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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of Earliest event Reported): March 30, 2012
PSYCHIC FRIENDS NETWORK INC.
(Exact name of registrant as specified in its charter)
Nevada 001-33968 N/A
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2360 Corporate Circle, Suite 400, Henderson, NV 89074-7722
(Address of principal executive offices) (Zip Code)
702-608-7360
(Registrant's telephone number, including area code)
No. 8, Lane 15, Gang Yang, Xin CunHuicheng, Xin Hui, Jiang Men City, China
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This report contains forward-looking statements. The forward-looking statements
are contained principally in the sections entitled "Description of Business,"
"Risk Factors," and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." These statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performances
or achievements expressed or implied by the forward-looking statements. These
risks and uncertainties include, but are not limited to, the factors described
in the section captioned "Risk Factors" below. In some cases, you can identify
forward-looking statements by terms such as "anticipates," "believes," "could,"
"estimates," "expects," "intends," "may," "plans," "potential," "predicts,"
"projects," "should," "would" and similar expressions intended to identify
forward-looking statements. Forward-looking statements reflect our current views
with respect to future events and are based on assumptions and subject to risks
and uncertainties. Given these uncertainties, you should not place undue
reliance on these forward-looking statements. These forward-looking statements
include, among other things, statements relating to:
* our anticipated growth strategies and our ability to manage the
expansion of our business operations effectively;
* our ability to maintain or increase our market share in the
competitive markets in which we do business;
* our ability to keep up with rapidly changing technologies and evolving
industry standards, including our ability to achieve technological
advances;
* our dependence on the growth in demand for our services;
* our ability to diversify our service offerings and capture new market
opportunities; and
* the loss of key members of our senior management.
Also, forward-looking statements represent our estimates and assumptions only as
of the date of this report. You should read this report and the documents that
we reference and filed as exhibits to this report completely and with the
understanding that our actual future results may be materially different from
what we expect. Except as required by law, we assume no obligation to update any
forward-looking statements publicly, or to update the reasons actual results
could differ materially from those anticipated in any forward-looking
statements, even if new information becomes available in the future.
USE OF CERTAIN DEFINED TERMS
Except where the context otherwise requires and for the purposes of this report
only:
* the "Company," "we," "us," and "our" refer to the business of Psychic
Friends Network Inc., a Nevada corporation (formerly, Web Wizard
Inc.);
* "Exchange Act" refers the Securities Exchange Act of 1934, as amended;
* "SEC" refers to the Securities and Exchange Commission;
* "Securities Act" refers to the Securities Act of 1933, as amended; and
* "U.S. dollars," "dollars" and "$" refer to the legal currency of the
United States.
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ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On January 27, 2012, we entered into three separate agreements regarding the
acquisition of certain assets related to providing psychic consultation services
under the trade name "The Psychic Friends Network". The agreements contemplated
an acquisition of such assets, along with a concurrent financing.
On March 30, 2012 we closed an asset purchase agreement with PFN Holdings,
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. The specific assets being
acquired are enumerated in Schedule 7 of the asset purchase agreement attached
hereto as Exhibit 10.1. In conjunction with this acquisition, our sole director
and officer Ya Tang Chao cancelled 50,000,000 shares of our common stock. This
agreement is subject to a number of conditions to closing, including:
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 agreement, Right Power agreed to provide us with a
total of $745,000 in financing. $245,000 of the financing was provided to us
prior to the closing of the asset purchase agreement at a price of $0.75 per
share for a total of 326,667 shares. An additional $500,000 is to be provided
within 90 days of the closing at a price which is the higher of $0.75 per share
or 90% of the average of the closing prices of our common stock for ten trading
immediately preceding the date of the investment. If we are not able to close on
any of the $500,000 post-closing financing, PFN Holdings will receive an
additional 70,000,000 shares of our common stock. If we are able to close on
only $250,000 of the post-closing financing, PFN Holdings will receive an
additional 40,000,000 shares of common stock. A full copy of this agreement is
attached hereto as Exhibit 10.2.
