UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 2012
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________________ to __________________
Commission file number: 001-33968
Psychic Friends Network, Inc.
(Exact name of registrant as specified in its charter)
Nevada 45-4928294
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2360 Corporate Circle, Suite 400, Henderson, NV 89074-7722
(Address of principal executive offices) (Zip Code)
1-702-608-7360
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ] Yes [X] No
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act: [ ] Yes [X] No
Indicate by check mark whether the registrant(1) has filed all reports required
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 day. [X] Yes [ ] No
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 (ss.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). [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not 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
the definitions of "large accelerated filer," "accelerated filer" 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 [X] No
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: $24,467,500 at March 31, 2012.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 84,016,334 shares of common
stock as of January 8, 2013
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference certain information from the registrant's
definitive informational statement for the 2013 Annual Meeting of Shareholders
to be filed on or before January 30, 2013.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. All statements
other than statements of historical fact are "forward-looking statements" for
purposes of federal and state securities laws, including, but not limited to,
any projections of earnings, revenue or other financial items; any statements of
the plans, strategies and objections of management for future operations; any
statements concerning proposed new services or developments; any statements
regarding future economic conditions or performance; any statements or belief;
and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words "may," "could," "estimate,"
"intend," "continue," "believe," "expect" or "anticipate" or other similar
words. These forward-looking statements present our estimates and assumptions
only as of the date of this report. Except for our ongoing securities laws, we
do not intend, and undertake no obligation, to update any forward-looking
statement. Although we believe that the expectations reflected in any of our
forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed in any or our forward-looking
statements. Our future financial condition and results of operations, as well as
any forward-looking statements, are subject to change and inherent risks and
uncertainties. The factors impacting these risks and uncertainties include, but
are not limited to; increased competitive pressures from existing competitors
and new entrants; our ability to efficiently and effectively finance our
operations; deterioration in general or regional economic conditions; adverse
state or federal legislation or regulation that increases the costs of
compliance; ability to achieve future sales levels or other operating results;
the fact that our accounting policies and methods are fundamental to how we
report our financial condition and results of operations, and they may require
management to make estimates about matters that are inherently uncertain; the
psychic services market; our ability to develop a fully-functioning web portal;
changes in U.S. GAAP or in the legal, regulatory and legislative environments in
the markets in which we operate; inability to efficiently manage our operations;
the inability of management to effectively implement our strategies and business
plans; and the other risks and uncertainties detailed in this report.
Throughout this Annual Report on Form 10-K references to "we", "our", "us",
"PFN", "the Company", and similar terms refer to Psychic Friends Network, Inc.
2
PSYCHIC FRIENDS NETWORK, INC.
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 2012
INDEX TO FORM 10-K
Page
----
PART I
Item 1 Business....................................................... 4
Item 1A Risk Factors................................................... 7
Item 1B Unresolved Staff Comments...................................... 7
Item 2 Properties..................................................... 7
Item 3 Legal Proceedings.............................................. 7
Item 4 Mine Safety Disclosures........................................ 7
PART II
Item 5 Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.............. 8
Item 6 Selected Financial Data........................................ 9
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 9
Item 7A Quantitative and Qualitative Disclosures About Market Risk..... 12
Item 8 Financial Statements and Supplementary Data.................... 12
Item 9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure....................................... 12
Item 9A Controls and Procedures........................................ 13
Item 9B Other Information.............................................. 13
PART III
Item 10 Directors, Executive Officers and Corporate Governance......... 14
Item 11 Executive Compensation......................................... 14
Item 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters................................ 14
Item 13 Certain Relationships and Related Transactions, and Director
Independence................................................... 14
Item 14 Principal Accounting Fees and Services......................... 14
PART IV
Item 15 Exhibits, Financial Statement Schedules........................ 15
3
PART I
ITEM 1 BUSINESS
CORPORATE HISTORY AND BACKGROUND
We were incorporated on May 9, 2007 under the laws of the state of Nevada. Our
registered offices are located at 2360 Corporate Circle, Suite 400, Henderson,
NV, 89074-7722 and our sales, customer service and administrative offices are
located at 5209 Wilshire Blvd., Los Angeles, CA 90036. Our website is
www.psychicfriendsnetwork.com.
Our original business was providing web services and products that enabled small
and medium-sized businesses to establish, maintain, promote and optimize their
Internet presence. We were not able to secure sufficient revenue or financing to
continue our original business and this business has been discontinued.
On January 27, 2012 we changed our business to that providing psychic
consultation services under the trade name "The Psychic Friends Network".
ACQUISITION OF PSYCHIC FRIENDS NETWORK
On January 27, 2012, we entered acquired certain assets related to providing
psychic consultation services under the trade name "The Psychic Friends
Network". On March 30, 2012 we closed such asset purchase with PFN Holdings,
Inc. pursuant to which we acquired a number of assets related to providing
psychic consultation services under the trade name "The Psychic Friends Network"
in exchange for 50,600,000 shares of our common stock. In conjunction with this
acquisition, our prior sole director and officer Ya Tang Chao cancelled
50,000,000 shares of our common stock.
In conjunction with the asset purchase agreement, we also entered into a
financing agreement with Right Power Services Ltd., a British Virgin Islands
company. Pursuant to the financing agreement, Right Power Services provided us
with a total of $745,000 in equity financing.
BUSINESS
OUR SERVICES
We are an entertainment company that plans to provide live psychic advice via
telephone and the internet, as well as daily and weekly horoscopes. We plan to
generate revenue via "per minute'" or "on demand" phone charges as well as
web-based fees. In addition, we are in the process of adding several new
channels to generate revenue, including mobile applications, and internet audio,
video and text chat. Our business is reliant on a large volume of small
customers and, therefore, we are not dependent on any one group of customers.
Our management operated a phone service during the 1990's under the brand "The
Psychic Friends Network". At the peak of its popularity in the 1990's, The
Psychic Friends Network averaged 14,000 calls per day, and the average customer
spent approximately $350-$400 over a 12-month period. Unfortunately, due to
certain legislative and regulatory changes which allowed customers to retain
their phone service while not paying for 900 number charges, the company was
forced to file for bankruptcy reorganization protection in 1998. By 1999, our
officers Mike and Marc Lasky had repurchased all of the material intellectual
property assets from the bankruptcy trustee. These assets were subsequently
transferred to PFN Holdings.
Since we acquired the PFN Holdings' assets, we have commenced working on a new
updated website that we call PFN 2.0. The main focus will be to capitalize on
current technologies and social media as well as increasing the overall
experience for our customers. This website had its soft launch in October 2012.
