The accompanying notes are an integral part of these financial statements.
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Primco Management Inc.
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Primco Management Inc. (the “Company”) was incorporated under the laws of the state of Delaware on October 14, 2010.
Nature of operations
The Company is a real estate management company. The Company raised capital during 2011 to fund operations.
Basis of presentation
The accompanying unaudited interim financial statements and information have been prepared in accordance with accounting principles generally accepted in the United States of America and in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, these financial statements contain all normal and recurring adjustments considered necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. The results for the three and nine month periods ended September 30, 2012 and 2011 are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2011 filed on Form 10-K.
Development stage enterprise
The Company is a development stage company as defined in Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915 "Development Stage Entities". Since October 14, 2010, the Company has been devoting substantially all of its efforts to establishing new customized real estate management programs for their clients. As such, the Company has not generated significant revenues from its operations and has no assurance of future revenues. All losses accumulated since October 14, 2010 have been considered as part of the Company's development stage activities.
Use of estimates
The preparation of the accompanying financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that directly affect the results of reported assets, liabilities, revenue, and expenses. Actual results may differ from these estimates.
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Revenue recognition
Operating revenue consists of management income for services provided by the Company to a related party pursuant to a management agreement. Management income is recognized during the period in which the Company provides services in connection with this agreement.
Concentration of cash
The Company places its cash and cash equivalents with high quality financial institutions. At times, cash balances may be in excess of the FDIC insurance limits. Management considers the risk to be minimal.
Fair value of financial instruments
All financial instruments are carried at amounts that approximate estimated fair value.
Income taxes
Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Financial Accounting Standards Board Accounting Standards Codification ASC 740, “Income Tax,” requires the recognition of the impact of a tax position in the financial statements only if that position is more likely than not of being sustained on a tax return upon examination by the relevant taxing authority, based on the technical merits of the position. At September 30, 2012 and December 31, 2011, the Company had no unrecognized tax benefits. The Company recognizes interest and penalties related to income tax matters in interest expense and operating expenses, respectively. As of September 30, 2012 and December 31, 2011, the Company had no accrued interest or penalties related to uncertain tax positions.
Research and development
The Company records research and development expense as incurred.
Net loss per common share
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by ASC Topic 260, "Earnings per Share". Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Recent accounting pronouncements
The Company does not believe recently issued accounting pronouncements will have any material impact on its financial position, results of operations or cash flows.
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NOTE 2 – GOING CONCERN
The Company is a development stage company and management of the Company is devoting substantially all of its present efforts to establish new customized real estate management programs for its clients. In the near term, the Company expects operating costs to continue to exceed funds generated from operations.
The Company has not generated revenues from its operations and has no assurance of future revenues. As a result, the Company expects to continue to incur operating losses, and the operations in the near future are expected to continue to use working capital. The ability of the Company to continue as a going concern is dependent on its ability to raise capital to meet its operating requirements.
The Company’s independent auditors, in their report on the Company’s financial statements for the year ended December 31, 2011, expressed substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this uncertainty.
NOTE 3 – NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net loss per share:
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NOTE 4 – RELATED PARTY TRANSACTIONS
Advances from officer
As of September 30, 2012 and December 31, 2011, the Company owed $23,075 and $4,125 to an officer of the Company. These advances are unsecured, due on demand, with no interest.
Lease
The Company leases its office premise from a director of the Company on a month-to-month basis at no cost.
Consultation Fee
During the three and nine months ended September 30, 2012, the Company incurred zero and $14,200, respectively, for consultation services to a firm whose officers were related to the CEO of the Company.
Management agreement
On May 1, 2011, the Company entered into a management agreement with New Visions Group to act as the managing agent of their beneficial interest in the apartment buildings known as Walnut Villas Apts. located at 1027 Florence Avenue, Vineland, New Jersey, for a term of five years. New Visions Group is owned by Murray Friedman, the father of Neal Friedman, an officer and director of the Company. Pursuant to this agreement, the Company receives 5% of amounts collected from the distributions of income derived from the buildings and will be reimbursed for all out-of-pocket costs. The management fee charged during the three and nine months ended September 30, 2012 amounted to $500 and $2,600, respectively. At September 30, 2012, the Company was owed $500 by New Visions Group that is included in accounts receivable in the accompanying balance sheet.
NOTE 5 – PRIVATE PLACEMENT
During November and December 2011, the Company issued 1,245,600 common shares (post split) at a price of $.25 per share, for gross proceeds of $153,700, through a private placement. The Company paid $2,000 in offering costs in connection with this private placement.
NOTE 6 – FORWARD STOCK SPLIT
On December 12, 2011, the Company completed a two-for-one forward stock split for common shareholders of the private placement. The holder of the 8,000,000 shares issued at inception, declined to receive any additional shares as a result of the stock split.
The Company’s financial statements and footnotes give retroactive effect to this stock split.
NOTE 7 – SUBSEQUENT EVENT
On October 10, 2012, the Company increased the authorization of common shares from 25,000,000 (par value $0.001) to 500,000,000 (par value $0.001). In addition, the Company authorized a twenty-for-one forward stock split for common shareholders, which increased the outstanding common shares from 9,245,600 to 184,912,000.