We are also a party to a convertible debenture agreement in the amount of $5,000
entered into on January 27, 2012. The convertible debenture is a loan from Right
Power to PFN Holdings. Upon closing of the asset acquisition agreement between
our company and PFN Holdings, the convertible debenture converted into a total
of 6,667 of our common shares. A full copy of this agreement is attached hereto
as Exhibit 10.3.
Accounting for the issuance of 50,600,000 shares of our common stock to PFN
Holdings, the cancellation of 50,000,000 shares of our common stock held by our
former director and officer, Ya Tang Chao, the issuance of 236,667 shares of our
common stock in consideration for the $245,000 private placement as well as the
issuance of 6,667 shares of our common stock pursuant to the conversion of the
convertible debenture, we had 83,263,334 shares issued and outstanding as of
March 30, 2012.
FORM 10 INFORMATION DISCLOSURE
As disclosed elsewhere in this report, on March 30, 2012, we acquired a number
of assets related to providing psychic consultation services under the trade
name "The Psychic Friends Network". Item 2.01(f) of Form 8-K states that if the
registrant was a shell company, as we were immediately before the acquisition of
assets under Item 2.01, then the registrant must disclose the information that
would be required if the registrant were filing a general form for registration
of securities on Form 10.
Accordingly, we are providing below the information that would be included in a
Form 10 if we were to file a Form 10. Please note that the information provided
below relates to the combined enterprises after the acquisition of the PFN
Holdings assets except that information relating to periods prior to the date of
the acquisition of the PFN Holdings assets only relate to Psychic Friends
Network Inc. (formerly Web Wizard Inc.), unless otherwise specifically
indicated.
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DESCRIPTION OF BUSINESS
OUR CORPORATE HISTORY AND BACKGROUND
We were incorporated on May 9, 2007 under the laws of the state of Nevada. Our
principal offices are located at 2360 Corporate Circle, Suite 400, Henderson,
NV, 89074-7722. Our telephone number is 702-608-7360. Our year end is September
30. There are no bankruptcy, receivership, or similar proceedings against our
company. Our website is www.psychicfriendsnetwork.com. We were originally
incorporated and operated with an aim to providing web services and products
that enable small and medium-sized businesses to establish, maintain, promote
and optimize their Internet presence. We commenced business operations by
selling a Web design solutions package to a restaurant located in Canada. We
were not able to secure sufficient revenue or financing to continue our original
business and on January 27, 2012 we entered into the agreements described above
with the intention of changing our business to that providing psychic
consultation services under the trade name "The Psychic Friends Network".
On February 7, 2012, our board of directors approved an agreement and plan of
merger to merge with and into our wholly-owned subsidiary Psychic Friends
Network Inc., a Nevada corporation, to effect a name change from Web Wizard,
Inc. to Psychic Friends Network Inc. Psychic Friends Network Inc. was formed
solely to facilitate the change of name. In addition to the name change, our
board of directors approved a 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, all with a par value of $0.001. On February 27, 2012
FINRA declared these changes effective on the market. Our current trading symbol
is WWZDD, with the extra D being appended for a period of 20 business days.
After 30 days, our trading symbol will change to a symbol provided by FINRA,
which more closely relates to our new name.
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. Typically customers connect to their preferred psychic by
telephone or website, and phone operations have been recently been updated to
accept such calls. However, we are in the process of adding several new ways to
connect. These include mobile applications, as well as audio, video and text
chat by internet. These additional connection methods include the anticipated
creation of mobile and web based applications, where customers will receive
daily discounted readings, and other astrological content for an ongoing monthly
subscription fee. Our business is reliant on a large volume of small customers
and because of this we are not dependent on any one group of customers. Our
management operated a phone service during the 1990s under the same trademark of
The Psychic Friends Network. At the peak of its popularity in the 1990s, The
Psychic Friends Network averaged 14,000 calls per day, and the average customer
spent approximately $350 over a 12-month period. Unfortunately, due to certain
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, Mike and Marc Lasky repurchased all
of the intellectual property assets back from the bankruptcy trustee.
Since our acquisition of the PFN Holdings' assets, we have begun working on a
new updated website that we call PFN 2.0. The main focus will be to make better
use of current technologies and social media in addition to increasing the
overall experience for our customers.
