly harm our business, operating results
and financial condition. Any financial difficulties for our providers
may have negative effects on our business, the nature and extent of
which we cannot predict. We have experienced and expect to continue to
experience interruptions and delays in service and availability for such
elements.
Furthermore, we depend on hardware and software suppliers for prompt
delivery, installation and service of servers and other equipment to
deliver our products and services. Any errors, failures, interruptions,
or delays experienced in connection with these third-party technologies
and information services could negatively impact our relationship with
users and adversely affect our brand and our business and could expose
us to liabilities to third parties.
We have not entered into any material agreements with any third parties
other than the service we subscribe to via the incubator at FAU.
8
Service interruptions and delays
--------------------------------
We may experience service interruptions and delays due to limited
hardware and software resources. We are exploring options to add
redundancy equipment to our network that provides alternative equipment
to use in the event of hardware failure. This equipment would include
multiple servers, raid drives (multiple hard drives) and rotational
backups of our system and services.
Trademarks, Patents & Domains
-----------------------------
We view the computer software technology that we have developed as
proprietary. For the year ended December 31, 2009, no amounts were
spent on research and development activities.
We attempt to protect our technology and trade secrets through the use
of:
- Confidentiality and non-disclosure agreements,
- Trademarks,
- Patents, and
- By other security measures.
Assignment and Lease assumption
-------------------------------
On June 28, 2009, the registrant entered into an assignment and lease
assumption with AU Spectators, LLC. On February 14, 2009, the
registrant had entered into a Lease Purchase Option Agreement with
Western Sierra Mining Corporation, for which the registrant paid to
Western Sierra Mining Corporation a deposit of twenty-five thousand
($25,000) dollars. Under the agreement with AU, the registrant agrees
to assign all rights and obligations of the registrant arising after the
date thereof under the lease pursuant to the terms and conditions
hereof; and each of the members of AU have extended loans to the
registrant represented by promissory notes. In consideration for the
agreement, each of the members of AU has agreed to collectively forgive
the repayment of the sum of thirty-thousand ($30,000) dollars of the
notes. The assignment and assumption was deemed effective and operative
as of June 30, 2009. The registrant has recognized five thousand
($5,000) in income on the gain on this transaction.
Government Regulation
---------------------
We are subject to general business regulations and laws, as well as
regulations and laws directly applicable to the Internet. As we
continue to expand the scope of our properties and service offerings,
the application of existing laws and regulations to the registrant
relating to issues such as user privacy, defamation, pricing,
advertising, taxation, gambling, sweepstakes, promotions, financial
market regulation, consumer protection, content regulation, quality of
products and services, and intellectual property ownership and
infringement can be unclear. In addition, we will also be subject to
new laws and regulations directly applicable to our activities.
9
Any existing or new legislation applicable to us could expose us to
substantial liability, including significant expenses necessary to
comply with such laws and regulations, and dampen the growth in use of
the Web.
Several federal laws, including the following, could have an impact on
our business. The Digital Millennium Copyright Act is intended, in
part, to limit the liability of eligible online service providers for
listing or linking to third-party Websites that include materials that
infringe copyrights or other rights of others. The Children's Online
Protection Act and the Children's Online Privacy Protection Act are
intended to restrict the distribution of certain materials deemed
Harmful to children and impose additional restrictions on the ability of
online services to collect user information from minors. In addition,
the Protection of Children from Sexual Predators Act of 1998 requires
online service providers to report evidence of violations of federal
child pornography laws under certain circumstances. Such legislation may
impose significant additional costs on our business or subject us to
additional liabilities.
We post our privacy policies and practices concerning the use and
disclosure of user data. Any failure by us to comply with our posted
privacy policies, the consent order, FTC requirements or other privacy-
related laws and regulations could result in proceedings by the FTC or
others which could potentially have an adverse effect on our business,
results of operations and financial condition. In this regard, there
are a large number of legislative proposals before the United States
Congress and various state legislative bodies regarding privacy issues
related to our business. It is not possible to predict whether or when
such legislation may be adopted, and certain proposals, if adopted,
could materially and adversely affect our business through a decrease in
user registrations and revenues. This could be caused by, among other
possible provisions, the required use of disclaimers or other
requirements before users can utilize our services.
Due to the nature of the Web, it is possible that the governments of
other states and foreign countries might attempt to regulate Web
transmissions or prosecute us for violations of their laws. We might
unintentionally violate such laws, such laws may be modified and new
laws may be enacted in the future. Any such developments (or
developments stemming from enactment or modification of other laws)
could increase the costs of regulatory compliance for us or force us to
change our business practices.
Competition
-----------
We compete with many other providers of online web hosting, advertising
and electronic commerce services. As we expand the scope of our
Internet offerings, we will compete directly with a greater number of
Internet sites, media companies, and companies providing business
services across a wide range of different online services, including:
10
- companies offering communications, Web search, commercial search,
information, community and entertainment services and Internet access
either on a stand alone basis or integrated into other products and
media properties;
- Vertical markets where competitors may have advantages in
expertise, brand recognition, available financial and other resources,
and other factors;
- Online employment recruiting companies; and
- Online merchant hosting services.
In order to compete effectively, we may need to expend significant
internal engineering resources or acquire other technologies and
companies to provide or enhance our capabilities. These companies may
have a competitive advantage because they have greater access to
content, maintain billing relationships with more customers and have
access to established distribution networks.
There are various competitors who allow vendors to sell their items
online. They have established customer base and instant market
recognition. These competitors have greater access to content and
maintain billing relationships with more customers and have access to
established distribution networks. We have not yet generated any
material revenue from our business model compared to significant revenue
generated by these competitors.
If new competitors seize our product ideas and business model and
produced competing web sites with similar product matrixes, our ability
to generate revenue would be negatively affected. Additionally, these
new competitors could be better capitalized and capture a larger market
share of our intended market.
We face competition from traditional advertisers. If consumers choose
not to purchase their products through the Internet, our ability to
generate revenues will be negatively affected.
Insurance
---------
We have not obtained any insurance to cover potential risks and
liabilities.
Employees
---------
We currently have two full-time employees and no part-time employees.
As operations increase and revenues allow, we will have to employ an
undetermined number of designers and programmers in addition to
obtaining sales persons on an independent contractor, commission only
basis.
Consulting Agreement
--------------------
On February 1, 2009, the registrant entered into a consulting agreement
with OTC Business Solutions, then an unaffiliated company. As of
February 23, 2010, Michael C. Hiler, its owner, became an officer and
director of PMX Communities. The consultant provides consulting services
11
related to the management and organization of the company, their
financial policies, the terms and conditions of employment and generally
any matter arising out of the business affairs of the company.
The consulting agreement will terminate on December 31, 2011.
The consultant was issued 5,000,000 common shares for services rendered
and to be rendered to PMX Communities. Additionally, the consultant
received $60,000.
ITEM 1A. RISK FACTORS
Not applicable to a smaller reporting company.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
The registrant has signed a lease agreement with Enterprise Development
Corporation, a non profit organization associated with Florida Atlantic
University Incubator Technology Program. The office space consists of
120 sq ft of space at a cost of $600.00 per month. The lease agreement
is on a month to month basis, with no contractual obligation.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any legal proceedings the outcome of which, in the
opinion of our management, would have a material adverse effect on our
business, financial condition, or results of operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Item 5(a)
a) Market Information. As of the date of this report there is
no market for our common stock. We intend to take certain steps
to cause a licensed market maker to file an application with
FINRA to list our common stock for trading on the OTCBB, or
another national exchange.
There can be no assurances that our common stock will be approved
for listing on the OTCBB, or any other existing US trading
market.
b) Holders. At March 15, 2010, there were approximately 42
shareholders of the registrant.
c) Dividends. Holders of the registrant's common stock are entitled to
receive such dividends as may be declared by its board of directors. No
dividends on the registrant's common stock have ever been paid, and the
registrant does not anticipate that dividends will be paid on its common
stock in the foreseeable future.
d) Securities authorized for issuance under equity compensation plans.
No securities are authorized for issuance by the registrant under equity
compensation plans.
e) Performance graph. Not applicable.
f) Sale of unregistered securities.