With the launch of PFN 2.0, we anticipate that we will be able to provide
customers with multiple connections to our advisors, including toll free and
click to call telephone services, audio, video and text chat internet services,
and mobile phone applications and SMS services.
Currently, PFN 2.0 is capable of providing the service of connecting customers
for one-on-one telephone calls with psychics. The one-on-one call service is the
core business of The Psychic Friends Network. People can call from the comfort
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of their homes, offices, or wherever they choose, and they will be instantly
connected to their favorite Master Psychic, for a confidential reading. Callers
have the option to choose a psychic by category, such as, Tarot, Astrology, Love
& Relationships, Money and Career, Dreams or even Past Lives. They may also
choose to speak to the next available psychic or to speak to the same psychic
each time they call, which allows them to establish an ongoing relationship,
simply by calling that psychic's extension. Callers can choose to pay by credit
card, debit card, pay by check, or by using pre-paid Gift Cards. The prices that
we charge are flexible, so that we are able to test multiple pricing points to
see what will optimize profits. We plan to offer first time caller promotional
rates. The key is to get new callers in the door. Historically, we found that
over 65% of our callers end up calling back. We believe this is primarily due to
the stringent selection process we have for choosing the psychics we engage for
our service.
With the advent of new technologies, like Mobile applications, VOIP, and social
media tools, we will be able to offer psychics from all over the world, and
accept international calls from customers. We believe that these technological
improvements will allow us to capture a large audience. As part of the PFN 2.0
website we are developing, we will be including a number of services which we
were not previously able to offer. These are currently under development and
include:
* ONE-ON-ONE WEB-BASED READINGS: A new feature that we plan to offer is the
ability for customers to connect to their psychic through our new "Skype"
like feature. This means that the customer can log into their account and
in real time check the bios, specialty categories and availability of all
of our psychics. Once they find their account and then choose their
available psychic, they will be able to instantly chat with that psychic.
We plan on integrating the ability to text chat, audio only chat and video
chat. The video chat feature will allow customers to see the psychics and
see the psychic's action, such as Tarot cards being flipped for the
reading. In addition to the improvement in the customer service experience,
this service will also allow us to increase the efficiency of our
scheduling. If the psychic is unavailable, a customer can actually log in
to their account and schedule a reading in the near future. This is
advantageous to the customer as well as the psychic, who does not have to
sit by their computer and phone, hoping for calls to come in. Like our
phone-based readings, customers will have the option to pay by credit card,
debit card, personal check, or by using pre-paid gift cards. They can
choose to pre-pay for minute packages as well as get discounted monthly
subscription rates. The purchases can be made online or by calling in over
the phone.
* MOBILE APPLICATIONS: Thanks to the advances in mobile technology, we plan
to offer several ways for our customers to get our Psychic branded content
through mobile phones in ways which we were not able to take advantage of
previously. This includes PSMS, Bill to mobile, and Mobile Applications for
the iPhone, Blackberrry and Android based phones.
* PSMS or Premium SMS, allows the caller to send a text message with our
branded keywords, to our short code. Through this type of service, we will
be able to offer a daily horoscope sent to our customers' mobile phones.
The billing for this service will show up as a monthly item on their mobile
phone invoice. We also plan to offer live psychic advice through mobile
devices that allow users to send a text to one of our live psychics and
receive an immediate reply. We anticipate that we will be charging $0.99
per message received, also billed directly through the customer's mobile
phone invoice.
* Bill to Mobile is a new service that we plan to offer, which will allow our
customers to pay via their mobile phone, instead of by credit card, debit
card, or check. This will be a convenient way for customers to pay for our
services, instead of having to find a credit card or other form of payment.
* We anticipate that mobile applications will become a major part of our
psychic content offerings. We have begun developing various mobile
applications that our customers will be able to download directly from the
application stores on their mobile phones. We plan to offer live psychic
readings, as well a Astrological content. The applications will be free to
download, but after a short free trial, the content will be paid.
5
MARKETING
During the 1990's and early 2000's, our management operated Psychic Friends
Network, a company involved in connecting customers for one on one telephone
calls with psychics under the same trademark: "The Psychic Friends Network".
This company only had market presence in the U.S and Canada; made up primarily
of women, 30-60 years old, and skewed towards African Americans. We believe that
the our target market is much larger today, due in part to new technologies like
the Internet, mobile phones and social media. We believe that our new offerings
will expand our market to individuals from 18-65, of all races. This market will
likely still be predominated by women, but we believe that more men will be
interested in our Internet and social media offerings than they would be in one
on one phone interaction. We believe that the market for psychic services is
substantial. An example of the size of the potential market, and also a
potential advertising venue for our services, is a syndicated radio show called
Coast to Coast. The show attracts an estimated 4.5 million listeners every
night, making it the most listened to late night show in North America.
In addition, we can now access customers in international jurisdictions because
of the new technologies that allow anyone to connect directly to one of our
psychics at the push of a button in real time. Additionally, many of the new
markets which will have access to our services, such as China and India, already
have strong traditions or connections to psychic phenomenon.
During the peak of The Psychic Friends Network, the company was averaging 14,000
calls per day, and 90% of the callers were generated through TV advertising.
Currently, there are virtually no psychic phone services being advertised on
television. The few competitors that we have are almost exclusively adverting on
the Internet. This provides us an opportunity to take advantage of a vastly
underserved market.
We plan to advertise and market our services via the following avenues:
INFOMERCIALS - we anticipate that paid advertisements on television/radio will
be used to provide information about our services and direct traffic to our
different mediums.
WEB-BASED ANALYTICS - we plan to use advertisements, social media and search
engine optimization to help inform our target audience as well as make us stand
out from our peers.
WORD OF MOUTH - from historical experience, we believe that our clients will
tend to be repeat customers and friends of past customers. Word of mouth and
positive client experiences are a very important source of marketing and based
on providing a high level of service. With the strength of our brand name both
psychics and customers are very excited about the re-launch.
COMPETITION
The market for psychic services is competitive. We compete with a significant
number of online, telephone and brick and mortar psychic service companies, the
largest of which are Keen, California Psychics, Ask Now. Psychic Source and Live
Person.
Many of our competitors have significant advantages over our Company in terms of
scale, operating histories, number of locations in operation, capital and other
resources. We are a start-up company that has just begun to commence commercial
operations. Accordingly, there can be no assurances that the Company can
successfully compete in our market.