We anticipate that we will soon be able to provide customers with multiple
methods of connection 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. At this time, we are 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 of their homes, offices, or wherever they
choose, and they will be instantly connected to their favourite 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,
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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, such as 10 minutes for
$10, or 3 minutes free. The key for us is to get new callers in the door.
Historically, we found that over 60% of our callers end up calling back. This is
primarily due to the stringent selection process we have for choosing the
psychics we engage for our service.
We also offer attractive bonuses to the psychics that reward them for getting
call-backs. We measure our success by percentage of call-backs, not by total
minutes spent on the phone by customers. We have instituted a policy to instruct
our psychics to inform the callers on a regular basis as to the time they have
spent on the call. We also include a money back guarantee for unsatisfied
customers.
With the advent of new technologies, like Mobile applications, VOIP, and social
media tools, we are now able to offer psychics from all over the world, and we
can now 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, BilltoMobile, 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.
* BilltoMobile 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 as
Astrological content. The applications will be free to download,
but after a short free trial, the content will be paid.
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MARKETING
During the 1990's and early 2000's, our management operated Psychic Friends,
LLC, 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, operated by Psychic Friends,
LLC, 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.
COMPETITION
There are only a few competitors for our psychic services in the market at the
present time, which advertise entirely through the Internet. In order for us to
successfully compete in our industry we will need to:
* Bring awareness to the fact that our brand has returned to the psychic
services business;
* Expand our network of psychics relationships;
* Develop a strong customer base; and
* Increase our financial resources.
However, there can be no assurance that, even if we do these things, we will be
able to compete effectively with the other companies in our industry.
As we are a newly-established company, we face the same problems as other new
companies starting up in an industry, such as lack of available funds. Our
competitors may be substantially larger and better funded than us, and have
significantly longer operating histories than us. In addition, they may develop
similar technologies to ours and use the same methods as we do and generally be
able to respond more quickly to new or emerging technologies and changes in
legislation and regulations relating to the industry. Additionally, our
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competitors may devote greater resources to the development, promotion and sale
of their services than we do. Increased competition could also result in loss of
key personnel, reduced margins or loss of market share, any of which could harm
our business.
We believe that we do have a number of competitive advantages over other
companies in our industry. Firstly and most importantly we have the only widely
known psychic brand in the market, and the brand was, and still is, very well
respected amongst customers, psychics and the media. We believe that we will
also soon have the unique technology in the market. If we are able to develop
our intended technology, we will be the only major psychic company offering live
video readings, in addition to phone readings and mobile apps.
RESEARCH AND DEVELOPMENT
During the year ended December 31, 2011 we spent $nil on research and
development. We anticipate that we will incur $175,000 in expenses on research
and development of our website and various applications associated with our
business.
EMPLOYEES
We are a development stage company and currently have no employees, other than
our two officers and directors who provide their services on a consulting basis.
The psychics that provide readings for our clients are all independent
contractors, who work from home.
INTELLECTUAL PROPERTY
We own the trademark Psychic Friends Network in the US (USPTO Serial # 78583100
and Registration # 3063407) and Canada (Registration Number TMA475757).
We also own all of the right to the website, and the content therein, of
www.psychicfriendsnetwork.com. Additionally, we own various domain names
associated with our trademark: Psychic Friends Network.
GOVERNMENTAL REGULATIONS
We are subject to a number of foreign and domestic laws and regulations that
affect companies conducting business on the internet. In addition, laws and
regulations relating to user privacy, freedom of expression, content,
advertising, information security and intellectual property rights are being
debated and considered for adoption by many countries throughout the world. We
face risks from some of the proposed legislation that could be passed in the
future.
In the US, laws relating to the liability of providers of online services for
activities of their users and other third parties are currently being tested by
a number of claims, which include actions for libel, slander, invasion of
privacy and other tort claims, unlawful activity, copyright and trademark
infringement and other theories based on the nature and content of the materials
searched, the ads posted or the content generated by users. Certain foreign
jurisdictions are also testing the liability of providers of online services for
activities of their users and other third parties. Any court ruling that imposes
liability on providers of online services for activities of their users and
other third parties could harm our business.