On February 1, 2009, PMX Communities approved a 40 to 1 forward split on
the common shares.
On February 1, 2009, PMX Communities issued 5,000,000 shares of common
stock to OTC Business Solutions, then a non-affiliate company controlled
by Michael Hiler for services rendered at a value of $500. OTC
Business Solutions provides consulting services to the Company.
On May 9, 2009, PMX Communities issued 100,000 shares of common stock to
Island Capital Management, a non-affiliate control by Micah Eldred and
Carl Dilley for services rendered at a value of $10. Island Capital
Management provides transfer agent services to the Company.
In May 2009, PMX Communities issued 1,000,000 shares of common stock to
Mervyn Gervis, a director, for services rendered at a value of $100.
Subsequently, On February 23, 2010, Dennis Carrasquillo, a former
officer and director sold 33,000,000 common shares to Michael C. Hiler,
an officer and director of PMX Communities for $.001 per common share.
13
All of the above securities were issued pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933 to
sophisticated investors.
During the year ended December 31, 2009, PMX Communities offered the
common stock through its officers, directors, and employees without
commission under an exemption from registration under Rule 506 of
Regulation D and/or Section 4(2) to accredited investors and less than
35 non-accredited investors. The Form D was not properly filed. PMX
Communities issued the following 7,500,000 shares of common stock at
$.0001 per share, for a total of $750.
Mark R. Connell 500,000
Andrew Goldstein 500,000
Mark Goldstein 2,750,000
Philip Liberty
& Cynthia Liberty 500,000
Michael McCauley 650,000
Glen Murphy 350,000
Barry G. Roderman 2,250,000
Item 5(b) Use of Proceeds. We registered 19,600,000 common shares
on behalf of selling security holders. We will not receive any cash or
other proceeds in connection with the subsequent sale by the selling
security holders. Our registration statement on Form S-1 (Commission
File No. 333-161699) became effective on December 11, 2009.
Item 5(c) Purchases of Equity Securities by the issuer and
affiliated purchasers. None.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable to a smaller reporting company.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Trends and Uncertainties
------------------------
The registrant is exploring ways to add complementary products without
extensive engineering and other product development. Preliminary
discussions are being held with potential strategic partners to combine
products under one company umbrella, especially where our sales and
system integrator network provide additional sales professionals on the
street.
We believe that maintaining and expanding our brand is an important
aspect of our efforts to attract and expand our user and advertiser
base. We will spend increasing amounts of money on, and devote greater
resources to advertising, marketing and other brand-building efforts to
enhance consumer awareness of the Company brand. We may not be able to
14
successfully maintain or enhance consumer awareness of our brand and,
even if we are successful in our branding efforts, such efforts may not
be cost-effective.
We rely on private third-party providers for our principal Internet
connections, co-location of a significant portion of our data servers
and network access. Any disruption in the Internet or network access or
co-location services provided by these third-party providers or any
failure of these third-party providers to handle current or higher
volumes of use could significantly harm our business, operating results
and financial condition. Any financial difficulties for our providers
may have negative effects on our business, the nature and extent of
which we cannot predict. We expect to experience interruptions and
delays in service and availability for such elements.
Furthermore, we depend on hardware and software suppliers for prompt
delivery, installation and service of servers and other equipment to
deliver our products and services. Any errors, failures, interruptions,
or delays experienced in connection with these third-party technologies
and information services could negatively impact our relationship with
users and adversely affect our brand and our business and could expose
us to liabilities to third parties.
We are subject to general business regulations and laws, as well as
regulations and laws directly applicable to the Internet. As we
continue to expand the scope of our properties and service offerings,
the application of existing laws and regulations relating to issues such
as user privacy, defamation, pricing, advertising, taxation, gambling,
sweepstakes, promotions, financial market regulation, consumer
protection, content regulation, quality of products and services, and
intellectual property ownership and infringement can be unclear. In
addition, we will also be subject to new laws and regulations directly
applicable to our activities. Any existing or new legislation
applicable to us could expose us to substantial liability, including
significant expenses necessary to comply with such laws and regulations,
and dampen the growth in use of the Web.
Any failure by us to comply with our posted privacy policies, the
consent order, FTC requirements or other privacy-related laws and
regulations could result in proceedings by the FTC or others which could
potentially have an adverse effect on our business, results of
operations and financial condition. In this regard, there are a large
number of legislative proposals before the United States Congress and
various state legislative bodies regarding privacy issues related to our
business. It is not possible to predict whether or when such
legislation may be adopted, and certain proposals, if adopted, could
materially and adversely affect our business through a decrease in user
registrations and revenues. This could be caused by, among other
possible provisions, the required use of disclaimers or other
requirements before users can utilize our services.
15
Due to the nature of the Web, it is possible that the governments of
other states and foreign countries might attempt to regulate Web
transmissions or prosecute us for violations of their laws. We might
unintentionally violate such laws, such laws may be modified and new
laws may be enacted in the future. Any such developments (or
developments stemming from enactment or modification of other laws)
could increase the costs of regulatory compliance for us or force us to
change our business practices.
Results of Operations for the years ended December 31, 2009 and 2008
--------------------------------------------------------------------
For the year ended December 31, 2009, we did not receive any revenue.
Selling, general and administrative expenses were $110,464 and consisted
of primarily of accounting fees of $16,600, consulting expenses of
$60,500, wage expenses of $22,250 and other miscellaneous expenses of
$11,114. For the year ended December 31, 2009, we had a net loss of
$(113,685).
Comparatively, for the year ended December 31, 2008, we did not receive
any revenue. Selling, general and administrative expenses were $500.
For the year ended December 31, 2008, we had a net loss of $500.
The increase in selling, general and administrative expenses for the two
periods were due to preparation of the S-1 offering and preparation for
the commencement of operations.
Liquidity and Capital Resources
-------------------------------
As at December 31, 2009, we had cash and cash equivalents of $212. For
the year ended December 31, 2009, the registrant paid a deposit for a
lease agreement of $25,000. Additionally, the registrant purchased
property and equipment of $2,005, and purchased a license for $5,000. As
a result, the registrant had net cash used in investing activities of
$32,005 for the year ended December 31, 2009.
Comparatively, the registrant did not pursue any investing activities
for the year ended December 31, 2008.
For the year ended December 31, 2009, the registrant received proceeds
from notes payable of $150,000 and had an increase in accrued interest
of $7,647. Additionally, for the year ended December 31, 2009, the
registrant had common stock issued for cash, net of costs of $(18,250).
As a result, the registrant had net cash provided by financing
activities of $139,397 for the year ended December 31, 2009.
For the year ended December 31, 2008, the registrant received a cash
contribution of operation expenses of $500 resulting in net cash
provided by financing activities of $500.
We only have sufficient currently available capital resources for the
next 30-60 days. Anticipated capital expenditures relating to the
expenses we will incur upon becoming a reporting company are estimated
to range from $5,000-$10,000 per quarter.
16
Our internal and external sources of liquidity have included proceeds
raised from subscription agreements and private placements and advances
from related parties. We are currently not aware of any trends that are
reasonably likely to have a material impact on our liquidity. We are
attempting to increase the sales to raise much needed cash for the
remainder of the year, which will be supplemented by our efforts to
raise cash through the issuance of equities securities. It is our
intent to secure a market share in the social networking industry
through advertising revenue which we feel will require additional
capital over the long term to undertake sales and marketing initiatives,
further our research and development, and to manage timing differences
in cash flows from the time product is manufactured to the time it is
sold and cash is collected from the sale. Our capital strategy is to
increase our cash balance through financing transactions, including the
issuance of debt and/or equity securities.
Plan of Operation
-----------------
Milestone Estimated Cost Timeline
1. Complete first four websites $1,000 or less 3 months
including getting the conference
software operational
2. Generate advertising revenues
- Solicit 10 advertisers per website
by offering free advertising for 60 days
thereafter, $200 per month $1,000 or less 3-6 months
- Hire full time sales person commission based 9 months
3. Complete two additional websites $1,000 or less 9-12 months
- Solicit 10 advertisers per website
by offering free advertising for 60 days
thereafter, $200 per month $1,000 or less 9-12 months
The first milestone needs to be reached before we can proceed with the
second and third milestone.