EMPLOYEES
As of September 30, 2012, the Company had three full time consultants and no
employees. Our personnel are responsible for performing or overseeing all
operations of the Company. Specifically, our personnel direct responsibilities
include, but are not limited to, developing our website and mobile application,
seeking the investment capital necessary to commence and build commercial
operations, creating our marketing, branding and sales strategy, driving the
overall services strategy, customer service, operations, and all financial
reporting and general administrative duties.
6
ITEM 1A RISK FACTORS
Not required for a smaller reporting company.
ITEM 1B UNRESOLVED STAFF COMMENTS
Not required for a smaller reporting company.
ITEM 2 PROPERTIES
Our principle corporate offices are located at 2360 Corporate Circle, Suite 400,
Henderson, NV 89074.
Our sales, customer service and administrative offices are located at 5209
Wilshire Blvd., Los Angeles, CA 90036. We are leasing approximately 500 square
feet of office space for a term of Month/Month at a price of $1100 per month.
ITEM 3 LEGAL PROCEEDINGS
None.
ITEM 4 MINE SAFETY DISCLOSURES
Not applicable.
7
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our Common Stock is listed to trade in the over-the-counter securities market
through OTC Markets OTCQB under the symbol "PFNI".
The following table sets forth the quarterly high and low bid prices for our
Common Stock since we began trading on April 17, 2012, as reported by Yahoo!
Finance. The quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission, and may not necessarily represent actual transactions.
Bid Prices ($)
----------------
Quarter Ending High Low
-------------- ---- ---
June 30, 2012 1.10 0.72
September 30, 2012 0.75 0.35
On December 20, 2012, the closing price for our common stock on the OTCQB was
$0.12 per share.
HOLDERS
As of September 30, 2012, we had 23 holders of our common stock.
DIVIDEND POLICY
The payment of dividends in the future rests within the discretion of our Board
of Directors and will depend upon our earnings, capital requirements and
financial condition, as well as other relevant factors. We do not intend to pay
any cash dividends in the foreseeable future, but intend to retain all earnings,
if any, for use in our business.
EQUITY COMPENSATION PLAN INFORMATION
On September 17, 2012, the Company adopted the 2012 PFN Stock Plan ("the Plan").
The total number of shares of stock which may be granted directly by options,
stock awards or restricted stock purchase offers, shall not exceed 8,250,000.
The Plan indicates that the exercise price of an award is equivalent to the
market value of the Company's common stock on the grant date.
The following table gives information about our common stock that may be issued
under our existing equity compensation plans as of September 30, 2012.
Number of Securities
Number of Securities to be Remaining Available for
Issued Upon Exercise of Weighted-Average Exercise Future Issuance Under
Outstanding Options, Price of Outstanding Options, Equity Compensation Plans
Warrants and Rights Warrants and Rights (excluding column (a))
Plan Category (a) (b) (c)
------------- ------------------- ------------------- -------------------------
Equity Compensation Plans 200,000 -- 8,050,000
Approved by Security
Holders
Equity Compensation Plans Not 0 -- n/a
Approved by Security Holders
Total 200,000 -- 8,050,000
8
RECENT SALES OF UNREGISTERED SECURITIES
None.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 6 SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations
should be read in conjunction with the financial statements included herewith.
This discussion should not be construed to imply that the results discussed
herein will necessarily continue into the future, or that any conclusion reached
herein will necessarily be indicative of actual operating results in the future.
YEAR ENDED SEPTEMBER 30, 2012 AND 2011 AND FOR THE PERIOD FROM MAY 9, 2007
(INCEPTION) TO SEPTEMBER 30, 2012:
REVENUE
The Company generated limited gross revenues from its prior business of $1,434
during the period from inception to September 30, 2012, and no revenues during
the years ended September 30, 2012 or 2011. The Company had not yet commenced
commercial operations as of September 30, 2012.
During the development stage, the Company has been primarily focused on
corporate organization and development of our web site and mobile application.
We do not anticipate earning significant revenues until such time we
commercially launch our services platform.
EXPENSES
During the year ended September 30, 2012, total operating expenses for the
Company were $379,494 compared to $20,452 for the year ended September 30, 2011.
The majority of the operating expenses incurred during the year ended September
30, 2012 were consulting, legal, professional and general and administrative
costs for corporate development as a result of the asset acquisition and website
development. Total operating expenses for the period from inception through
September 30, 2012 were $455,663.
NET LOSS
Our net loss for the year ended September 30, 2012 was $379,494 as compared to a
net loss of $20,452 for the year ended September 30, 2011. Our accumulative net
loss for the period from inception to September 30, 2012 was $454,634.
LIQUIDITY AND FINANCIAL CONDITION
As of September 30, 2012, the Company had current assets of $500,898 and current
liabilities of $37,697 compared to current assets of $108 and current
liabilities of $51,280 at September 30, 2011.
Our cash balance as of September 30, 2012 was $499,898 compared to $108 at
September 30, 2011. The increase in cash is a result of net proceeds from the
sale of common stock pursuant to private placements. The Company believes it
currently has sufficient funds to execute its business plan through the second
quarter of 2013.
We anticipate that additional capital will be required to implement our business
plan beyond the second quarter of 2013 and to pay for marketing efforts to
support our revenue forecast for 2013. In order to obtain the necessary capital,
the Company may need to sell additional shares of common stock or borrow funds
from private lenders.
9
Even if we are able to raise the funds required, it is possible that we could
incur unexpected costs and expenses, fail to collect significant amounts owed to
us or experience unexpected cash requirements that would force us to seek
alternative financing. Further, if we issue additional equity or debt securities
as a means of raising additional capital, stockholders may experience dilution
or the new equity securities may have rights, preferences or privileges senior
to those of existing holders of common stock.
PLAN OF OPERATIONS
We are a development stage company in the process of finishing up the final
stages of our Web platform.
We have everything in place from an operations perspective to start our soft
launch during the fourth quarter of 2012, and expect our full launch to take
place during the first quarter of 2013.
During our full launch in the first quarter of 2013, we will take a
multi-faceted approach towards marketing. This will include both online and
offline marketing.
Our Online marketing will include a robust pay per click campaign with google,
bing and yahoo. So that we can hit the ground running we have contacted experts
in the PPC field. We will also do affiliate marketing on a CPA (Cost per
Acquisition) basis. Using this model, we will only pay the affiliated for a paid
customer, and they pay for their own marketing, so it is a very targeted brand
of marketing. We will also be doing some banner ads and contextual marketing,
where we can serve people ads only after they express some sort of interest in
psychics or horoscopes.
Regarding our offline advertising, this is our true strength, as witnessed from
our previous run of success. We already have new television spots produced that
we expect to perform extremely well. These spots were all produced by the same
team that produced the original Psychic Friends Network infomercials.