A range of other laws and new interpretations of existing laws could have an
impact on our business. For example, the Digital Millennium Copyright Act has
provisions that limit, but do not necessarily eliminate, our liability for
listing, linking or hosting third-party content that includes materials that
infringe copyrights. The Child Online Protection Act and the Children's Online
Privacy Protection Act restrict the distribution of materials considered harmful
to children and impose additional restrictions on the ability of online services
to collect information from children under 13. In the area of data protection,
many states have passed laws requiring notification to users when there is a
security breach for personal data, such as California's Information Practices
Act. The costs of compliance with these laws may increase in the future as a
result of changes in interpretation. Furthermore, any failure on our part to
comply with these laws may subject us to significant liabilities.
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We also face risks due to government failure to preserve the internet's basic
neutrality as to the services and sites that users can access through their
broadband service providers. Such a failure to enforce network neutrality could
limit the internet's pace of innovation and the ability of large competitors,
small businesses and entrepreneurs to develop and deliver new products, features
and services, which could harm our business.
We are also subject to federal, state and foreign laws regarding privacy and
protection of user data. We post on our web site our privacy policies and
practices concerning the use and disclosure of user data.
ENVIRONMENTAL COMPLIANCE
We are not aware of any material violations of environmental permits, licenses
or approvals that have been issued with respect to our operations. We expect to
comply with all applicable laws, rules and regulations relating to our business,
and at this time, we do not anticipate incurring any material capital
expenditures to comply with any environmental regulations or other requirements.
While our intended projects and business activities do not currently violate any
laws, any regulatory changes that impose additional restrictions or requirements
on us or on our potential customers could adversely affect us by increasing our
operating costs or decreasing demand for our products or services, which could
have a material adverse effect on our results of operations.
REPORTS TO SECURITY HOLDERS
We are subject to the reporting and other requirements of the Exchange Act and
we intend to furnish our shareholders with annual reports containing financial
statements audited by our independent auditors and to make available quarterly
reports containing unaudited financial statements for each of the first three
quarters of each year.
The public may read and copy any materials that we file with the SEC at the
SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of that
site is www.sec.gov.
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below, together with all of the other
information included in this report, before making an investment decision. If
any of the following risks actually occurs, our business, financial condition or
results of operations could suffer. In that case, the trading price of our
common stock could decline, and you may lose all or part of your investment. You
should read the section entitled "Special Note Regarding Forward Looking
Statements" above for a discussion of what types of statements are
forward-looking statements, as well as the significance of such statements in
the context of this report.
You should carefully consider the risks described below together with all of the
other information included in this report before making an investment decision
with regard to our securities. The statements contained in or incorporated into
this current report on Form 8-K that are not historic facts are forward-looking
statements that are subject to risks and uncertainties that could cause actual
results to differ materially from those set forth in or implied by
forward-looking statements. If any of the following risks actually occur, our
business, financial condition or results of operations could be harmed. In that
case, the trading price of our common stock could decline, and you may lose all
or part of your investment.
RISKS RELATED TO OUR BUSINESS
BECAUSE OUR AUDITORS HAVE ISSUED A GOING CONCERN OPINION, THERE IS SUBSTANTIAL
UNCERTAINTY WE WILL CONTINUE OPERATIONS IN WHICH CASE YOU COULD LOSE YOUR
INVESTMENT.
Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as an ongoing business for the next 12
months. The financial statements do not include any adjustments that might
result from the uncertainty about our ability to continue in business. As such
we may have to cease operations and you could lose your investment.
Our ability to achieve and maintain profitability and positive cash flow is
dependent upon:
* our ability to attract customers to our services;
* our ability to develop and continually update our website as well as
internet and telephone services;
* our ability to procure and maintain on commercially reasonable terms
relationships with third parties to integrate and maintain our payment
process and service mediums;
* our ability to identify and pursue mediums through which we will be
able to market our services;
* our ability to generate revenues through our customers; and
* our ability to manage growth by managing administrative overhead.
Based upon current plans, we expect to incur operating losses in future periods
because we will be incurring expenses and not generating significant revenues.
We cannot guarantee that we will be successful in generating significant
revenues in the future. Failure to generate revenues which are greater than our
expenses will cause you to lose your investment.
