PeerLogix, Inc. - Quarter Report: 2015 June (Form 10-Q)

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

Quarterly Report Under the Securities Exchange Act of 1934

For Quarter Ended: June 30, 2015

Commission File Number: 333-191175

REALCO INTERNATIONAL, INC.

(Exact name of small business issuer as specified in its charter)

154 Thames Street

Newport, Rhode Island 02840

(Address of principal executive offices)

877-435-5998

(Issuer’s Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes þ  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No þ

The number of shares of the registrant’s only class of common stock issued and outstanding as of August 13, 2015, was 18,990,000 shares.

TABLE OF CONTENTS

PART I.

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

REALCO INTERNATIONAL, INC.

BALANCE SHEET

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

REALCO INTERNATIONAL, INC.

STATEMENT OF OPERATIONS

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

REALCO INTERNATIONAL, INC.

STATEMENT OF CASH FLOWS

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

REALCO INTERNATIONAL, INC.

STATEMENT OF CASH FLOWS - CONTINUED

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

REALCO INTERNATIONAL, INC.

Notes to Financial Statements

As of June 30, 2015

Note 1.     Organization, History and Business

Realco International, Inc. (the “Company”) was incorporated in Nevada on February 14, 2014. Our fiscal year end is December 31.

The Company was established for the purpose of real estate sales and management in Europe, the Middle East and the United States.

Note 2.     Summary of Significant Accounting Policies

Revenue Recognition

Revenue is derived from sales of products to distributors and consumers. Revenue is recognized in accordance with Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements,” as revised by SAB No. 104. As such, the Company recognizes revenue when persuasive evidence of an arrangement exists, title transfer has occurred, the price is fixed or readily determinable, and collectability is probable. Sales are recorded net of sales discounts and terms are recorded by contract.

Accounts Receivable

Accounts receivable is reported at the customers’ outstanding balances, less any allowance for doubtful accounts.  Interest is not accrued on overdue accounts receivable.

Allowance for Doubtful Accounts

An allowance for doubtful accounts on accounts receivable is charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses.  Management determines the adequacy of the allowance based on historical write-off percentages and information collected from individual customers.  Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired.

Stock Based Compensation

When applicable, the Company will account for stock-based payments to employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”).  Stock-based payments to employees include grants of stock, grants of stock options and issuance of warrants that are recognized in the consolidated statement of operations based on their fair values at the date of grant.

The Company accounts for stock-based payments to non-employees in accordance with ASC 505-50, “Equity-Based Payments to Non-Employees.” Stock-based payments to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized in the consolidated statement of operations based on the value of the vested portion of the award over the requisite service period as measured at its then-current fair value as of each financial reporting date.

The Company calculates the fair value of option grants and warrant issuances utilizing the Binomial pricing model.  The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest.  ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.  The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock option or warrant.  The Company estimates forfeiture rates for all unvested awards when calculating the expense for the period.  In estimating the forfeiture rate, the Company monitors both stock option and

REALCO INTERNATIONAL, INC.

Notes to Financial Statements

As of June 30, 2015

Note 2.     Summary of Significant Accounting Policies (continued)

warrant exercises as well as employee termination patterns. The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. 

Loss per Share

The Company reports earnings (loss) per share in accordance with ASC Topic 260-10, “Earnings per Share.” Basic earnings (loss) per share are computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share have not been presented since there are no dilutive securities.

Cash and Cash Equivalents

For purpose of the statements of cash flows, the Company considers cash and cash equivalents to include all stable, highly liquid investments with maturities of three months or less.

Concentration of Credit Risk

The Company primarily transacts its business with one financial institution. The amount on deposit in that one institution may from time to time exceed the federally-insured limit.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Business Segments

ASC 280, “Segment Reporting” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company determined it has one operating segment as of June 30, 2015.

Income Taxes

The Company accounts for its income taxes under the provisions of ASC Topic 740, “Income Taxes.” The method of accounting for income taxes under ASC 740 is an asset and liability method. The asset and liability method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities.

REALCO INTERNATIONAL, INC.

Notes to Financial Statements

As of June 30, 2015

Note 2.     Summary of Significant Accounting Policies (continued)

Emerging Growth Company

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.

Recent Accounting Pronouncements

On June 10, 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-10, Development Stage Entities (Topic 915) – Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which eliminates the concept of a development stage entity (DSE) in its entirety from current accounting guidance. The Company has elected early adoption of this new standard.

The Company has implemented all other new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. 

Note 3.     Income Taxes

The Company is currently operating at approximately a breakeven rate on an interim basis. Deferred income tax assets and liabilities will be computed annually for differences between financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. 

The effective tax rate on the net loss before income taxes differs from the U.S. statutory rate as follows: 

REALCO INTERNATIONAL, INC.