In addition, we are expecting our mobile app to be finished during the first
quarter of 2013. We believe that our mobile app will be the most successful of
all of our platforms. Mobile advertising has the best ROI, of all forms of
advertising simply because the market is still relatively new, and as such is
not near a saturation point. Furthermore, mobile applications are truly tailor
made for Psychic Friends. For the first time ever we can contact our customer in
their pockets or purses. We can let them know about promo offers, or send them a
horoscope or with them a happy birthday with a discount code. And, the customer
is just a few clicks away from connecting to one of our hand chosen psychics
anytime or anywhere that they have their mobile smart phones.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of America.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements involves the use of
estimates, which have been made using judgment. Actual results may vary from
these estimates.
The financial statements have, in management's opinion, been prepared within the
framework of the significant accounting policies summarized below:
DEVELOPMENT STAGE COMPANY
The Company is considered to be in the development stage, as defined under
Accounting Codification Standard, (ASC 915) "Development Stage Entities". Since
its formation, the Company has not yet realized any revenues from its planned
operations.
RECLASSIFICATIONS
The Company reclassified $780 and $14,377 in "Transfer and filing fees"; $-0-
and $1,500 in "Travel and entertainment", to "General and administrative"
expenses for the year ended September 30, 2011 and for the period from inception
(May 9, 2007) through September 30, 2011, respectively to conform to the current
presentation. The reclassifications had no effect on the Company's financial
condition, results of operation, or cash flows.
10
CASH AND CASH EQUIVALENTS
The Company considers highly liquid financial instruments purchased with a
maturity of three months or less to be 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 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments, consisting of cash and
accounts payable and accrued liabilities, is equal to fair value due to their
short-term to maturity. Unless otherwise noted, it is management's opinion that
the Company is not exposed to significant interest, currency or credit risks
arising from these financial instruments.
REVENUE RECOGNITION
The Company recognizes revenue on an accrual basis. Revenue is generally
realized or realizable and earned when all of the following criteria are met: 1)
persuasive evidence of an arrangement exists between the Company and our
customer(s); 2) services have been rendered; 3) our price to our customer is
fixed or determinable; and 4) collectability is reasonably assured.
PER SHARE DATA
In accordance with "ASC 260 - Earnings per Share", the basic loss per common
share is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common 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. At September 30, 2012 and 2011,
the Company had no stock equivalents that were anti-dilutive and excluded in the
loss per share computation.
STOCK-BASED COMPENSATION
The Company records stock based compensation in accordance with the guidance in
ASC Topic 718 which requires the Company to recognize expenses related to the
fair value of its employee stock option awards. This eliminates accounting for
share-based compensation transactions using the intrinsic value and requires
instead that such transactions be accounted for using a fair-value-based method.
Accordingly, the Company recognized expenses of $2,429 and $0 during the years
ended September 30, 2012 and 2011, respectivelyWEBSITE DEVELOPMENT COSTS
WEBSITE DEVELOPMENT COSTS
The Company capitalizes its costs to develop its website and when preliminary
development efforts are successfully completed, management has authorized and
committed project funding, and it is probable that the project will be completed
and the website will be used as intended. Such costs are amortized on a
straight-line basis over the estimated useful life of the related asset, which
approximates three years. Costs incurred prior to meeting these criteria,
together with costs incurred for training and maintenance, are expensed as
incurred. Costs incurred for enhancements that are expected to result in
additional material functionality are capitalized and expensed over the
estimated useful life of the upgrades.
The Company capitalized website costs of $46,750 for the period from inception
on May 9, 2007 through September 30, 2012. The Company's capitalized website
amortization is included in depreciation and amortization in the Company's
consolidated statements of operations, and totaled $5,503 for the period.
11
ADVERTISING COSTS
Advertising costs are to be expensed as incurred in accordance to Company
policy; for the year ended September 30, 2012, Advertising expenses totaled
$23,778.
INCOME TAXES
The Company records income taxes under the asset and liability method, whereby
deferred tax assets and liabilities are recognized based on the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and attributable to operating loss and tax credit
carryforwards. Accounting standards regarding income taxes requires a reduction
of the carrying amounts of deferred tax assets by a valuation allowance, if
based on the information available it is more likely than not, that such assets
will not be realized. Accordingly, the need to establish valuation allowances
for deferred tax assets is assessed at each reporting period based on a
more-likely-than-not realization threshold. This assessment considers, among
other matters, the nature, frequency and severity of current and cumulative
losses, forecasts of future profitability, the duration of statutory
carryforward periods, the Company's experience with operating loss and tax
credit carryforwards not expiring unused, and tax planning alternatives.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2011, The FASB issued Accounting Standards Update 2011-11,
"Disclosures about Offsetting Assets and Liabilities." This update requires
entities to disclose both gross information and net information about
instruments and transactions eligible for offset in the statement of financial
position and instruments and transactions subject to an agreement similar to a
master netting arrangement. The scope of this update includes derivatives, sale
and repurchase agreements and reverse sale and repurchase agreements and
securities borrowing and lending arrangements. The Company is required to adopt
this update retrospectively for periods beginning after January 1, 2013. The
adoption of this accounting standard update will become effective for the
reporting period beginning January 1, 2013. Management does not anticipate that
adoption will have a material impact on the Company's consolidated financial
position, results of operations or cash flows.
Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the American Institute of Certified Public
Accountants, and the SEC did not, or are not believed by management to, have a
material impact on the Company's present or future financial position, results
of operations or cash flows.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements, financings, or other
relationships with unconsolidated entities or other persons, also known as
"special purpose entities" (SPEs).
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See F-1.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
12
ITEM 9A CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934 (the "Exchange Act"), are our controls
and other procedures that are designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Act is accumulated and communicated to our management, including our Chief
Executive and Financial Officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. Rules
13a-15(b) and 15d-15(b) under the Exchange Act, requires us to carry out an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures as of September 30, 2012, being the date of our most
recently completed fiscal year end. This evaluation was implemented under the
supervision and with the participation of our Chief Executive and Financial
Officer.
Based on that evaluation, our management, including our Chief Executive and
Financial Officer have concluded that, as of the end of the period covered by
this report, our disclosure controls and procedures are ineffective in ensuring
that information required to be disclosed in our Exchange Act reports is (1)
recorded, processed, summarized and reported in a timely manner, and (2)
accumulated and communicated to our management, including our Chief Executive
and Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Our internal control system was designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation and fair presentation of our financial statements for external
purposes in accordance with generally accepted accounting principles. Because of
its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Our officers have assessed the effectiveness of our internal controls over
financial reporting as of September 30, 2012. In making this assessment,
management used the criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based upon its assessment, management concluded that, as of
September 30, 2012, our internal control over financial reporting was not
effective.