IF WE CANNOT PREVENT OTHER COMPANIES FROM INFRINGING ON OUR TECHNOLOGIES OR
TRADEMARK, WE MAY NOT ACHIEVE PROFITABILITY AND YOU MAY LOSE YOUR INVESTMENT.
Our success is heavily dependent upon market awareness and exposure. To protect
our proprietary technology, we rely principally upon copyright and trade secret
protection. To protect our trademark, we rely on trademark registration in the
US and Canada. All proprietary information that can be copyrighted is marked as
such. There can be no assurance that the steps taken by us in this regard will
be adequate to prevent misappropriation or independent third-party development
of our technology. Further, the laws of certain countries in which we anticipate
licensing our technologies and products do not protect software and intellectual
property rights to the same extent as the laws of the United States. We
generally do not include in our software any mechanism to prevent or inhibit
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unauthorized use, but we generally require the execution of an agreement that
restricts unauthorized copying and use of our products. If unauthorized copying
or misuse of our products were to occur, our business and results of operations
could be materially adversely affected.
While the disclosure and use of our proprietary technology, know-how and trade
secrets are generally controlled under agreements with the parties involved,
there can be no assurance that all confidentiality agreements will be honored,
that others will not independently develop similar or superior technology, that
disputes will not arise concerning the ownership of intellectual property, or
that dissemination of our proprietary technology, know-how and trade secrets
will not occur. Further, if an infringement claim is brought against us,
litigation would be costly and time consuming, but may be necessary to protect
our proprietary rights and to defend ourselves. We could incur substantial costs
and diversion of management resources in the defense of any claims relating to
the proprietary rights of others or in asserting claims against others. If we
cannot prevent other companies from infringing on our technologies, we may not
achieve profitability and you may lose your investment.
IF WE ARE SUBJECT TO INTELLECTUAL PROPERTY RIGHTS CLAIMS WHICH MAY BE COSTLY TO
DEFEND, COULD REQUIRE THE PAYMENT OF DAMAGES AND COULD LIMIT OUR ABILITY TO USE
CERTAIN TECHNOLOGIES IN THE FUTURE WE MAY NOT GENERATE SUFFICIENT REVENUES OR
ACHIEVE PROFITABILITY.
Companies in the Internet, technology and media industries own large numbers of
patents, copyrights, trademarks and trade secrets and frequently enter into
litigation based on allegations of infringement or other violations of
intellectual property rights. We may be subject to intellectual property rights
claims in the future and our technologies may not be able to withstand any
third-party claims or rights against their use. Any intellectual property
claims, with or without merit, could be time consuming, expensive to litigate or
settle and could divert management resources and attention. An adverse
determination also could prevent us from offering our products and services to
others and may require that we procure substitute products or services for these
members.
With respect to any intellectual property rights claim, we may have to pay
damages or stop using technology found to be in violation of a third party's
rights. We may have to seek a license for the technology, which may not be
available on reasonable terms and may significantly increase our operating
expenses. The technology also may not be available for license to us at all. As
a result, we may also be required to develop alternative non-infringing
technology, which could require significant effort and expense. If we cannot
license or develop technology for the infringing aspects of our business, we may
be forced to limit our product and service offerings and may be unable to
compete effectively. Any of these results could harm our brand and prevent us
from generating sufficient revenue or achieving profitability.
CHANGING CONSUMER PREFERENCES WILL REQUIRE PERIODIC PRODUCT INTRODUCTION. IF WE
ARE UNABLE TO CONTINUALLY MEET CONSUMER PREFERENCES WE MAY NOT GENERATE
SIGNIFICANT REVENUES.
As a result of changing consumer preferences, many psychic services and websites
are successfully marketed for a limited period of time. Even if our products
become popular, there can be no assurance that any of our searching or gaming
products will continue to be popular for a period of time. Our success will be
dependent upon our ability to develop new and improved services. Our failure to
introduce new features and to achieve and sustain market acceptance could result
in us being unable to continually meet consumer preferences and generating
significant revenues.
IF WE DO NOT ATTRACT CUSTOMERS TO OUR WEBSITE OR TELEPHONE SERVICES ON
COST-EFFECTIVE TERMS, WE WILL NOT MAKE A PROFIT, WHICH ULTIMATELY WILL RESULT IN
A CESSATION OF OPERATIONS.