Going Concern
-------------
The registrant has incurred net losses for the year ended December 31,
2009 of $(113,685) and for the year ended December 31, 2008 of $(500).
Because of these losses, the registrant will require additional working
capital to develop its business operations.
The regsitrant intends to raise additional working capital through
private placements, public offerings and/or bank financing. There are
no assurances that the registrant will be able to either
- achieve a level of revenues adequate to generate sufficient cash
flow from operations; or
17
- obtain additional financing through either private placements,
public offerings and/or bank financing necessary to support the
registrant working capital requirements.
To the extent that funds generated from operations and any private
placements, public offerings and/or bank financing are insufficient, the
registrant will have to raise additional working capital. No assurance
can be given that additional financing will be available, or if
available, will be on terms acceptable to the registrant. These
conditions raise substantial doubt about our ability to continue as a
going concern.
Our independent auditors have raised substantial doubts about our
ability to continue as a going concern in their reports on our financial
statements included in this annual report.
Off-Balance Sheet Arrangements
------------------------------
The registrant had no material off-balance sheet arrangements as of
December 31, 2009.
Critical Accounting Policies and Estimates
------------------------------------------
Management's discussion and analysis of its financial condition and
results of operations is based upon our consolidated financial
statements, which have been prepared in accordance with U.S. generally
accepted accounting principles. The preparation of these financial
statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenue and expenses, and
related disclosure of contingent assets and liabilities. On an on-going
basis, we evaluate our estimates, including those related to the
reported amounts of revenues and expenses and the valuation of our
assets and contingencies. We believe our estimates and assumptions to be
reasonable under the circumstances. However, actual results could differ
from those estimates under different assumptions or conditions. Our
financial statements are based on the assumption that we will continue
as a going concern. If we are unable to continue as a going concern we
would experience additional losses from the write-down of assets.
New Accounting Pronouncements
-----------------------------
The registrant has adopted all recently issued accounting
pronouncements. The adoption of the accounting pronouncements,
including those not yet effective, is not anticipated to have a material
effect on the financial position or results of operations of the
registrant.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PMX Communities, Inc.
Index to the Financial Statements
Report of Independent Registered Public Accounting Firm 19
Financial Statements of PMX Communities, Inc.:
Balance Sheets as of December 31, 2009 and 2008 20
Statements of Operations For the Years
Ended December 31, 2009 and 2008 21
Statements of Stockholders' Equity (Deficit) For
the Years Ended December 31, 2009 and 2008 22
Statements of Cash Flows For the Years Ended
December 31, 2009 and 2008 23
Notes to Financial Statements 25
19
[LETTERHEAD OF AUDIT FIRM]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO the Board of Directors and
Stockholders of PMX Communities, Inc.
We have audited the accompanying balance sheets of PMX Communities, Inc.
(a development stage enterprise)(the "Company") as of December 31, 2009
and 2008, and the related statements of operations, stockholders'
equity/(deficit), and cash flows for the years then ended, and for the
period December 29, 2004 (inception) through December 31, 2009. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States of America). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of PMX
Communities, Inc. (a Nevada corporation) as of December 31, 2009 and
2008, and the results of its operations, and its cash flows for the years
ended December 31, 2009 and 2008, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed further in
Note 13, the Company has been in the development stage since its
inception (December 29, 2004) and continues to incur significant losses.
The Company's viability is dependent upon its ability to obtain future
financing and the success of its future operations. These factors raise
substantial doubt as to the Company's ability to continue as a going
concern. Management's plan in regard to these matters is also described
in Note 13. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Lake & Associates CPA's LLC
Boca Raton, Florida
March 24, 2010
20
PMX Communities, Inc.
(Formerly Merge II, Inc.)
(A Development Stage Company)
Balance Sheets
December 31, December 31,
2009 2008
----------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 212 $ -
Deposits 600 -
----------- -----------
Total current assets 812 -
----------- -----------
Fixed assets
Property and equipment, net 1,847 -
----------- -----------
Other assets
License with related party, net 4,583 -
----------- -----------
Total assets $ 7,242 $ -
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts Payable $ 5,960 $ -
Accrued expenses 4,960 -
Notes payable, includes related
party notes of $101,764 at
12/31/09 and $0 at 12/31/08 127,647 -
----------- -----------
Total current liabilities 138,567 -
Commitments & Contingencies - -
STOCKHOLDERS' DEFICIT
Common stock, $.0001 par value;
authorized 100,000,000 shares,
issued and outstanding 53,600,000
shares, and 40,000,000,
respectively (adjusted for forward
split 5,360 4,000
Additional paid-in capital (20,725) (1,725)
Deficit accumulated during the
development stage (115,960) (2,275)
----------- -----------
Total stockholders' deficit (131,325) -
----------- -----------
Total liabilities and stockholders'
deficit $ 7,242 $ -
=========== ===========
See accompanying notes to financial statements.
21
PMX Communities, Inc.
(Formerly Merge II, Inc.)
(A Development Stage Company)
Statement of Operations
Years Ended December 31, 2009 and 2008 and
Period from December 29, 2004 (inception) through June 30, 2009
December 29, 2004
Years Ended December 31, (Inception) through
2008 2007 June 30, 2009
---- ---- ------------------
Net sales $ - $ - $ -
Cost of sales - - -
----------- ----------- -----------
Gross profit - - -
Costs and expenses:
Amortization 417 - 417
Depreciation 157 - 157
Selling, general and
administrative expenses 110,464 500 112,739
----------- ----------- -----------
111,038 500 113,313
----------- ----------- -----------
Loss from operations (111,038) (500) (113,313)
Other income 5,000 - 5,000
Interest expense (7,647) - (7,647)
----------- ----------- -----------
Loss before income taxes (113,685) (500) (115,960)
Income taxes - - -
----------- ----------- -----------
Net loss $ (113,685) $ (500) $ (115,960)
=========== =========== ===========
Basic net loss per share $ (0.00) $ (0.00)
=========== ===========
Weighted average shares
outstanding
Basic 49,140,000 40,000,000
=========== ===========
See accompanying notes to financial statements.
22
PMX Communities, Inc.
(Formerly Merge II, Inc.)
(A Development Stage Company)
Statement of Stockholders' (Deficit)
For the Period from December 29, 2004 (Inception) to June 30, 2009
Additional
Common Stock Paid -in
Shares Par Value Capital
------------------- ----------
Balance, December 29, 2004 (Inception) - $ - $ -
Common stock issued for cash to an initial
investor - December 29, 2004 at $.00275/sh
restated for February 1, 2009 forward
split 40-1 40,000,000 4,000 (3,725)
Net loss for the period from December 29,
2004 (inception) to December 31, 2004 - - -
---------- ------ ----------
Balance December 31, 2004 40,000,000 4,000 (3,725)
Capital contribution of operating expenses - - 500
Net loss - December 31, 2005 - - -
---------- ------ ----------
Balance December 31, 2005 40,000,000 4,000 (3,225)
Capital contribution of operating expenses - - 500
Net loss - December 31, 2006 - - -
---------- ------ ----------
Balance December 31, 2006 40,000,000 4,000 (2,725)
Capital contribution of operating expenses - - 500
Net loss - December 31, 2007 - - -
---------- ------ ----------
Balance December 31, 2007 40,000,000 4,000 (2,225)
Capital contribution of operating expenses - - 500
Net loss - December 31, 2008 - - -
---------- ------ ----------
Balance December 31, 2008 40,000,000 4,000 (1,725)
Common stock issued for services
- (February 2009 @ $.0001/sh) 5,000,000 500 -
Common stock issued for services
- (May 2009 @ $.0001/sh) 100,000 10 -
Common stock issued to directors for
services - (May 2009 @ $.0001/sh) 1,000,000 100 -
Common stock issued for cash (June 2009
@ $.0001/sh) 7,500,000 750 -
Costs incurred to file registration
statement - - (19,000)
Net loss - December 31, 2009 - - -
---------- ------ ----------
Balance December 31, 2009 53,600,000 $5,360 $ (20,725)
See accompanying notes to financial statements.
23
PMX Communities, Inc.
(Formerly Merge II, Inc.)