This Annual Report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to an exemption for smaller reporting companies under
Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the final quarter of the year ended September 30, 2012, there were no
changes in our internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 9B OTHER INFORMATION
None.
13
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated by reference from our 2013 Information Statement.
ITEM 11 EXECUTIVE COMPENSATION
Incorporated by reference from our 2013 Information Statement.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Incorporated by reference from our 2013 Information Statement.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Incorporated by reference from our 2013 Information Statement.
ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES
Incorporated by reference from our 2013 Information Statement.
14
PART IV
ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Number Exhibit
------ -------
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
31 Rule 13a-14(a) Certification of Principal Executive and Financial
Officer
32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 of Principal
Executive and Financial Officer
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
----------
(1) Incorporated by reference to the exhibits to the registrant's registration
statement on Form SB-2 dated January 11, 2008.
* Pursuant to applicable securities laws and regulations, we are deemed to
have complied with the reporting obligation relating to the submission of
interactive data files in such exhibits and are not subject to liability
under any anti-fraud provisions of the federal securities laws as long as
we have made a good faith attempt to comply with the submission
requirements and promptly amend the interactive data files after becoming
aware that the interactive data files fail to comply with the submission
requirements. Users of this data are advised that, pursuant to Rule 406T,
these interactive data files are deemed not filed and otherwise are not
subject to liability.
15
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.
Psychic Friends Network, Inc.
Date: January 8, 2013 /s/ Marc Lasky
-----------------------------------
Marc Lasky, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Michael Lasky President and Director January 8, 2013
--------------------------
Michael Lasky
/s/ Kelly Anderson Director January 8, 2013
--------------------------
Kelly Anderson
/s/ Peter Newton Director January 8, 2013
--------------------------
Peter Newton
/s/ Marc Lasky Director and Chief Executive Officer January 8, 2013
-------------------------- (Principal Executive, Financial and
Marc Lasky Accounting Officer)
16
[LETTERHEAD OF SADLER, GIBB & ASSOCIATES, LLC]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Psychic Friends Network, Inc.
We have audited the accompanying balance sheet of Psychic Friends Network, Inc.,
as of September 30, 2012 and the related statements of operations, stockholders'
equity (deficit) and cash flows for the year then ended and for the cumulative
period from May 9 2007 (date of inception) through September 30, 2012. 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 audit. The financial statements of Psychic Friends Network, Inc. as of
September 30, 2011 were audited by other auditors whose report dated November
30, 2011, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated 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 audit 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 also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit 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 Psychic Friends Network, Inc., as
of September 30, 2012, and the results of their operations and cash flows for
the year then ended, in conformity with U.S. generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company had accumulated losses of $454,634 for the
period from inception through September 30, 2012 which raises substantial doubt
about its ability to continue as a going concern. Management's plans concerning
these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Sadler, Gibb & Associates, LLC
----------------------------------------
Farmington, UT
December 27, 2012
F-1
GEORGE STEWART, CPA
316 17TH AVENUE SOUTH
SEATTLE, WASHINGTON 98144
(206) 328-8554 FAX(206) 328-0383
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Web Wizard, Inc.
I have audited the accompanying balance sheet of Web Wizard, Inc. (A Development
Stage Company) as of September 30, 2011 and 2010, and the related statements of
operations, stockholders' equity and cash flows for the years then ended and for
the period from May 9, 2007 (inception), to September 30, 2011. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Web Wizard, Inc., (A Development
Stage Company) as of September 30, 2011 and 2010, and the results of its
operations and cash flows for the years then ended and from May 9, 2007
(inception), to September 30, 2011 in conformity with generally accepted
accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note # 1 to the financial
statements, the Company has had no operations and has no established source of
revenue. This raises substantial doubt about its ability to continue as a going
concern. Management's plan in regard to these matters is also described in Note
# 1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ George Stewart, CPA
-----------------------------------
Seattle, Washington
November 30, 2011
F-2
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
BALANCE SHEETS
September 30, September 30,
2012 2011
---------- ----------
ASSETS
Current assets
Cash $ 499,898 $ 108
Prepaid expenses 1,000 --
---------- ----------
Total current assets 500,898 108
Intangible assets (net of $5,503 of
accumulated amortization) 41,247 --
---------- ----------
Total Assets $ 542,145 $ 108
========== ==========
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities $ 37,697 $ 5,600
Loans from related parties -- 45,680
---------- ----------
Total current liabilities 37,697 51,280
---------- ----------
Total Liabilities 37,697 51,280
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; 750,000,000 shares authorized at $0.001 par value;
84,016,334 and 82,250,000 issued and outstanding at
September 30, 2012 and 2011, respectively 84,017 82,250
Additional paid-in capital 875,065 (58,350)
Deficit accumulated during development stage (454,634) (75,072)
---------- ----------
Total stockholders' equity (deficit) 504,448 (51,172)
---------- ----------
Total liabilities and stockholders' equity (deficit) $ 542,145 $ 108
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
STATEMENTS OF OPERATIONS
From inception
For the Year Ended (May 9, 2007)
------------------------------------ through
September 30, September 30, September 30,
2012 2011 2012
------------ ------------ ------------
REVENUE $ -- $ -- $ 1,434
------------ ------------ ------------
OPERATING EXPENSES
Payroll expenses 91,579 -- 91,579
Depreciation and amortization 5,503 -- 5,503
General and administrative 59,861 852 75,984
Consulting fees 141,652 -- 141,652
Legal and professional 80,899 19,600 140,945
------------ ------------ ------------
TOTAL OPERATING EXPENSES 379,494 20,452 455,663
------------ ------------ ------------
NET LOSS FROM OPERATIONS (379,494) (20,452) (454,229)
OTHER (INCOME) EXPENSE
Bank charges and interest 68 -- 405
------------ ------------ ------------
TOTAL OTHER EXPENSE 68 -- 405
------------ ------------ ------------
NET LOSS BEFORE INCOME TAXES (379,562) (20,452) (454,634)
PROVISION FOR INCOME TAX -- -- --
------------ ------------ ------------
NET LOSS FOR THE PERIOD $ (379,562) $ (20,452) $ (454,634)
============ ============ ============
BASIC AND DILUTED (LOSS)
PER COMMON SHARE $ (0.00) $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES (BASIC AND DILUTED) 83,239,447 8,225,000
============ ============
The accompanying notes are an integral part of these financial statements.