Our success depends on our ability to attract retail customers to our website or
phone services on cost-effective terms. Our strategy to attract customers to our
website, which has not been formalized or implemented, includes television
marketing, infomercials, viral marketing, the practice of generating "buzz"
among Internet users in our products through the developing and maintaining
weblogs or "blogs", online journals that are updated frequently and available to
the public, postings on online communities such as Facebook, MySpace, Yahoo!
Groups and amateur websites such as YouTube.com, and other methods of getting
Internet users to refer others to our website and telephone services by e-mail
or word of mouth; search engine optimization, marketing our website via search
engines by purchasing sponsored placement in search results; and entering into
affiliate marketing relationships with website providers to increase our access
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to Internet consumers. We expect to rely on word of mouth marketing as the
primary source of traffic to our website, with search engine optimization and
affiliate marketing as secondary sources. Our marketing strategy may not be
enough to attract sufficient traffic to our website or telephone services. We do
not currently employ any personnel specifically assigned to the marketing of our
products. If we do not attract customers to our website or telephone services on
cost-effective terms, we will not make a profit, which ultimately will result in
a cessation of operations.
WE RELY ON HIGHLY SKILLED PERSONNEL AND, IF WE ARE UNABLE TO RETAIN OR MOTIVATE
KEY PERSONNEL OR HIRE QUALIFIED PERSONNEL, WE MAY NOT BE ABLE TO GROW
EFFECTIVELY, GENERATE SUFFICIENT REVENUES AND ACHIEVE PROFITABILITY.
Our performance and future success depends on the talents and efforts of highly
skilled individuals who will be providing psychic readings to our customers. We
will need to continue to identify, hire, develop, motivate and retain highly
skilled personnel for all areas of our organization. Our continued ability to
compete effectively depends on our ability to attract new psychics and to retain
and motivate our existing consultants.
As competition in our industry intensifies, it may be more difficult for us to
hire, motivate and retain highly skilled personnel. If we do not succeed in
attracting additional highly skilled personnel or retaining or motivating our
existing personnel, we may be unable to grow effectively generate sufficient
revenues and achieve profitability.
OUR BUSINESS DEPENDS SUBSTANTIALLY ON THE CONTINUING EFFORTS OF OUR EXECUTIVE
OFFICERS, AND OUR BUSINESS MAY BE SEVERELY DISRUPTED IF WE LOSE THEIR SERVICES.
We believe that our success is largely dependent up on the continued service of
the member of our management team, who are critical to establishing our
corporate strategies and focus, and ensuring our continued growth. In
particular, Mr. Mike Lasky, has over 20 years experience and expertise in the
business of providing psychic services to retail customers. Our continued
success will depend on our ability to attract and retain a qualified and
competent management team in order to manage our existing operations and support
our expansions plans. Although this possibility is low, if any of our executive
officers are unable or unwilling to continue in their present positions, we may
not be able to replace them readily, if at all. Therefore, our business may be
severely disrupted, and we may incur additional expenses to recruit and retain
new officers. In addition, if any of our executives joins a competitor or forms
a competing company, we may lose some of our customers
OUR BUSINESS DEPENDS PARTIALLY ON THE DEVELOPMENT AND MAINTENANCE OF THE
INTERNET INFRASTRUCTURE. OUTAGES AND DELAYS COULD REDUCE THE LEVEL OF INTERNET
USAGE GENERALLY AS WELL AS THE LEVEL OF USAGE OF OUR SERVICES AND REDUCE OUR
REVENUES.
The success of our services will depend partially on the development and
maintenance of the Internet infrastructure. This includes maintenance of a
reliable network backbone with the necessary speed, data capacity, and security,
as well as timely development of complementary products, for providing reliable
Internet access and services. The Internet has experienced, and is likely to
continue to experience, significant growth in the numbers of users and amount of
traffic. The Internet infrastructure may be unable to support such demands. In
addition, increasing numbers of users, increasing bandwidth requirements, or
problems caused by "viruses," "worms," and similar programs may harm the
performance of the Internet. The backbone computers of the Internet have been
the targets of such programs. The Internet has experienced a variety of outages
and other delays as a result of damage to portions of its infrastructure, and it
could face outages and delays in the future. These outages and delays could
reduce the level of Internet usage generally as well as the level of usage of
our services and reduce our revenues.