The Company has evaluated subsequent events through October 16, 2012, the date which the financial statements were available to be issued. Except as disclosed above, there were no material events noted that would require adjustment to or disclosure in these financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The registrant offers real estate management services. Our performance will be significantly affected by changes in general economic conditions and, specifically, shifts in consumer confidence and spending. Additionally, our performance will be affected by competition. Management believes that as the industry continues to consolidate, competition with respect to price will intensify. Such a heightened competitive pricing environment will make it increasingly important for us to successfully distinguish ourselves from competitors based on quality and superior service and operating efficiency.
We have neither engaged in any material operations nor generated any significant revenues to date. Our only activities since inception have been organizational activities and those necessary to prepare for this offering.
We are currently not aware of any other known material trends, demands, commitments, events or uncertainties that will have, or are reasonably likely to have, a material impact on our financial condition, operating performance, revenues and/or income, or results in our liquidity decreasing or increasing in any material way.
Results of Operations
For the three months ended September 30, 2012, we had revenues of $500. We had accounting expenses of $2,500, resulting in total operating expenses of $2,500 for the period. For the three months ended September 30, 2012, we had a net loss of $2,000.
For the three months ended September 30, 2011, we had revenues of $1,000. As a result, we had net income of $1,000 for the three months ended September 30, 2011.
For the nine months ended September 30, 2012, we had revenues of $2,600. We had accounting expenses of $5,900, bank service charges of $40, consulting expenses of $14,200, and research and development expenses of $110,000, resulting in total operating expenses of $130,140 for the period. We had a net loss of $127,540 for the nine months ended September 30, 2012.
For the nine months ended September 30, 2011, we had revenues of $2,200. We had operating expenses consisting of accounting expenses of $6,956, bank service charges of $120, and tax and license expenses of $116, resulting in total operating expenses of $7,192 for the period. We had a net loss of $4,992 for the nine months ended September 30, 2011.
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For the period from Inception (October 14, 2010) through September 30, 2012, we generated revenues of $6,185. We had accounting expenses of $23,556, bank service charges of $214, consulting expenses of $40,200, legal and professional expenses of $18,999, research and development costs of $110,000 and state filing fees and permits of $1,500. As a result, we had total operating expenses of $194,469 for the period. For the period from Inception (October 14, 2010) through September 30, 2012, we had a net loss of $188,284.
Liquidity and Capital Resources
We used $131,590 of cash in operating activities for the nine months ended September 30, 2012, an increase of $124,398 compared to the nine months ended September 30, 2011. This increase in cash used is primarily attributable to $110,000 increase in research and development, and $14,200 increase in consulting expenses.
For the period from inception (October 14, 2010) through September 30, 2012, we did not pursue any investing activities.
For the nine months ended September 30, 2012, we received proceeds from officer advances of $19,350, and made a repayment of $400, resulting in net cash provided by financing activities of $18,950.
For the nine months ended September 30, 2011, we received proceeds from officer advances of $7,125, resulting in net cash provided by financing activities.
For the period from inception (October 14, 2010) through September 30, 2012, we received proceeds from officer advances of $38,475, of which we repaid $15,400. We received proceeds from the issuance of common stock of $165,800. As a result, we have net cash provided by financing activities of $188,875 for the period from October 14, 2010 (inception) through September 30, 2012.
Plan of Operations
The registrant has not yet developed its real estate programs.
If we are unable to raise sufficient funds or obtain alternate financing, we may never complete development and become profitable.
Our current cash balance is estimated not to be sufficient to fund our current operations. Mr. Friedman has verbally agreed to personally loan any amounts up to the $50,000 needed to run operations. Any loan provided by Mr. Friedman is due on demand, with no interest. However, we still need to raise sufficient funds to complete the development of our service line. No other financing plans are in place. We may never obtain the necessary financing to complete product development and begin operations.
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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable for a smaller reporting company.
ITEM 4: CONTROLS AND PROCEDURES
During the three months ended September 30, 2012, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of September 30, 2012. Based on this evaluation, our chief executive officer and principal financial officers were not able to conclude that the Company’s disclosure controls and procedures are effective to ensure that information required to be included in the Company’s periodic Securities and Exchange Commission filings is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms. Therefore, under Section 404 of the Sarbannes-Oxley Act of 2002, the Company must conclude that these controls and procedures are not effective.
In connection with the December 31, 2011 audit of our consolidated financial statements and our review of the quarter ended September 30, 2012, our independent auditors identified significant deficiencies that together constitute a material weakness in our internal control over financial reporting. These significant deficiencies primarily relate to our lack of appropriate resources and lack of a sophisticated financial reporting system. The accounting department constituted of one officer who is also the controller. Therefore, we have relied heavily on entity or management review controls to lessen the issue of segregation of duties. Upon receiving adequate financing the Company plans to increase its controls in these areas by hiring more employees in financial reporting, and establishing an audit committee. These significant deficiencies together constitute a material weakness in our internal control over financial reporting.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
As of September 30, 2012, we did not have any off-balance sheet arrangements and did not have any commitments or contractual obligations.
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PART II
ITEM 1. Legal Proceedings
None
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
ITEM 3. Defaults Upon Senior Securities:
None
ITEM 4 Mine Safety Disclosures
Not Applicable
ITEM 5 Other Information:
None
ITEM 6. Exhibits
31 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
101.INS** XBRL Instance Document
101.SCH** XBRL Taxonomy Extension Schema Document
101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF** XBRL Taxonomy Extension Definition Linkbase Document
101.LAB** XBRL Taxonomy Extension Label Linkbase Document
101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith
**XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
/s/Neal Friedman
Neal Friedman
Chief Executive Officer
Principal Financial Officer
Dated: October 31, 2012
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