F-4
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
From Inception May 9, 2007 through September 30, 2012
Deficit
Accumulated Total
Common Stock Additional During Stockholders'
------------------------- Paid-in Development Equity
Issued Amount Capital Stage (Deficit)
---------- ---------- ---------- ---------- ----------
Balance at inception - May 9, 2007 -- $ -- $ -- $ -- $ --
Shares issued for cash - June 5, 2007
at $0.001 per share 74,000,000 74,000 (66,600) -- 7,400
Shares issued for cash - July 31, 2007
at $0.02 per share 8,250,000 8,250 8,250 -- 16,500
Net (loss) for period from inception on
May 9, 2007 to September 31, 2007 -- -- -- 1,398 1,398
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 31, 2007 82,250,000 82,250 (58,350) 1,398 25,298
Net (loss) for the year ended September 31, 2008 -- -- -- (37,052) (37,052)
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 31, 2008 82,250,000 82,250 (58,350) (35,654) (11,754)
Net (loss) for the year ended September 31, 2009 -- -- -- (11,134) (11,134)
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 31, 2009 82,250,000 82,250 (58,350) (46,788) (22,888)
Net (loss) for the year ended September 31, 2010 -- -- -- (7,832) (7,832)
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 31, 2010 82,250,000 82,250 (58,350) (54,620) (30,720)
Net (loss) for the year ended September 31, 2011 -- -- -- (20,452) (20,452)
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 31, 2011 82,250,000 82,250 (58,350) (75,072) (51,172)
Shares issued for conversion of debt -
January 27, 2012 at $0.75 per share 6,667 7 4,993 -- 5,000
Shares issued for cash - January 27, 2012
at $0.75 per share 326,667 327 244,673 -- 245,000
Shares issued for asset purchase agreement -
January 27, 2012 at $.097 per share 600,000 600 57,403 -- 58,003
Shares issued for cash - February 9, 2012
at $0.75 per share 40,000 40 29,960 -- 30,000
Shares issued for consulting services - April 25, 2012
at $0.75 per share 25,000 25 18,725 -- 18,750
Shares issued for consulting services - April 15, 2012
at $0.75 per share 75,000 75 56,175 -- 56,250
Shares issued for cash - April 30, 2012 at $0.75
per share 333,333 333 249,667 -- 250,000
Shares issued for consulting services - July 1, 2012
at $0.75 per share 25,000 25 18,725 -- 18,750
Shares issued for cash - July 13, 2012 at $0.75
per share 334,667 335 250,665 -- 251,000
Stock options issued for services - September 17, 2012 -- -- 2,429 -- 2,429
Net loss for the year ended September 30, 2012 -- -- -- (379,562) (379,562)
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 30, 2012 84,016,334 $ 84,017 $ 875,065 $ (454,634) $ 504,448
========== ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-5
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
From inception
For the Year Ended (May 9, 2007)
------------------------------------ through
September 30, September 30, September 30,
2012 2011 2012
---------- ---------- ----------
OPERATING ACTIVITIES
Net loss $ (379,562) $ (20,452) $ (454,634)
Adjustments to reconcile net loss from operations:
Stock-based compensation 96,179 -- 96,179
Amortization 5,503 -- 5,503
Change in operating assets and liabilities:
Prepaid expenses (1,000) -- (1,000)
Accounts payable and accrued liabilities 32,097 3,900 37,697
---------- ---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (246,783) (16,552) (316,255)
---------- ---------- ----------
INVESTING ACTIVITIES
Capitalization of website development costs (46,750) -- (46,750)
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (46,750) -- (46,750)
---------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 781,000 -- 804,900
Proceeds from cash subscriptions payable -- -- --
Proceeds from related parties 12,323 16,480 58,003
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 793,323 16,480 862,903
---------- ---------- ----------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS 499,790 (72) 499,898
CASH AND CASH EQUIVALENTS
- BEGINNING OF PERIOD 108 180 --
---------- ---------- ----------
CASH AND CASH EQUIVALENTS
- END OF PERIOD $ 499,898 $ 108 $ 499,898
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ -- $ -- $ --
========== ========== ==========
Cash paid for taxes $ -- $ -- $ --
========== ========== ==========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued in asset acquisition $ 58,003 $ -- $ 58,003
========== ========== ==========
Liabilities assumed in asset acquisition $ 400 $ -- $ 400
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-6
Psychic Friends Network, Inc.
(fka: Web Wizard, Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2012 and 2011
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Psychic Friends Network, Inc. (OTC:PFNI) hereinafter, ("the Company") was
incorporated in the State of Nevada on May 9, 2007 under the name "Web Wizard,
Inc.". On February 17, 2012 the Company's board passed a motion to change the
corporate name to "Psychic Friends Network, Inc." pursuant to an asset purchase
agreement executed on January 27, 2012. As part of this agreement, all of the
assets of PFN Holdings were purchased. These assets are an integral part of the
Company's business development and ultimately the realization of the Company's
anticipated cash flows.
The Company is in the business of providing daily horoscopes and live psychic
advice by telephone, internet or our soon to be released mobile application. Our
website is www.psychicfriendsnetwork.com. First time customers will be offered
promotions and are able to choose their psychic friend by specialties. They also
are able to establish an ongoing relationship with their advisor, or they can
choose to try someone new the next time they call. We will strive to stay on the
cutting edge of technology in an effort to deliver our content. Currently this
includes facebook applications, and twitter pages, that reward our customers
with free credits towards readings for sharing, liking or tweeting about PFN. We
will also be giving all of our psychics their own website, to find new
customers.
BASIS OF PRESENTATION
The Company is considered to be a development stage company and has not
generated significant revenues from operations. There is no bankruptcy,
receivership, or similar proceedings against our company.
The accompanying audited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the rules and regulations of the United States Securities and Exchange
Commission for annual financial information.
GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. Its ability to continue as a going concern is
dependent upon the ability of the Company to obtain the necessary financing to
meet its obligations and pay its liabilities arising from normal business
operations when they come due. Furthermore, as of September 30, 2012, the
Company has accumulated losses from inception (May 9, 2007) of $454,634.
Likewise, net cash of $316,255 has been used in operations during the same
period. The outcome of these matters cannot be predicted with any certainty at
this time and raise substantial doubt that the Company will be able to continue
as a going concern. These financial statements do not include any adjustments to
the amounts and classification of assets and liabilities which may be necessary
should the Company be unable to continue as a going concern. Management believes
that the Company will need to obtain additional funding by borrowing funds from
its directors and officers, or a private placement of common stock through
various sales and public offerings.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of America.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements involves the use of
estimates, which have been made using judgment. Actual results may vary from
these estimates.