INTERRUPTION OR FAILURE OF OUR INFORMATION TECHNOLOGY AND COMMUNICATIONS SYSTEMS
COULD IMPAIR OUR ABILITY TO EFFECTIVELY PROVIDE OUR PRODUCTS AND SERVICES, WHICH
COULD DAMAGE OUR REPUTATION AND HARM OUR OPERATING RESULTS.
Our ability to provide our products and services depends on the continuing
operation of our information technology and communications systems. Any damage
to or failure of our systems could interrupt our service. Service interruptions
could reduce our revenues and profits, and damage our brand if our system is
perceived to be unreliable. Our systems are vulnerable to damage or interruption
as a result of terrorist attacks, war, earthquakes, floods, fires, power loss,
telecommunications failures, computer viruses, interruptions in access to our
11
website through the use of "denial of service" or similar attacks, hacking or
other attempts to harm our systems, and similar events. Our servers, which are
hosted at third-party internet data centers, are also vulnerable to break-ins,
sabotage and vandalism. Some of our systems are not fully redundant, and our
disaster recovery planning does not account for all possible scenarios. The
occurrence of a natural disaster or a closure of an internet data center by a
third-party provider without adequate notice could result in lengthy service
interruptions. Interruption or failure of our information technology and
communications systems could impair our ability to effectively provide our
products and services, which could damage our reputation and harm our operating
results.
IF OUR SOFTWARE CONTAINS UNDETECTED ERRORS, WE COULD LOSE THE CONFIDENCE OF
USERS, RESULTING IN LOSS OF CUSTOMERS AND A REDUCTION OF REVENUE.
Our online systems, including our website and other software applications and
products, could contain undetected errors or "bugs" that could adversely affect
their performance. We regularly update and enhance our website and our other
online systems and introduce new versions of our software products and
applications. The occurrence of errors in any of these may cause us to lose
market share, damage our reputation and brand name, and reduce our revenues.
IF THE SECURITY MEASURES THAT WE USE TO PROTECT THEIR PERSONAL INFORMATION, SUCH
AS CREDIT CARD NUMBERS, ARE INEFFECTIVE, OUR CUSTOMERS MAY LOSE THEIR CONFIDENCE
IN OUR WEBSITE AND STOP VISITING THEM. THIS MAY RESULT IN A REDUCTION IN
REVENUES AND INCREASE OUR OPERATING EXPENSES, WHICH WOULD PREVENT US FROM
ACHIEVING PROFITABILITY.
Any breach in our website security could expose us to a risk of loss or
litigation and possible liability. We anticipate that we will rely on encryption
and authentication technology licensed from third parties to provide secure
transmission of confidential information. As a result of advances in computer
capabilities, new discoveries in the field of cryptography or other
developments, a compromise or breach of our security precautions may occur. A
compromise in our proposed security could severely harm our business. A party
who is able to circumvent our proposed security measures could misappropriate
proprietary information, including customer credit card information, or cause
interruptions in the operation of our website. We may be required to spend
significant funds and other resources to protect against the threat of security
breaches or to alleviate problems caused by these breaches. However, protection
may not be available at a reasonable price, or at all. Concerns regarding the
security of e-commerce and the privacy of users may also inhibit the growth of
the Internet as a means of conducting commercial transactions. This may result
in a reduction in revenues and increase our operating expenses, which would
prevent us from achieving profitability.
WE WILL RELY MAINLY ON THIRD PARTY SERVICE PROVIDERS AND OTHER PAYMENT
PROCESSING COMPANIES TO COLLECT OUR REVENUE. IF WE ARE UNABLE TO COLLECT REVENUE
GENERATED BY OUR CUSTOMERS FROM THESE PROCESSING COMPANIES, WE MAY NOT BE ABLE
TO REALIZE ANY REVENUES AND OUR BUSINESS MAY FAIL.