(A Development Stage Company)
Statement of Stockholders' (Deficit)
For the Period from December 29, 2004 (Inception) to December 31, 2009
(Continued)
Deficit Total
Accumulated during the Stockholders'
Development Stage Deficit
------------------- ----------
Balance, December 29, 2004 (Inception) $ - $ -
Common stock issued for cash to an initial
investor - December 29, 2004 at $.00275/sh
restated for February 1, 2009 forward
split 40-1 - 275
Net loss for the period from December 29,
2004 (inception) to December 31, 2004 (275) (275)
----------- -----------
Balance December 31, 2004 (275) -
Capital contribution of operating expenses - 500
Net loss - December 31, 2005 (500) (500)
----------- -----------
Balance December 31, 2005 (775) -
Capital contribution of operating expenses - 500
Net loss - December 31, 2006 (500) (500)
----------- -----------
Balance December 31, 2006 (1,275) -
Capital contribution of operating expenses - 500
Net loss - December 31, 2007 (500) (500)
----------- -----------
Balance December 31, 2007 (1,725) -
Capital contribution of operating expenses - 500
Net loss - December 31, 2008 (500) (500)
----------- -----------
Balance December 31, 2008 (2,275) -
Common stock issued for services
- (February 2009 @ $.0001/sh) - 500
Common stock issued for services
- (May 2009 @ $.0001/sh) - 10
Common stock issued to directors for
services - (May 2009 @ $.0001/sh) - 100
Common stock issued for cash (June 2009
@ $.0001/sh) - 750
Costs incurred to file registration
statement - (19,000)
Net loss - December 31, 2009 (113,685) (113,685)
----------- -----------
Balance December 31, 2009 $ (115,960) $ (131,325)
See accompanying notes to financial statements.
24
PMX Communities, Inc.
(Formerly Merge II, Inc.)
(A Development Stage Company)
Statement of Cash Flows
Years Ended December 31, 2008 and 2007 and
Period from December 29, 2004 (inception) through June 30, 2009
December 29, 2004
Years Ended December 31, (Inception) through
2008 2007 June 30, 2009
---- ---- ------------------
Cash flows from operating
activities
Net loss $(113,685) $ (500) $(115,960)
Adjustments to reconcile
net (loss) to net cash
provided by (used in)
operating activities:
Issuance of common stock
for services 610 - 610
Conversion of notes
payable (5,000) - (5,000)
Depreciation 158 - 158
Amortization 417 - 417
Change in assets and
liabilities
Deposit (600) - (600)
Accounts payable 5,960 - 5,960
Accrued expenses 4,960 - 4,960
-------- ------ --------
Net cash used in operating
activities (107,180) (500) (109,455)
-------- ------ --------
Cash flows from investing
Activities
Purchase of property and equipment (2,005) - (2,005)
Purchase of license (5,000) - (5,000)
Deposit of lease agreement (25,000) - (25,000)
-------- ------ --------
Net cash used in investing
activities (32,005) - (32,005)
Cash flows from financing
activities
Proceeds from notes payable 150,000 - 150,000
Increase in accrued interest 7,647 - 7,647
Cash contribution of
operating expenses - 500 2,000
Common stock issued for cash,
net of costs (18,250) - (17,975)
-------- ------ --------
Net cash provided by financing
activities 139,397 500 141,672
-------- ------ --------
25
Net increase in cash and cash
equivalents 212 - 212
Cash and cash equivalents,
Beginning of fiscal year - - -
-------- ------ --------
Cash and cash equivalents,
end of period $ 212 $ - $ 212
======== ====== ========
Supplementary information
-------------------------
Cash paid for:
Interest $ - $ - $ -
======== ====== ========
Income taxes
======== ====== ========
Assignment of lease agreement
as payment for notes payable $ 30,000 $ - $ 30,000
======== ====== ========
See accompanying notes to financial statements.
26
PMX COMMUNITIES, INC.
(FORMERLY MERGE II, INC.)
(A DEVELOPMENT STAGE COMPANY)
December 31, 2009 and 2008
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND DEVELOPMENT STAGE RISK
PMX Communities, Inc. (formerly Merge II, Inc) (The Company) was
organized under the laws of the State of Nevada. The Company was
incorporated under the name Merge II, Inc. on December 29, 2004 in the
State of Nevada. The Company's year end is December 31. The Company
operates from its office at Technology Business Incubator, Research &
Development Park, 3701 FAU Blvd., Suite 210, Boca Raton, FL 33431.
On February 10, 2009, by Unanimous Written Consent, the Board of
Directors authorized an amendment to its Certificate of Incorporation
(the Certificate) to change the name of the corporation to PMX
Communities, Inc. The Company also authorized an amendment to amend the
articles of incorporation from 25,000,000 to 100,000,000 common shares
authorized. The amendments were filed on June 30, 2009.
The Company has not earned any revenue from operations. Accordingly,
the Company's activities have been accounted for as those of a
"Development Stage Enterprise" as set forth in Accounting Standards
Codification ("ASC") 915 "Development Stage Entities", which was
previously Financial Accounting Standards Board Statement No. 7 ("SFAS
7"). Among the disclosures required by SFAS 7 are that the Company's
financial statements be identified as those of a development stage
company, and that the statements of operations, stockholders' equity
and cash flows disclose activity since the date of the Company's
inception.
The Company is in the developmental stage and intends to conduct
business as an advertising and social networking portal. Since its
inception the Company has had no significant business activity, the
Company has been dependent upon the receipt of capital investment to
fund its continuing activities. In addition to the normal risks
associated with a new business venture, there can be no assurance that
the Company's business plan will be successfully executed. Our ability
to execute our business model will depend on our ability to obtain
additional financing and achieve a profitable level of operations. There
can be no assurance that sufficient financing will be obtained, or can
we give any assurance that we will generate substantial revenues or that
our business operations will prove to be profitable.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements and notes are prepared in
accordance with accounting principles generally accepted in the United
States of America.
27
PMX COMMUNITIES, INC.
(FORMERLY MERGE II, INC.)
(A DEVELOPMENT STAGE COMPANY)
December 31, 2009 and 2008
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements is as follows:
Cash and Cash equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. The Company
has no cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Equipment
Equipment is stated at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the
estimated useful life of five years for equipment and seven years for
furniture and fixtures. Components of property and equipment are as
follows:
2009 2008
---- ----
Office Equipment $1,600 $ 0
Office Furniture and Fixtures 404 0
Less: Accumulated Depreciation (157) (0)
------ ------
Property and Equipment, net $1,847 $ 0
====== ======
Income Taxes
Under the asset and liability method prescribed under ASC 740, Income
Taxes, The Company uses the liability method of accounting for income
taxes. The liability method measures deferred income taxes by applying
enacted statutory rates in effect at the balance sheet date to the
differences between the tax basis of assets and liabilities and their
reported amounts on the financial statements. The resulting deferred
tax assets or liabilities are adjusted to reflect changes in tax laws as
they occur. A valuation allowance is provided when it is more likely
than not that a deferred tax asset will not be realized.
The Company recognizes the financial statement benefit of an uncertain
tax position only after considering the probability that a tax
authority would sustain the position in an examination. For
tax positions meeting a "more-likely-than-not" threshold, the
amount recognized in the financial statements is the benefit
28
PMX COMMUNITIES, INC.
(FORMERLY MERGE II, INC.)
(A DEVELOPMENT STAGE COMPANY)
December 31, 2009 and 2008
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
expected to be realized upon settlement with the tax authority. For
tax positions not meeting the threshold, no financial statement benefit
is recognized. As of December 31, 2009, the Company has had no
uncertain tax positions. The Company recognizes interest and penalties,
if any, related to uncertain tax positions as general and administrative
expenses. The Company currently has no federal or state tax
examinations nor has it had any federal or state examinations since its
inception. All of the Company's tax years are subject to federal and
state tax examination.
There is no provision for income taxes due to continuing losses. At
December 31, 2009, the Company has net operating loss carryforwards for
tax purposes of approximately $115,960 which expire through 2029. The
Company has recorded a valuation allowance that fully offsets deferred
tax assets arising from net operating loss carryforwards because the
likelihood of the realization of the benefit cannot be established. The
Internal Revenue Code contains provisions that may limit the net
operating loss carryforwards available if significant changes in
stockholder ownership of the Company occur.