The financial statements have, in management's opinion, been prepared within the
framework of the significant accounting policies summarized below:
DEVELOPMENT STAGE COMPANY
The Company is considered to be in the development stage, as defined under
Accounting Codification Standard, (ASC 915) "Development Stage Entities". Since
its formation, the Company has not yet realized significant revenues from its
planned operations.
F-7
Psychic Friends Network, Inc.
(fka: Web Wizard, Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2012 and 2011
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
RECLASSIFICATIONS
The Company reclassified $780 and $14,377 in "Transfer and filing fees"; $-0-
and $1,500 in "Travel and entertainment", to "General and administrative"
expenses for the year ended September 30, 2011 and for the period from inception
(May 9, 2007) through September 30, 2011, respectively to conform to the current
presentation. The reclassifications had no effect on the Company's financial
condition, results of operation, or cash flows.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid financial instruments purchased with a
maturity of three months or less to be 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 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments, consisting of cash and
accounts payable and accrued liabilities, is equal to fair value due to their
short-term to maturity. Unless otherwise noted, it is management's opinion that
the Company is not exposed to significant interest, currency or credit risks
arising from these financial instruments.
REVENUE RECOGNITION
The Company recognizes revenue on an accrual basis. Revenue is generally
realized or realizable and earned when all of the following criteria are met: 1)
persuasive evidence of an arrangement exists between the Company and our
customer(s); 2) services have been rendered; 3) our price to our customer is
fixed or determinable; and 4) collectability is reasonably assured. For the
years ended September 30, 2012 and 2011, the Company recognized no revenues.
PER SHARE DATA
In accordance with "ASC 260 - Earnings per Share", the basic loss per common
share is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common 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. At September 30, 2012 and 2011,
the Company had no stock equivalents that were anti-dilutive and excluded in the
loss per share computation.
STOCK-BASED COMPENSATION
The Company records stock based compensation in accordance with the guidance in
ASC Topic 718 which requires the Company to recognize expenses related to the
fair value of its employee stock option awards. This eliminates accounting for
share-based compensation transactions using the intrinsic value and requires
instead that such transactions be accounted for using a fair-value-based method.
Accordingly, the Company recognized expenses of $2,429 and $0 during the years
ended September 30, 2012 and 2011, respectively (see Note 5).
F-8
Psychic Friends Network, Inc.
(fka: Web Wizard, Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2012 and 2011
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
WEBSITE DEVELOPMENT COSTS
The Company capitalizes its costs to develop its website and when preliminary
development efforts are successfully completed, management has authorized and
committed project funding, and it is probable that the project will be completed
and the website will be used as intended. Such costs are amortized on a
straight-line basis over the estimated useful life of the related asset, which
approximates three years. Costs incurred prior to meeting these criteria,
together with costs incurred for training and maintenance, are expensed as
incurred. Costs incurred for enhancements that are expected to result in
additional material functionality are capitalized and expensed over the
estimated useful life of the upgrades.
The Company capitalized website costs of $46,750 during the year ended September
30, 2012. The Company's capitalized website amortization is included in
depreciation and amortization in the Company's consolidated statements of
operations, and totaled $5,503 for the period.
ADVERTISING COSTS
Advertising costs are to be expensed as incurred in accordance to Company
policy; for the year ended September 30, 2012, Advertising expenses totaled
$23,778.
INCOME TAXES
The Company records income taxes under the asset and liability method, whereby
deferred tax assets and liabilities are recognized based on the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and attributable to operating loss and tax credit carry
forwards. Accounting standards regarding income taxes requires a reduction of
the carrying amounts of deferred tax assets by a valuation allowance, if based
on the information available it is more likely than not that such assets will
not be realized. Accordingly, the need to establish valuation allowances for
deferred tax assets is assessed at each reporting period based on a
more-likely-than-not realization threshold. This assessment considers, among
other matters, the nature, frequency and severity of current and cumulative
losses, forecasts of future profitability, the duration of statutory carry
forward periods, the Company's experience with operating loss and tax credit
carry forwards not expiring unused, and tax planning alternatives. As of
September 30, 2012 and 2011, the Company did not have any amounts recorded
pertaining to uncertain tax positions.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 2011, The FASB issued Accounting Standards Update 2011-11,
"Disclosures about Offsetting Assets and Liabilities." This update requires
entities to disclose both gross information and net information about
instruments and transactions eligible for offset in the statement of financial
position and instruments and transactions subject to an agreement similar to a
master netting arrangement. The scope of this update includes derivatives, sale
and repurchase agreements and reverse sale and repurchase agreements and
securities borrowing and lending arrangements. The Company is required to adopt
this update retrospectively for periods beginning after January 1, 2013. The
adoption of this accounting standard update will become effective for the
reporting period beginning January 1, 2013. Management does not anticipate that
adoption will have a material impact on the Company's consolidated financial
position, results of operations or cash flows.
Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the American Institute of Certified Public
Accountants, and the SEC did not, or are not believed by management to, have a
material impact on the Company's present or future financial position, results
of operations or cash flows.
F-9
Psychic Friends Network, Inc.
(fka: Web Wizard, Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2012 and 2011
NOTE 3 - INTANGIBLE ASSET
The following table presents the detail of other intangible assets for the
periods presented:
Gross
Carrying Accumulated Net Carrying Weighted-Average
Amount Amortization Amount Remaining Life
------ ------------ ------ --------------
September 30, 2012:
Capitalized website
development costs $46,750 $(5,503) $41,247 2.74 years
------- ------- ------- ----------
Total $46,750 $(5,503) $41,247 2.74 years
======= ======= ======= ==========
NOTE 4 - RELATED PARTY TRANSACTIONS
During the year ended September 30, 2009, the Company entered into a verbal loan
agreement with an officer of the Company, whereby the Company borrowed amounts
from time to time which are interest-free, payable on demand. During the year
ended September 30, 2012, advances of $12,723 were made pursuant to this
agreement. According to the terms of the "Asset Purchase Agreement" with PFN
Holdings, all related party advances were fully repaid as of September 30, 2012,
leaving a balance of $0 and $0 as of September 30, 2012 and 2011, respectively.
NOTE 5 - STOCKHOLDERS' EQUITY
As summarized in Note 1, on January 27, 2012, our board of directors approved to
effect a name change from Web Wizard, Inc. to Psychic Friends Network Inc. In
addition to the name change, our board of directors approved a ten (10) new for
one (1) old forward stock split of our authorized and issued and outstanding
shares of common stock. Upon effect of the forward stock split, our authorized
capital was increased from 75,000,000 to 750,000,000 shares of common stock and
correspondingly, our issued and outstanding shares of common stock was increased
from 8,225,000 to 82,250,000 shares of common stock as of September 30, 2011,
all with a par value of $0.001.
