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TMCNet:  REAL ESTATE CONTACTS, INC. - 10-Q/A - Management's Discussion and Analysis of Financial Condition and Results of Operations

[November 15, 2012]

REAL ESTATE CONTACTS, INC. - 10-Q/A - Management's Discussion and Analysis of Financial Condition and Results of Operations

(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Report. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.


The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Plan of Operations Our plan of operation is to operate the most definitive online video network and search engine portal for real estate. We want to position our company as the first of its kind national real estate search engine/social community/media video network that matches buyers, sellers, brokers, and professionals anywhere in the world through rich and social media.

Our website allows real estate professionals and consumers to interact through the internet as a business medium. The Company's operating strategy is to feature real estate professional's websites on the RealEstateContacts.com portal website in the areas that they service and work enabling potential home buyers to view real estate listings and homes that are for sale and featured on the real estate agency's website. This format is called a lead generation program for real estate professionals that are on the RealEstateContacts.com portal website.

Our business strategy is an ease of use approach which allows the consumer to view listings of homes from the website and video channel of their local real estate office or agent. In addition, our website will feature no more than five agents per territory. This policy will eliminate a substantial amount of the competition for the real estate agent, broker and office. For this reason we believe our concept will have a high level of interest from any real estate professional.

Currently while there are other real estate directories and portals on the internet only a select few feature real estate agents on a semi-exclusive basis.

We believe this approach will be attractive to real estate professionals in each locale.

We will also have the technology to focus on online media, particularly video.

We will provide an online National Real Estate Video Listings Network that will include rich media content including weekly and monthly shows by region which can be sold to sponsors and to affiliates by territory.

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

Real Estate Contacts, Inc. will offer affiliate territories for local publishing of online real estate video channels in many areas, where our affiliate partner can own their own video channel, manage the publishing and display hundreds of video properties in a true television format through one simple tool giving real estate professionals exposure for their properties in less time and for less money.

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

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

We plan to grow revenues in the next 12 months by undertaking the following steps: 13 -------------------------------------------------------------------------------- · Devote greater resources to marketing and selling our services such as developing and creating a more productive advertising sales division within our company by the hiring of advertising sales account executives.

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

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

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

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

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

· We plan to advertise on internet search engines and other websites, and supplement this advertising with other media to help manage and geographically target consumer traffic and lead volume.

· We plan to increase our online Search Engine Marketing to create more unique users. Measuring unique users is important to us because our advertising revenues depend in part on our ability to enable our consumers to connect with real estate professionals. We define a unique user as a user who visits our website at least once during a calendar month, as measured by our analytical tools.

· The number of real estate subscribers (advertiser) on our website is an important driver of revenue growth because each subscriber pays us a yearly fee to participate in the advertising of their services.

· Build, develop, market and hire national sales account advertising executives and create additional revenues by offering real estate professionals for a yearly advertising fee the opportunity to have their own real estate video channel on the internet.

Limited Operating History We have generated a limited financial history and have not previously demonstrated that we will be able to expand our business through increased investment in marketing activities. We cannot guarantee that the expansion efforts described in this Registration Statement will be successful. The business is subject to risks inherent in growing an enterprise, including limited capital resources and possible rejection of our business model and/or sales methods.

Future financing may not be available to us on acceptable terms. If debt financing is not available or not available on satisfactory terms, we may be unable to continue expanding our operations. Equity financing will result in a dilution to existing shareholders.

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

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

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

14 -------------------------------------------------------------------------------- Capital Resources and Liquidity The Company is currently financing its operations primarily through loans, equity sales and advances from shareholders. These advances are being made to supplement any cash generated by the operating revenue. We believe we can currently satisfy our cash requirements for the next twelve months with our current expected increase in revenue, and the expected capital to be raised in private placement and sales of our common stock. Additionally, we will begin to use our common stock as payment for certain obligations and secure work to be performed. Management plans to increase revenue in order to sustain operations for at least the next twelve months.

At September 30, 2012 the Company has cash in the amount of $21,863. Management does not believe that is has adequate cash resources to meet current obligations, as the amount represents less than one month of operating expenses.

The Company anticipates increasing revenue, which will mitigate partial cash flow deficiencies, however at the present time our revenues will not cover our cash requirements. Management believes that financial support from the majority shareholder to pay minimal and necessary incurred expense will allow the Company to benefit from advertising revenue streams, currently in-place, to produce the anticipated cash flow necessary to support operations.

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

Based upon the above, we do not believe we have enough cash to support our daily operations for the next 12 months while we are attempting to expand operations and produce revenues. We estimate the Company needs an additional $250,000 to fully implement its business plans over the next twelve months. In addition, we anticipate we will need a minimum of $80,000 to cover operational and administrative expenses for the next twelve months. The majority shareholder has committed to cover any cash shortfalls of the Company, although there is no written agreement or guarantee. If we are unable to satisfy our cash requirements we may be unable to proceed with the Offering and our plan of operations.

Future financing for our operations may not be available to us on acceptable terms. To raise equity will require the sale of stock and the debt financing will require institutional or private lenders. We do not have any institutional or private lending sources identified. If debt financing is not available or not available on satisfactory terms, we may be unable to continue expanding our operations. Equity financing will result in a dilution to existing shareholders.

The foregoing represents our best estimate of our cash needs based on current planning and business conditions. In the event we are not successful in reaching our initial revenue targets, additional funds may be required, and we may not be able to proceed with our business plan for the development and marketing of our core services. Should this occur, we will suspend or cease operations.

We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.

Recent Accounting Pronouncements The Financial Accounting Standards Board and other standard-setting bodies issued new or modifications to, or interpretations of, existing accounting standards during the year. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation's reported financial position or operations in the near term.

These recently issued pronouncements have been addressed in the footnotes to the financial statements included in this filing.

Critical Accounting Policies and Estimates Deferred Revenue Deferred revenues are derived from the unearned portion of advertising subscriptions. Advertising revenue is generated primarily from annual subscription transactions. Revenue is earned ratably over the expired portion of the subscription term. The unearned portion is deferred until earned through the passage of time based on the subscription term.

Revenue Recognition The Company recognizes revenue on arrangements in accordance with FASB ASC No.

605, Revenue Recognition. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured.

Consideration for future advertising services are made by customers in advance of those services being provided. Advertising revenue is recognized ratably over the period that the services are subscribed, generally a one year period.

The unearned portion of the advertising revenue is deferred until future periods in which the subscription is earned.

15 -------------------------------------------------------------------------------- The Company has not issued guarantees or other warrantees on the advertising subscription success or results. The Company has not experienced any refund requests or committed to any adjustments for terminated subscriptions. The Company does not believe that there is any required liability.

Off-Balance Sheet Arrangements The company does not have any off-balance sheet arrangements.

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