Revenue Recognition
The Company will recognize revenue when:
- Persuasive evidence of an arrangement exists;
- Shipment has occurred;
- Price is fixed or determinable; and
- Collectability is reasonably assured
The Company closely follows the provisions of Staff Accounting Bulletin
No. 104 as described above. For the twelve month periods ended December
31, 2009 and 2008 and the period from December 29, 2004 (inception)
through December 31, 2009 the Company has no revenues.
Income (loss) Per Share
Basic income (loss) per share is calculated using the weighted-average
number of common shares outstanding during each reporting period.
Diluted loss per share includes potentially dilutive securities such as
outstanding options and warrants, using various methods such as the
treasury stock or modified treasury stock method in the determination of
dilutive shares outstanding during each reporting period. Common
equivalent shares are excluded from the computation of net loss per
share since their effect is anti-dilutive
Fair value of Financial Instruments
The Company adopted ASC topic 820, "Fair Value Measurements and
Disclosures" (ASC 820), formerly SFAS No. 157 "Fair Value Measurements,"
29
PMX COMMUNITIES, INC.
(FORMERLY MERGE II, INC.)
(A DEVELOPMENT STAGE COMPANY)
December 31, 2009 and 2008
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
effective January 1, 2009. ASC 820 defines "fair value" as the price
that would be received for an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on
the measurement date. There was no impact relating to the adoption of
ASC 820 to the Company's financial statements.
ASC 820 also describes three levels of inputs that may be used to
measure fair value:
- Level 1: Observable inputs that reflect unadjusted quoted prices
for identical assets or liabilities traded in active markets.
- Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or
indirectly.
- Level 3: Inputs that are generally unobservable. These inputs may
be used with internally developed methodologies that result in
management's best estimate of fair value.
Financial instruments consist principally of cash, prepaid expenses,
accounts payable, and accrued liabilities. The carrying amounts of such
financial instruments in the accompanying balance sheets approximate
their fair values due to their relatively short-term nature. It is
management's opinion that the Company is not exposed to any significant
currency or credit risks arising from these financial instruments.
Reclassifications
Certain prior period balances have been reclassified to conform to the
current year's presentation. These reclassifications had no impact on
previously reported results of operations or stockholders' equity.
Business Segments
The Company operates in one segment and therefore segment information is
not presented.
Recent Authoritative Accounting Pronouncements
The Company has adopted all recently issued accounting pronouncements.
The adoption of the accounting pronouncements, including those not yet
effective, is not anticipated to have a material effect on the financial
position or results of operations of the Company.
30
PMX COMMUNITIES, INC.
(FORMERLY MERGE II, INC.)
(A DEVELOPMENT STAGE COMPANY)
December 31, 2009 and 2008
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - ACCRUED EXPENSES
Accrued liabilities represent expenses that apply to the reported
period and have not been billed by the provider or paid by the Company.
Accrued liabilities consisted of the following:
December 31, December 31,
2009 2008
----------- -----------
Accrued Professional
Fees $ 4,960 $ -
--------- ---------
$ 4,960 $ -
========== =========
NOTE 4 - NOTES PAYABLE
During the year December 31, 2009, The Company entered into promissory
notes with six investors who are also shareholders of the company for
the principal sum of one hundred and twenty five thousand dollars
($125,000). The entire principal amount with eight percent (8%) interest
per annum shall become due and payable two years (720 days) from date of
issue. In the event that the Company elects to prepay these notes the
Company will be obligated to pay a minimum of one (1) years interest to
the holder of these notes. At the option of the holder , any prepayment
of principal plus interest may be in the form of cash or common stock of
the Company at a discounted price of fifty (50%) percent of the average
closing bid of the stock on the preceding 30 days of trading.
If the Company does not prepay the notes in its entirety, the holder
will have the option to convert the debt due from these notes into
common stock of the Company according to the following schedule and
terms: i) after 180 days the holder may elect to convert 25% of the
principal plus accrued interest into common stock of the Company at a
discounted price of fifty (50%) percent of the average closing bid of
the stock on the preceding 30 days of trading. If at the 180 day
anniversary of the notes the Company is not trading on an exchange, the
first conversion window will extend until such time as the Company is
trading on an exchange. ii) after 360 days the holder may elect to
convert 50% of the principal plus accrued interest into common stock of
the Company at a discounted price of fifty (50%) percent of the average
closing bid of the stock on the preceding 30 days of trading. If at the
360 day anniversary of the notes the Company is not trading on an
exchange, the first conversion window will extend until such time as the
Company is trading on an exchange. iii) after 540 days the holder may
elect to convert 75% of the principal plus accrued interest into common
stock of the Company at a discounted price of fifty (50%) percent of the
31
PMX COMMUNITIES, INC.
(FORMERLY MERGE II, INC.)
(A DEVELOPMENT STAGE COMPANY)
December 31, 2009 and 2008
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - NOTES PAYABLE (continued)
average closing bid of the stock on the preceding 30 days of trading. If
at the 540 day anniversary of the notes the Company is not trading on an
exchange, the first conversion window will extend until such time as the
Company is trading on an exchange. iv) after 720 days the holder may
elect to convert any remaining principal plus accrued interest into
common stock of the Company at a discounted price of fifty (50%) percent
of the average closing bid of the stock on the preceding 30 days of
trading.
On August 25, 2009, The Company entered into a promissory note with one
investor for the principal sum of twenty five thousand dollars
($25,000). The entire principal amount with ten percent (10%) interest
per annum shall become due and payable two years (720 days) from date of
issue. In the event that the Company elects to prepay this note the
Company will be obligated to pay a minimum of six months interest to the
holder of this note.
At December 31, 2009 the Company has accrued interest on the notes of
$7,647.
On June 28, 2009 the Company entered into an assignment and lease
assumption with AU Spectators, LLC. (AU). On February 14, 2009 the
Company had entered into a Lease Purchase Option Agreement with Western
Sierra Mining Corporation, for which the Company paid to Western Seirra
Mining Corporation a deposit of twenty-five thousand ($25,000) dollars.
Under the agreement with AU the Company agrees to assign all rights and
obligations of the Company arising after the date hereof under the lease
pursuant to the terms and conditions hereof; and each of the members of
AU have extended loans to the Company represented by promissory notes.
In consideration for the agreement, each of the members of AU have
agreed to collectively forgive the repayment of the sum of thirty-
thousand ($30,000) dollars of the notes. The assignment and assumption
shall be effective and operative as of June 30, 2009. The Company has
recognized five thousand ($5,000) in income on the gain on this
transaction.
Promissory notes payable consists of the following:
Principal contributed $150,000
Add: Accrued interest 7,647
Less: Repayment under lease assumption (30,000)
--------
Balance, December 31, 2009 $127,647
========
31
PMX COMMUNITIES, INC.
(FORMERLY MERGE II, INC.)
(A DEVELOPMENT STAGE COMPANY)
December 31, 2009 and 2008
NOTES TO FINANCIAL STATEMENTS
Note 5 - EQUITY TRANSACTIONS
Common Stock
During the year ended December 31, 2004, the Company issued 1,000,000
shares of common stock (40,000,000 shares post split) to founding
shareholders at $.000275 per share, for cash of $275.
On February 1, 2009 the Company approved a 40 to 1 forward split on the
common shares.
On February 10, 2009 the Company amended the articles of incorporation
to increase the number of authorized shares from 25,000,000 shares at
$.0001 to 100,000,000 shares ay $.0001.
During the year ended December 31, 2009 the Company issued 5,000,000
shares of common stock for services rendered at a value of $500.
During the year ended December 31, 2009 the Company issued 100,000
shares of common stock for services rendered at a value of $10.
During the year ended December 31, 2009, the Company issued 1,000,000
shares of common stock to a director for services rendered at a value of
$100.
During the year ended December 31, 2009, the Company commenced an
offering for sale to "accredited investors" (as defined by Regulation D
under the Securities Act of 1933, as amended) of its Common Stock at a
price of $.0001 per share. The Company is offering the Common Stock
through its officers, directors, and employees without commission. The
Company issued 7,500,000 shares of common stock at $.0001 per share, for
a total of $750.