Notes to Financial Statements

As of June 30, 2015

Note 3.     Income Taxes (continued)

The significant components of deferred tax assets and liabilities are as follows:

On an interim basis, the Company has a net operating loss of $80,714. Any future operating losses will be netted against this income for income tax reporting purposes, which will expire in various years through 2032, if not previously utilized. However, the Company’s ability to use the carryover net operating loss may be substantially limited or eliminated pursuant to Internal Revenue Code Section 382.  The Company adopted the provisions of ASC 740-10-50, formerly FIN 48, and “Accounting for Uncertainty in Income Taxes”. The Company had no material unrecognized income tax assets or liabilities as of June 30, 2015. 

The Company’s policy regarding income tax interest and penalties is to expense those items as general and administrative expense but to identify them for tax purposes. During the three months ended March 31,2015, there was no income tax, or related interest and penalty items in the income statement, or liabilities on the balance sheet. The Company files income tax returns in the U.S. federal jurisdiction and Nevada state jurisdiction. We are not currently involved in any income tax examinations. 

Note 4.     Related Party Transactions

Steven Allen Friedman, a former officer and director, has lent the Company a net total of $ 36,289. For the six months ended June 30, 2015, he lent the Company $11,680. These funds have been used for working capital to date.

Note 5.     Stockholders’ Equity

Common Stock

The holders of the Company's common stock are entitled to one vote per share of common stock held. As of June 30, 2015, the Company had 18,990,000 shares issued and outstanding.

REALCO INTERNATIONAL, INC.

Notes to Financial Statements

As of June 30, 2015

Note 6.     Commitments and Contingencies

Commitments:

The Company currently has no long term commitments as of our balance sheet date.

Contingencies:

None as of our balance sheet date.

Note 7.     Net Income (Loss) Per Share

The following table sets forth the information used to compute basic and diluted net income per share attributable to Realco International, Inc. for the six months ended June 30, 2015 and 2014:

Note 8.     Notes Payable

Notes payable consist of the following for the periods ended:

REALCO INTERNATIONAL, INC.

Notes to Financial Statements

As of June 30, 2015

Note 9.     Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Currently, the Company has a net operating loss and a negative working capital with very limited operating history. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management believes that the Company’s capital requirements will depend on many factors including the success of the Company’s development efforts and its efforts to raise capital. Management also believes the Company needs to raise additional capital for working capital purposes. There is no assurance that such financing will be available in the future.   The conditions described above raise substantial doubt about our ability to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 10.    Subsequent Events

On August 13, 2015 (the “Closing Date”), we entered into a Share Exchange Agreement (the “Agreement”) with PeerLogix Technology, Inc. (“PeerLogix “) and its shareholders. Pursuant to the terms of the Agreement, all of the shareholders of PeerLogix will exchange all of their shares of common stock on a 1 for 1 basis for an aggregate of 17,050,002 newly issued shares of our Common Stock (the “Exchanged Stock”). As a result, PeerLogix will become our wholly owned subsidiary. The Share Exchange will become effective upon the filing of Articles of Share Exchange with the Nevada Secretary of State, which is expected to occur early next week.

Simultaneously with the Share Exchange, on the Closing Date: (i) the holder of 18,000,000 shares of our Common Stock agreed to voluntarily redeem its shares back to us; (ii) we took action to undertake a forward split of our issued and outstanding Common Stock after the aforesaid redemption but before the issuance of the Exchanged Stock on a 4.04:1 ratio in order to establish our issued and outstanding Common Stock at 990,000 shares prior to issuance of the Exchange Stock. The effective date of this forward split will be announced shortly; and (iii) all of the issued and outstanding options and warrants to purchase shares of PeerLogix common stock were exchanged, respectively, into options (the “New Options”) and warrants (the “New Warrants”) to purchase shares of our Common Stock. The number of shares of Common Stock issuable under, and the price per share upon exercise of, the New Options and the New Warrants were the same as those of the original options and warrants of PeerLogix, as a result of a 1 for 1 exchange ratio of securities pursuant to the Share Exchange.

As a result of the Share Exchange, our management resigned their positions with our Company and were replaced by management of PeerLogix.

We intend to file a Form 8-K advising of the execution of the Agreement, the contents of which are incorporated herein as if set forth.

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.

Overview and History

Realco International, Inc., a Nevada corporation (“we”, “us”, “our”, or the “Company”) was incorporated on February 14, 2014. We offer real estate marketing and sales services to individuals and businesses seeking to purchase international real estate, with a particular focus on the European and Middle Eastern markets. Initially we expect to focus our marketing and sales efforts on a range of new construction located in Israel. We also intend to offer related property management services for our clients, as well as consulting services, including site selection on new construction projects.  To date, we offer real estate sales services for a commission rate ranging from 3% to 5%.

