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PMX COMMUNITIES, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

May 12, 2014

Trends and Uncertainties

The registrant has developed its PMX Gold Bullion Dispensing Terminal prototype called the MGIV and deployed the first prototype in Boca Raton, Florida, U.S.A. The terminal is an unmanned dispenser, which allows for gold dispensing and deposit and account management functions. These terminals also incorporate conventional ATM and touch-screen technology. After a successful 6 months test, the MGIV was removed in July 2013 from the first location.

The registrant has been assigned the ownership rights to two U.S. Provisional Patent Applications and a final International Patent Application Number PCT/US2012/020486 ("Unattended Precious Metal Distribution System, Methods and Apparatus"), and has filed next stage patent applications for its proprietary precious metals machine, in Australia, South Africa and the United States of America.

Our precious metals business operations were focused in three areas. The first original focus was the consumer demand for essentially one commodity gold through a dispensing terminal. Specifically, we were addressing the markets of physical gold ownership by retail investors, as well as developing and offering an ancillary set of financial services that would complement the purchase and sale of gold and other precious metals by retail investors. Any decrease in demand for gold or gold investments could still materially adversely affect our revenues in this area and profitability and general business prospects. The second revenue stream our online PMX Goldstore, which sells 24k bullion gold bars and coins, launched in August and we still believe is a viable marketplace for buyers of gold bullion. Our third business operation focused in precious metals will involve the sales of our dispensing terminals globally through direct sales and distributor channels. We are presently working with various groups to develop this footprint internationally.

In this quarter we widened our terminal product line to develop new machines on the platform of the original MGIV gold terminal. PMX started due diligence in states that have passed legislation to permit businesses in medical marijuana and recreational marijuana dispensaries. The research was conducted to accumulate information to decide whether the terminal would be an efficient machine to place in dispensaries. The company concluded that the ability to enter this new marketplace could potentially be a new revenue producing opportunity. The registrant will continue working with consultants and lawyers in these states to develop a compliant terminal to quickly deploy to dispensaries hopefully in the second quarter. The commercialization of any industry has barriers to entry that change quickly and PMX is hopeful that the terminal will meet them. There are risks that the company must consider but since the terminal is built on the same platform as the MGIV gold terminal, PMX feels the costs to develop this terminal are minimal.

9 Results of Operations



For the three months ended March 31, 2014, we did not earn any revenues. We had depreciation costs of $7,934 and selling, general and administrative expenses of $106,038. We paid interest expenses of $9,377. As a result, we had a net loss of $123,349 for the three months ended March 31, 2014.

Comparatively, for the three months ended March 31, 2013, we earned revenues of $19,143. Our cost of sales was $13,966, resulting in a gross profit of $5,177.

We paid depreciation expenses of $6,957 and selling, general and administrative expenses of $139,096. We paid interest expenses of $6,451. As a result, we had a net loss of $147,327 for the three months ended March 31, 2013.

The $23,978 difference between the three months ended March 31, 2014 and 2013 is primarily the result of decreased selling, general and administrative expenses during 2014 due to minimal operations. We did not earn any revenues during the three months ended March 31, 2014, though this is expected to change once the business focus has shifted to the medical and recreational marijuana industry.

Liquidity and Capital Resources

For the three months ended March 31, 2014, we had a net loss of $123,349. We had depreciation of $7,934 and we issued common stock for services with a value of $95,000. We had a negative change in accounts payable of $94 and an increase in accrued interest of $9,377. As a result, we had net cash used in operating activities of $11,132 for the three months ended March 31, 2014.

For the three months ended March 31, 2013, we had a net loss of $147,327. We had depreciation of $6,957 and we issued common stock for services with a value of $62,000. We had a positive change in inventory of $12,905 and a negative change due to prepaid expenses and other current assets of $1,807. We had a positive change of $7,025 for accounts payable and for accrued interest of $6,451. We had a negative change of $2,292 for accrued expenses. As a result, we had net cash used in operating activities of $56,088 for the three months ended March 31, 2014.

For the three months ended March 31, 2014, we did not pursue any investing activities.

For the three months ended March 31, 2013, we purchased fixed assets of $24,183, resulting in net cash used in investing activities of $24,183 for the period.

For the three months ended March 31, 2014, we received $11,473 as proceeds from related party notes payable and spent $1,400 on payments on a related party short term loan. As a result, we had net cash provided by financing activities of $10,073 for the three months ended March 31, 2014.

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For the three months ended March 31, 2013, we received $86,000 as proceeds from the issuance of stock. As a result, we had net cash provided by financing activities of $86,000 for the three months ended March 31, 2013.

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 fulfillment of the registrant's business plan. It is our intent to secure a market share in the retail gold and related financial services market, and in the medical and recreational marijuana market, 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 our PMX Gold Dispensing Terminals are developed and put into use and positive cash flow product is generated.

Our capital strategy is to increase our near and mid term cash balance through financing transactions, including the issuance of debt and/or equity securities. Once our PMX Gold ATM terminal prototypes have been developed and put into the field we intend to work with our accountants and SEC counsel and develop a Pro-Forma financial model based on their results and pursue traditional Wall Street financing.

Going Concern



To date, the registrant has incurred significant losses. The registrant'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 registrant's ability to continue as a going concern.

Off-Balance Sheet Arrangements

The registrant had no material off-balance sheet arrangements as of March 31, 2014.

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.

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The registrant uses the fair value recognition provision of ASC 718, "Compensation-Stock Compensation," which requires the registrant to expense the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of such instruments. The registrant uses the Black-Scholes option pricing model to calculate the fair value of any equity instruments on the grant date.

The registrant also uses the provisions of ASC 505-50, "Equity Based Payments to Non-Employees," to account for stock-based compensation awards issued to non-employees for services. Such awards for services are recorded at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50.

New Accounting Pronouncements

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


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Source: Edgar Glimpses