During the year ended December 31, 2009 the Company incurred costs to
file its registration statement of $19,000. These costs are offset
against additional paid in capital.
NOTE 6 - RELATED PARTY
Subsequently, On February 23, 2010, Dennis Carrasquillo, an officer and
director resigned for personal reasons and sold 33,000,000 common shares
to Michael C. Hiler, an officer and director of PMX Communities for
$.001 per common share.
Agreement with OTC Business Solutions. On February 1, 2009, The Company
entered into a consulting agreement with OTC Business Solutions, then an
unaffiliated company. As of February 23, 2010, Michael C. Hiler, its
owner, became an officer and director of PMX Communities. The
33
PMX COMMUNITIES, INC.
(FORMERLY MERGE II, INC.)
(A DEVELOPMENT STAGE COMPANY)
December 31, 2009 and 2008
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - RELATED PARTY (continued)
consultant provides consulting services related to the management and
organization of the company, their financial policies, the terms and
conditions of employment and generally any matter arising out of the
business affairs of the company.
The consulting agreement will terminate on December 31, 2011.
The consultant was issued 5,000,000 common shares for services rendered
and to be rendered to PMX Communities. Additionally, the consultant
shall receive $60,000. To date, $60,000 cash has been paid to the
consultant.
Subsequently, On February 23, 2010, OTC Business Solutions sold
4,000,000 common shares to two non-affiliates for consideration of $.25
per common share.
Agreement with Invisosoft. Invisosoft is a software developer of a
proprietary and copyrighted audio video software product known as
Invisosoft Live Communicator Suite that enables VOIP/Audiovisual
conferencing. On June 23, 2009, PMX Communities acquired an initial 100
Activation Seats of the Invisosoft Live Communicator Suite Software. The
seats were acquired for $50 per seat. The term of the agreement is for
five years. Dennis Carrasquillo, a former officer and director of PMX
Communities, Inc. has been vice president of Invisosoft, Inc. since
2005. For the first two years, PMX Communities shall have the right to
increase the number of activator seats at anytime via a one time payment
of $50 per seat up to a maximum of one hundred thousand seats.
Management is of the opinion that the material terms of the agreement
with Invisosoft are favorable compared to the material terms of a
similar agreement had PMX Communities entered into it with an unrelated
third-party.
From inception through August 10, 2009, our administrative functions
were operated from the home of our former president. We did not pay our
president for use of such space.
During the year ended December 31, 2009, The Company entered into
promissory notes with six investors who are also shareholders of the
company for the principal sum of one hundred and twenty five thousand
dollars ($125,000)(Note 4).
Subsequently, On February 23, 2010, we entered into an agreement
pursuant to which we issued stock options to purchase 1,000,000 common
shares to Mr. McCauley, a director at $.25 per common share
34
PMX COMMUNITIES, INC.
(FORMERLY MERGE II, INC.)
(A DEVELOPMENT STAGE COMPANY)
December 31, 2009 and 2008
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - LEASE AGREEMENT
On August 10, 2009, PMX Communities entered into a lease agreement with
Enterprise Development Corporation, a non profit organization associated
with Florida Atlantic University Incubator Technology Program. The
office space consists of 120 sq ft of space at a cost of $600.00 per
month. The lease agreement is on a month to month basis, with no
contractual obligation.
NOTE 8 - LICENSE AGREEMENT
We have entered into a license agreement with Invisosoft which is a
software developer of a proprietary and copyrighted audio video software
product known as Invisosoft Live Communicator Suite that enables
VOIP/Audiovisual conferencing. On June 23, 2009, PMX Communities agreed
to acquire an initial 100 Activation Seats of the Invisosoft Live
Communicator Suite Software, with an effective date of August 1, 2009,
for $5,000.
The license will be amortized over five years using the straight line
method. The estimated amortization expense over the next five years is
as follows:
Year Ending December 31
2009 $ 417
2010 1,000
2011 1,000
2012 1,000
2013 1,000
2014 583
------
$5,000
======
NOTE 9 - INCOME TAXES
For income tax purposes, the Company has elected to capitalize start-up
costs incurred during the period from December 29, 2004 (inception)
through December 31, 2009 totaling $115,960. The start-up costs are
being amortized over sixty months beginning in the year of initial
operations.
35
PMX COMMUNITIES, INC.
(FORMERLY MERGE II, INC.)
(A DEVELOPMENT STAGE COMPANY)
December 31, 2009 and 2008
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash deposits.
Accounts at each institution are insured by the Federal Deposit
Insurance Corporation (FDIC) up to $250,000. At December 31, 2009 and
2008, the Company had no amounts in excess of FDIC insured limit.
NOTE 11 - NET LOSS PER SHARE
Basic loss per common share has been calculated based on the weighted
average number of shares outstanding during the period after giving
retroactive effect to stock splits. There are no dilutive securities at
June 30, 2009 and December 31, 2008 and 2007 for purposes of computing
fully diluted earnings per share.
The following reconciles amounts reported in the financial statements:
Twelve Month Twelve Month
Period ended Period ended
December 31, December 31,
2009 2008
------------ ------------
Net loss $ (113,685) $ (500)
=========== ============
Denominator for basic
loss per share -
Basic Weighted average
shares 49,140,000 40,000,000
Basic loss per common
share $ (.00) $ (.00)
=========== ============
NOTE 12 - MANAGEMENT PLAN
For the next 12 months, the Company's Plan of Operations is as follows:
The company intends to complete all of its website portals, and start to
implement them by starting with an email campaign in promoting the
different sectors of each of the social networking websites. The Company
will call upon companies in each of the different sectors to promote
itself and obtain advertising revenues. The company will also attend
trade shows and conferences in order to expose the different industry
sectors as to what the social networking platform forums has to offer.
The Company also intends to grow its data base via the website member
sign-up registrations.
36
PMX COMMUNITIES, INC.
(FORMERLY MERGE II, INC.)
(A DEVELOPMENT STAGE COMPANY)
December 31, 2009 and 2008
NOTES TO FINANCIAL STATEMENTS
NOTE 12 - MANAGEMENT PLAN (continued)
We only have sufficient currently available capital resources for the
next 30-60 days. Anticipated capital expenditures relating to the
expenses we will incur upon becoming a reporting company are estimated
to range from $5,000-$10,000 per quarter.
Our internal and external sources of liquidity have included proceeds
raised from subscription agreements and private placements and advances
from related parties. We are currently not aware of any trends that are
reasonably likely to have a material impact on our liquidity. We are
attempting to increase the sales to raise much needed cash for the
remainder of the year, which will be supplemented by our efforts to
raise cash through the issuance of equities securities. It is our
intent to secure a market share in the social networking industry
through advertising revenue which we feel will require additional
capital over the long term to undertake sales and marketing initiatives,
further our research and development, and to manage timing differences
in cash flows from the time product is manufactured to the time it is
sold and cash is collected from the sale. Our capital strategy is to
increase our cash balance through financing transactions, including the
issuance of debt and/or equity securities.
The Company intends to raise additional working capital through private
placements, public offerings and/or bank financing. There are no
assurances that The Company will be able to either
- achieve a level of revenues adequate to generate sufficient cash
flow from operations; or
- obtain additional financing through either private placements,
public offerings and/or bank financing necessary to support The Company
working capital requirements.
To the extent that funds generated from operations and any private
placements, public offerings and/or bank financing are insufficient, The
Company will have to raise additional working capital. No assurance can
be given that additional financing will be available, or if available,
will be on terms acceptable to The Company
NOTE 13 - GOING CONCERN
As reflected in the accompanying financial statements, the Company had a
net loss for the year ended December 31, 2009 of $113,685, and a deficit
accumulated from inception to December 31, 2009 of $115,960. At
December 31, 2009, the Company has no operating revenues. The ability
of the Company to continue as a going concern is dependent on the
37
PMX COMMUNITIES, INC.
(FORMERLY MERGE II, INC.)
(A DEVELOPMENT STAGE COMPANY)
December 31, 2009 and 2008
NOTES TO FINANCIAL STATEMENTS
NOTE 13 - GOING CONCERN (continued)
Company's ability to further implement its business plan and raise
capital. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going
concern.