COMMON STOCK ISSUED
In June 2007, the Company issued 74,000,000 post-split shares of common stock at
a price of $0.001 per share, for total proceeds of $7,400.
In July 2007, the Company issued 8,250,000 post-split shares of common stock at
a price of $0.001 per share, for total proceeds of $16,500.
In February 2012, the Company issued 40,000 post-split shares of common stock at
a price of $0.75 per share, for total proceeds of $30,000.
In January 2012, the Company authorized the issuance of 6,667 post-split shares
of common stock at a price of $0.75 per share, for total proceeds of $5,000.
In January 2012, the Company authorized the issuance of 326,667 post-split
shares of common stock at a price of $0.75 per share, for total proceeds of
$245,000.
In January 2012, the Company issued common post-split shares previously payable
of 600,000 at a price of $0.09667 per share as described in detail below.
F-10
Psychic Friends Network, Inc.
(fka: Web Wizard, Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2012 and 2011
NOTE 5 - STOCKHOLDERS' EQUITY - (CONTINUED)
In April 2012, the Company authorized the issuance of 100,000 post-split shares
of common stock at a price of $0.75 per share, for consulting services valued at
$75,000.
In April 2012, the Company authorized the issuance of 333,333 post-split shares
of common stock at a price of $0.75 per share, for total proceeds of $250,000.
In July 2012, the Company authorized the issuance of 25,000 post-split shares of
common stock at a price of $0.75 per share, for consulting services valued at
$18,750.
In July 2012, the Company received cash of $251,000 for 334,667 post-split
common shares issued at a price of $0.75 per share pursuant to a financing
agreement.
ASSET PURCHASE AGREEMENT
Pursuant to the "Asset Purchase Agreement" (Note 1), on January 27, 2012 the
Company issued 50,600,000 post-split shares of common stock for the purchase of
intangible assets with a fair value of $-0- from PFN Holdings. In connection
with the issuance of stock, the majority shareholder of the Company agreed to
forgive $58,403 in related party advances and cancel 50,000,000 post-split
shares of common stock held by the shareholder. The value of the liabilities
assumed was reduced to $58,003 through the assumption of $400 of liabilities of
PFN Holdings by the Company. The Company has presented the common stock issued
in this transaction on a net basis on the statement of stockholders' deficit.
As the assets purchased had a fair value of $-0- on the date of the transaction,
the value of the shares issued was based on the net value of the liabilities
extinguished of $58,003, which was recorded as additional paid-in capital due to
the fact that the liabilities were owed to a related party.
OPTIONS AND WARRANTS
During July 2012, the Company's shareholders approved its 2012 Stock Option Plan
("the Plan"). Under the Plan, the Company may issue up to 8,250,000 shares at
its discretion. On September 17, 2012, the Company granted 200,000 stock options
to a director of the Company which shall vest on September 17, 2013. The options
expire ten (10) years following the vesting date and carry a strike price of
$0.35
These options were valued using the Black-Scholes model and the following
inputs: 1 year vesting term, 10 year life, volatility of 139.6%, interest rate
of 1.85%, and 0% forfeiture rate. The resulting value was $0.34 per option for a
total value of $68,259. Accordingly, during the years ended September 30, 2012
and 2011, the Company recognized expense of $2,429 and $0, respectively, for
options granted during the years pursuant to ASC Topic 718. Unrecognized stock
option compensation expense of $65,830 at September 30, 2012 will be recognized
during the year ended September 30, 2013.
F-11
Psychic Friends Network, Inc.
(fka: Web Wizard, Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2012 and 2011
NOTE 5 - STOCKHOLDERS' EQUITY - (CONTINUED)
A summary of the status of the options granted at September 30, 2012 and 2011and
changes during the years then ended is presented below:
2012 2011
------------------ -----------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
Outstanding at beginning of period -- $ -- -- $ --
Granted 200,000 0.35 --
Exercised -- -- --
Expired or canceled -- -- --
Outstanding at end of period 200,000 $0.35 -- $ --
------- ----- ------ ------
Exercisable -- $ -- -- $ --
======= ===== ====== ======
The options outstanding at September 30, 2012 and 2011 have a weighted average
exercise price of $0.35 per share and have a remaining useful life of 9.97
years.
NOTE 6 - INCOME TAXES
The Company provides for income taxes under FASB ASC 740, Accounting for Income
Taxes. FASB ASC 740 requires the use of an asset and liability approach in
accounting for income taxes. Deferred tax assets and liabilities are recorded
based on the differences between the financial statement and tax bases of assets
and liabilities.
FASB ASC 740 requires the reduction of deferred tax assets by a valuation
allowance, if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset is $90,946 which is calculated by multiplying a 34% estimated
tax rate by the cumulative net operating loss (NOL) adjusted for the following
items:
For the period ended September 30, 2012 2011
---------------------------------- ---------- ----------
Book loss for the year $ (379,562) $ (20,452)
Adjustments:
Meals and entertainment 1,496 --
Stock based compensation 93,750 --
Unpaid payroll taxes 16,829 --
---------- ----------
Tax loss for the year (265,058) (20,452)
Estimated effective tax rate 34% 34%
---------- ----------
Deferred tax asset $ (90,946) $ (6,954)
========== ==========
F-12
Psychic Friends Network, Inc.
(fka: Web Wizard, Inc.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2012 and 2011
NOTE 6 - INCOME TAXES - (CONTINUED)
The total valuation allowance is $90,946. Details for the last two periods are
as follows:
For the period ended September 30, 2012 2011
---------------------------------- ---------- ----------
Deferred tax asset $ 90,946 $ 6,954
Valuation allowance (90,946) (6,954)
---------- ----------
Net deferred tax asset -- --
---------- ----------
Income tax expense $ -- $ --
========== ==========
Below is a chart showing the estimated corporate federal cumulative net
operating loss (NOL) carry forward of $342,559 and the years in which it will
expire.
Year Amount Expiration
---- ------ ----------
2012 $ 267,487 2032
2011 $ 20,452 2031
Prior to 2011 $ 54,620 Prior to 2031
NOTE 7 - SUBSEQUENT EVENTS
The Company has evaluated events subsequent to the balance sheet date through
the issuance date of these financial statements in accordance with FASB ASC 855
and has determined there are no such events that would require adjustment to, or
disclosure in, the financial statements
F-13