We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

We also qualify as a smaller reporting company under Rule 12b-2 of the Securities Exchange Act of 1934, as amended. As a smaller reporting company and so long as we remain a smaller reporting company, we benefit from similar exemptions and exclusions as an emerging growth company. In the event that we cease to be an emerging growth company as a result of a lapse of the five year period, but continue to be a smaller reporting company, we would continue to be subject to similar exemptions available to emerging growth company until such time as we were no longer a smaller reporting company.

There is very little historical financial information about us upon which to base an evaluation of our performance. We are a development stage corporation and have only begun to generate revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources and possible cost overruns due to price and cost increases in products.

Our principal place of business is located at 154 Thames Street, Newport, Rhode Island 02840.  Our phone number is 877-435-5998.

We have not been subject to any bankruptcy, receivership or similar proceeding.

Results of Operations

Comparison of Results of Operations for the six months ended June 30, 2015 and 2014

We were incorporated on February 14, 2014 and did not commence operations until March 2014. We did not generate any revenues during the six months ended June 30, 2015, but did generate revenues of $10,750 during the six months ended June 30, 2014. Operating expenses for the three month period ended June 30, 2015 were $45,461 during the six months ended June 30, 2015, compared to $11,289 for the six months ended June 30, 2014, an increase of $34,172. This increase is primarily as a result of increased consulting fees totaling $27,500, compared to $5,000 in consulting fees incurred during the six months ended June 30, 2014. In addition, professional fees increased by $5,000 during the six months ended June 30, 2015 compared to the similar period in 2014.

As a result, we incurred a net loss of $45,461 during the six months ended June 30, 2015 (approximately $0.002 per share), compared to a net loss of $539 during the six months ended June 30, 2014 (less than $0.01 per share).

Comparison of Results of Operations for the three months ended June 30, 2015 and 2014

We did not generate any revenues during the three months ended June 30, 2015, but did generate revenues of $5,750 during the three months ended June 30, 2014. Operating expenses for the three month period ended June 30, 2015 were $22,412 during the three months ended June 30, 2015, compared to $4,000 for the three months ended June 30, 2014, an increase of $18,412. This increase is primarily as a result of increased consulting fees totaling $5,000 during the three months ended June 30, 2015, compared to no such fees incurred during the three months ended June 30, 2014. In addition, professional fees increased by $12,150 during the three months ended June 30, 2015 compared to the similar period in 2014.

As a result, we incurred a net loss of $23,049 during the three months ended June 30, 2015 (less than $0.01 per share), compared to a net loss of $2,289 during the three months ended June 30, 2014 (less than $0.01 per share).

Liquidity and Capital Resources

We had $16,866 in cash at June 30, 2015.

We raised an aggregate of $22,300 from our S-1 registered offering during 2014 and we believe these funds will be sufficient to meet our needs until we identify and consummate an acquisition or merger with a third party, of which there can be no assurance.

Because we are currently subject to the reporting requirements of the Exchange Act of 1934, we expect that we will incur ongoing expenses associated with professional fees for accounting, legal and other expenses for annual reports and proxy statements.  We estimate that these costs could range up to $30,000 per year for the next few years and will be higher if our business volume and activity increases but lower during the first year of being public because we will not yet be subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002.   

To date, our operations have been limited and we have only generated nominal revenues. We believe that our principal difficulty has been the lack of available capital to operate and expand our business.  We believe we need additional funding for working capital and general and administrative expense.   As of the date of this Report we have no commitment from any investor or investment-banking firm to provide us with the necessary funding and there can be no assurances we will obtain such funding in the future.  Failure to obtain this additional financing will have a material negative impact on our ability to generate profits in the future.  As of the date of this report we have borrowed funds from our prior management and anticipate that we will need to borrow additional funds either from our current management, our shareholders or a third party until such time as we begin generating revenues. There are no assurances we will begin generating revenues in the immediate future, or thereafter.

Inflation

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the three-month period ended June 30, 2015.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management maintains “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer/Chief Financial Officer, to allow timely decisions regarding required disclosure.

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by management, with the participation of our Chief Executive Officer/Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2015.

Based on that evaluation, management concluded, as of the end of the period covered by this report, that our disclosure controls and procedures were effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Controls over Financial Reporting

As of the end of the period covered by this report, there have been no changes in the internal controls over financial reporting during the quarter ended June 30, 2015, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting subsequent to the date of management’s last evaluation.

PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

We are not currently a party to any legal proceeding, nor are we aware of any threatened actions.

Item 1A.    Risk Factors

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

No securities were issued during the six months ended June 30, 2015.

Item 3.    Defaults upon Senior Securities

None.

Item 5.    Other Information

None.

Item 6.    Exhibits

The following exhibits are included with this report.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on August 14, 2015.

REALCO INTERNATIONAL, INC. 

By: s/ Jay Lasky

Jay Lasky, Principal Executive Officer,

Principal Accounting Officer and

Principal Financial Officer