The Company is currently a development stage company and its continued
existence is dependent upon the Company's ability to resolve its
liquidity problems, principally by obtaining additional debt financing
and/or equity capital. The Company has yet to generate a significant
internal cash flow, and until sales of products commence, the Company is
highly dependent upon debt and equity funding, should continuing debt
and equity funding requirements not be met the Company's operations may
cease to exist.
NOTE 14 - SUBSEQUENT EVENTS
On February 5, 2010, the Company entered into a promissory note with two
investor for the principal sum of three thousand dollars ($3,000). The
entire principal amount with ten percent (10%) interest per annum shall
become due and payable one year (360 days) from date of issue. In the
event that the Company elects to prepay this note the Company will be
obligated to pay a minimum of six months interest to the holder of this
note.
On February 23, 2010, Dennis Carrasquillo, an officer and director
resigned for personal reasons and sold 33,000,000 common shares to
Michael C. Hiler, an officer and director of the Company for $.001 per
common share.
On February 23, 2010, the Company entered into an agreement pursuant to
which we issued stock options to purchase 1,000,000 common shares to Mr.
McCauley, a director at $.25 per common share.
We evaluated subsequent events through the date and time our financial
statements were issued on March 24, 2010.
38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure controls and procedures
----------------------------------
Under the direction of our Principal Executive Officer and Principal
Financial Officer, we evaluated our disclosure controls and procedures
as of December 31, 2009. Our Principal Executive Officer and Principal
Financial Officer concluded that our disclosure controls and procedures
were effective as of December 31, 2009.
Management's annual report on internal control over financial reporting
-----------------------------------------------------------------------
This annual report does not include a report of management's assessment
regarding internal control over financial reporting or an attestation
report of the company's registered public accounting firm due to a
transition period established by rules of the Securities and Exchange
Commission for newly public companies.
Changes in Internal Control over Financial Reporting
----------------------------------------------------
There was no change in our internal control over financial reporting
identified in connection with our evaluation that occurred during our
last fiscal quarter (our fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Auditor Attestation
-------------------
This annual report does not include an attestation report of our
registered public accounting firm regarding internal control over
financial reporting. Our management's report was not subject to
attestation by our registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit us
to provide only management's report in this annual report.
ITEM 9B. OTHER INFORMATION
None
39
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Our bylaws provide that the number of directors who shall constitute the
whole board shall be such number as the board of directors shall at the
time have designated. We confirm that the number of authorized
directors has been set at one or more in number pursuant to our bylaws.
Each director shall be selected for a term of one year and until his
successor is elected and qualified. Vacancies are filled by a majority
vote of the remaining directors then in office with the successor
elected for the unexpired term and until the successor is elected and
qualified. The directors, officers and significant employees are as
follows:
NAME AGE POSITIONS HELD SINCE
Michael C. Hiler 50 President/CE0/Director February 23, 2010
CFO/Controller to present
Mervyn M. Gervis 60 VP/Director May 15, 2009
to present
Michael W. McCauley 42 VP/Director February 23, 2010
To present
Business Experience of Officers, Directors and Significant Employees
-------------------------------------------------------------------
Michael C. Hiler has been president, chief executive officer, chief
financial officer, controller and a director of PMX Communities since
February 23, 2010. From May 2006 to present, Mr. Hiler has been the
president of OTC Business Solutions, Inc., a business consultant to
public and private companies. From June 2004 to present, Mr. Hiler was
a private investor and business consultant. Mr. Hiler attended various
classes at Amherst University from 1979-1980. Additionally, Mr. Hiler
attended various classes at Broward Community College from 1981-1982.
Mervyn M. Gervis has been vice president and director of PMX Communities
since May 2009. From 1995 to present, Mr. Gervis has been president of
Universal Telecommunications, Inc., a telecommunications company. Since
2004, Mr. Gervis has been president of Network Telecom Consultants,
Inc., a telecommunications consultancy. Since 2006, Mr. Gervis has been
a managing member of 811 Hillsboro, LLC, a telecommunications company.
Mr. Gervis earned a Bachelor of Commerce from the University of
Witwatersrand in Johannesburg, South Africa in 1972.
Michael W. McCauley has been vice president and director of PMX
Communities since February 23, 2010. From 1995 to present, Mr. McCauley
has been president of Universal Jet Aviation, a private aviation
company. From December 2005 to present, Mr. McCauley has been president
and chief executive officer of Champion Flight Services, Inc., a private
aircraft services company. From February 2008 to present, Mr. McCauley
has been president and chief executive officer of Executive Jet
Services, Inc., a private jet services company. Mr. McCauley attended
both Palm Beach Community College and the Florida Institute of Technoogy
40
where he took various courses from approximately 1987 to 1991. Mr.
McCauley also attended various classes at Northwood University from 2003
to 2004.
The above named directors will serve in their capacity as director until
our next annual shareholder meeting to be held within six months of our
fiscal year's close. Directors are elected for one-year terms.
Director and Officer Resignation
---------------------------------
On February 23, 2010, Dennis Carrasquillo, a former officer and director
resigned for personal reasons and sold 33,000,000 common shares to
Michael C. Hiler, an officer and director of PMX Communities for $.001
per common share.
Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
To our knowledge, no director, officer or beneficial owner of more than
ten percent of any class of our equity securities, failed to file on a
timely basis reports required by Section 16(a) of the Exchange Act
during 2008.
Code of Ethics Policy
----------------------
We have not yet adopted a code of ethics that applies to our principal
executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
Corporate Governance
--------------------
There have been no changes in any state law or other procedures by which
security holders may recommend nominees to our board of directors. In
addition to having no nominating committee for this purpose, we
currently have no specific audit committee and no audit committee
financial expert. Based on the fact that our current business affairs
are simple, any such committees are excessive and beyond the scope of
our business and needs.
Family Relationships
--------------------
There are no family relationships between our officers and directors.
Involvement in Certain Legal Proceedings
----------------------------------------
None of our directors, executive officers and control persons has been
involved in any of the following events during the past five years:
- Any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that time,
- Any conviction in a criminal proceeding or being subject to any
pending criminal proceeding (excluding traffic violations and other
minor offenses);
41
- Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his or her involvement in any type of business, securities or
banking activities,; or
- Being found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.
Executive Compensation
----------------------
We may elect to award a cash bonus to key employees, directors, officers
and consultants based on meeting individual and corporate planned
objectives.
Summary Compensation Table
Nonqualified
Non-Equity Deferred
Name and Stock Option Incentive Comp All Other
Principal Position Year Salary Bonus Awards Awards Plan Comp Earnings Comp Total
------------------ ---- ------ ----- ------ ------ --------- -------- --------- -----
Michael C. Hiler
CEO/CFO 2009 n/a n/a n/a n/a n/a n/a $60,000 $60,000
2008 n/a n/a n/a n/a n/a n/a n/a n/a
Mervyn M. Gervis 2009 $0 $0 $0 $0 $0 $0 $0 $0
VP 2008 $0 $0 $0 $0 $0 $0 $0 $0
Michael W. McCauley
VP 2009 n/a n/a n/a n/a n/a n/a n/a n/a
2008 n/a n/a n/a n/a n/a n/a n/a n/a
Dennis Carrasquillo
Former CEO/CFO 2009 $22,500 - - - - - - $22,500
2008 n/a n/a n/a n/a n/a n/a n/a n/a
On May 15, 2009, we entered into an agreement pursuant to which we
issued 1,000,000 common shares to Mr. Gervis for services valued at
$100.
On February 23, 2010, we entered into an agreement pursuant to which we
issued stock options to purchase 1,000,000 common shares to Mr. McCauley
at $.25 per common share.
No cash has been paid to the directors in their capacity as such.
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDERS MATTERS
The following table sets forth, as of March 15, 2010, the number and
percentage of our outstanding shares of common stock owned by (i) each
person known to us to beneficially own more than 5% of its outstanding
common stock, (ii) each director, (iii) each named executive officer and
significant employee, and (iv) all officers and directors as a group.
42
The number of shares listed below includes shares that each shareholder
listed in the table has the right to acquire beneficial ownership of
within 60 days.
Percentage of
Number & Class Outstanding
Name and Address of Shares Common Shares
---------------- -------------- -------------
Michael C. Hiler(1)(2) 33,000,000 direct 61.57%
10504 NW 56th Drive 1,000,000 indirect 1.87%
Coral Springs, FL 33076
Mervyn M. Gervis(3) 1,000,000 1.86%
5938 Catesby Street
Boca Raton, FL 33433
Michael W. McCauley 650,000 direct 1.21%
4149 Alpina Court North 1,000,000 indirect(4) 1.87%
Boynton Deach, FL 33436
Directors/Officers 34,650,000 direct 64.65%
As a group (3 persons) 2,000,000 indirect 3.73%
Barry Roderman 2,250,000 direct 4.20%
500 West Cypress Creek RD 2,000,000 indirect(5) 3.73%
Suite 550
Fort Lauderdale, FL 33431
Mark Goldstein 2,750,000 direct 5.13%
2700 N. Military Trail 2,000,000 indirect(6) 3.73%
Suite 130
Boco Raton, FL 33431
(1)Mr. Hiler is an officer and director of PMX Communities.
(3)Represents common shares held by OTC Business Solutions (a sole
proprietorship) that is controlled by Michael C. Hiler, an officer and
director of PMX Communities, Inc.
(3)Mr. Gervis is an officer and director of PMX Communities.
(4)Represents common shares which may be issued pursuant to stock
options.
(5)Represents common shares held by BGR Ventures, LLC, an entity
controlled by Barry Roderman.
(6)Represents common shares held by 9100 Atlantic, LLC, an entity
controlled by Mark Goldstein.
Based upon 53,600,000 outstanding common shares as of March 15, 2010.
43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Director Independence
---------------------
Michael C. Hiler and Mervyn M. Gervis are not independent as such term
is defined by a national securities exchange or an inter-dealer
quotation system. During the years ended December 31, 2009 and 2008
there were no transactions with related persons other than as described
in the section below.
On February 23, 2010, Dennis Carrasquillo, a former officer and director
resigned for personal reasons and sold 33,000,000 common shares to
Michael C. Hiler, an officer and director of the registrant for $.001
per common share.
Agreement with OTC Business Solutions
-------------------------------------
On February 1, 2009, the registrant entered into a consulting agreement
with OTC Business Solutions, then an unaffiliated company. As of
February 23, 2010, Michael C. Hiler, its owner, became an officer and
director of the registrant. The consultant provides consulting services
related to the management and organization of the company, their
financial policies, the terms and conditions of employment and generally
any matter arising out of the business affairs of the company.
The consulting agreement will terminate on December 31, 2011.
The consultant was issued 5,000,000 common shares for services rendered
and to be rendered to registrant. Additionally, the consultant received
$60,000.
On February 23, 2010, OTC Business Solutions sold 4,000,000 common
shares to two non-affiliates for consideration of $.25 per common share.
Agreement with Invisosoft
-------------------------
Invisosoft is a software developer of a proprietary and copyrighted
audio video software product known as Invisosoft Live Communicator Suite
that enables VOIP/Audiovisual conferencing. On June 23, 2009, PMX
Communities acquired an initial 100 Activation Seats of the Invisosoft
Live Communicator Suite Software. The seats were acquired for $50 per
seat. The term of the agreement is for five years. Dennis
Carrasquillo, a former officer and director of the registrant has been
vice president of Invisosoft, Inc. since 2005. For the first two years,
the registrant shall have the right to increase the number of activator
seats at anytime via a one time payment of $50 per seat up to a maximum
of one hundred thousand seats.
Management is of the opinion that the material terms of the agreement
with Invisosoft are favorable compared to the material terms of a
similar agreement had registrant entered into it with an unrelated
third-party.
44
Our administrative functions were operated from the home of our former
president. We did not pay our president for use of such space. On
August 10, 2009, the registrant entered into a lease agreement with
Enterprise Development Corporation, a non profit organization associated
with Florida Atlantic University Incubator Technology Program. The
office space consists of 120 sq ft of space at a cost of $600.00 per
month. The lease agreement is on a month to month basis, with no
contractual obligation.
During the year ended December 31, 2009, the registrant entered into
promissory notes with six investors who are also shareholders of the
company for the principal sum of one hundred and twenty five thousand
dollars ($125,000).
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
------------------------------------------------
Lake and Associates CPA's, LLC served as our independent registered
public accounting firm for 2009 and 2008. The following table shows the
fees that were billed for the audit and other services provided by such
firm for 2009 and 2008.
2009 2008
---- ----
Audit Fees $12,600 $ 0
Audit-Related Fees 0 0
Tax Fees 0 0
All Other Fees 0 0
------- ------
Total $12,600 $ 0
Audit Fees - This category includes the audit of our annual financial
statements, review of financial statements included in our Form 10-Q
Quarterly Reports and services that are normally provided by the
independent auditors in connection with engagements for those fiscal
years. This category also includes advice on audit and accounting
matters that arose during, or as a result of, the audit or the review of
interim financial statements.
Audit-Related Fees - This category consists of assurance and related
services by the independent auditors that are reasonably related to the
performance of the audit or review of our financial statements and are
not reported above under "Audit Fees." The services for the fees
disclosed under this category include consultation regarding our
correspondence with the SEC and other accounting consulting.
Tax Fees - This category consists of professional services rendered by
our independent auditors for tax compliance and tax advice. The services
for the fees disclosed under this category include tax return
preparation and technical tax advice.
Pre-approval Policy
------------------
Our Board of Directors has adopted a procedure for pre-approval of all
fees charged by our independent auditors. Under the procedure, the
Board approves the engagement letter with respect to audit, tax and
45
review services. Other fees are subject to pre-approval by the Board,
or, in the period between meetings, by a designated member of
Board. Any such approval by the designated member is disclosed to the
entire Board at the next meeting. The audit and tax fees paid to the
auditors with respect to 2009 were pre-approved by the entire Board of
Directors.
Board of Directors Report
-------------------------
The Board of Directors has reviewed and discussed with the Company's
management and independent auditor the audited consolidated financial
statements of the Company contained in the Company's Annual Report on
Form 10-K for the Company's fiscal year ended December 31, 2009. The
Board has also discussed with the independent auditor the matters
required to be discussed pursuant to SAS No. 61 (Codification of
Statements on Auditing Standards, AU Section 380), which includes, among
other items, matters related to the conduct of the audit of the
Company's consolidated financial statements.
The Board has received and reviewed the written disclosures and the
letter from the independent auditor required by the applicable
requirements of the Public Company Accounting Oversight Board regarding
the independent auditor's communications with the Board concerning
independence, and has discussed with its independent auditor its
independence from the Company.
The Board has considered whether the provision of services other than
audit services is compatible with maintaining auditor independence.
Based on the review and discussions referred to above, the Board
approved the inclusion of the audited consolidated financial statements
in the Company's Annual Report on Form 10-K for its fiscal year ending
December 31, 2009 for filing with the SEC.
46
Part IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) List of Financial statements included in Part II hereof
Balance Sheets, December 31, 2009 and 2008
Statements of Operations for the years ended December 31, 2009 and 2008
Statements of Stockholders' Equity for the years ended December 31, 2009
and 2008
Statements of Cash Flows for the years ended December 31, 2009 and 2008
Notes to the Financial Statements
(a)(2) List of Financial Statement schedules included in Part IV hereof:
None.
(a)(3) Exhibits
The following of exhibits are filed with this report:
(31) 302 certification
(32) 906 certification
427
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this
Report to be signed on its behalf by the undersigned duly authorized
person.
Date: April 2, 2010
PMX Communities, Inc.
/s/ Michael C. Hiler
------------------------------
By: Michael C. Hiler, President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on
behalf of the Corporation and in the capacities and on the dates
indicated.
/s/Michael C. Hiler CEO/CFO April 2, 2010
------------------- President/Director
Michael C. Hiler
/s/Mervyn Gervis Director April 2, 2010
-------------------
Mervyn Gervis
/s/Michael W. McCauley Director April 2, 2010
----------------------
Michael W. McCauley
Would you like to add any risk factors you may anticipate?