The majority of our revenues will be generated by customers who will submit
their payment to third party service providers such as telephone companies, or
payment processing company, such as those which process online credit card
payments. There is a potential risk that these third party service providers and
payment processing companies may not release our portion of the payments made by
our customers in a timely manner or at all. If we are not able to repatriate
funds paid by our customers to third party service providers or payment
processing companies, we will not be able to achieve profitability and our
business may fail.
RISKS RELATED TO OWNERSHIP OF OUR SECURITIES
OUR STOCK PRICE MAY BE VOLATILE, WHICH MAY RESULT IN LOSSES TO OUR SHAREHOLDERS.
The stock markets have experienced significant price and trading volume
fluctuations, and the market prices of companies listed on the Over-the-counter
Bulletin Board quotation system in which shares of our common stock are listed,
have been volatile in the past and have experienced sharp share price and
trading volume changes. The trading price of our common stock is likely to be
volatile and could fluctuate widely in response to many factors, including the
following, some of which are beyond our control:
* variations in our operating results;
12
* changes in expectations of our future financial performance, including
financial estimates by securities analysts and investors;
* changes in operating and stock price performance of other companies in
our industry;
* additions or departures of key personnel; and
* future sales of our common stock.
Domestic and international stock markets often experience significant price and
volume fluctuations. These fluctuations, as well as general economic and
political conditions unrelated to our performance, may adversely affect the
price of our common stock.
ONE STOCKHOLDER OWNS A SUBSTANTIAL PORTION OF OUR OUTSTANDING COMMON STOCK,
WHICH MAY ENABLE THIS STOCKHOLDER TO INFLUENCE MANY SIGNIFICANT CORPORATE
ACTIONS.
PFN Holdings controls approximately 61.5% of our outstanding shares of common
stock as of March 30, 2012. As a result, PFN Holdings could have a substantial
impact on matters requiring the vote of the shareholders, including the election
of our directors and most corporate actions. This control could delay, defer or
prevent others from initiating a potential merger, takeover or other change in
our control, even if these actions would benefit us and our other shareholders.
This control could adversely affect the voting and other rights of our other
shareholders and could depress the market price of our common stock.
OUR COMMON SHARES MAY BECOME THINLY TRADED AND YOU MAY BE UNABLE TO SELL AT OR
NEAR ASK PRICES, OR AT ALL.
We cannot predict the extent to which an active public market for trading our
common stock will be sustained. Although our common share's trading volume
increase significantly recently, it has historically been sporadically or
"thinly-traded," meaning that the number of persons interested in purchasing our
common shares at or near bid prices at certain given time may be relatively
small or non-existent.
This situation is attributable to a number of factors, including the fact that
we are a small company which is relatively unknown to stock analysts, stock
brokers, institutional investors and others in the investment community who
generate or influence sales volume. Even if we came to the attention of such
persons, those persons tend to be risk-averse and may be reluctant to follow,
purchase, or recommend the purchase of shares of an unproven company such as
ours until such time as we become more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give you any assurance
that a broader or more active public trading market for our common stock will
develop or be sustained, or that current trading levels will be sustained.
The market price for our common stock is particularly volatile given our status
as a relatively small company, which could lead to wide fluctuations in our
share price. You may be unable to sell your common stock at or above your
purchase price if at all, which may result in substantial losses to you.
Shareholders should be aware that, according to SEC Release No. 34-29093, the
market for penny stocks has suffered in recent years from patterns of fraud and
abuse. Such patterns include (1) control of the market for the security by one
or a few broker-dealers that are often related to the promoter or issuer; (2)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and (5) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
13
WE DO NOT ANTICIPATE PAYING ANY CASH DIVIDENDS TO OUR COMMON SHAREHOLDERS.
We presently do not anticipate that we will pay dividends on any of our common
stock in the foreseeable future. If payment of dividends does occur at some
point in the future, it would be contingent upon our revenues and earnings, if
any, capital requirements, and general financial condition. The payment of any
common stock dividends will be within the discretion of our Board of Directors.
We presently intend to retain all earnings after paying the interest for the
preferred stock, if any, to implement our business plan; accordingly, we do not
anticipate the declaration of any dividends for common stock in the foreseeable
future.
IF WE ARE CURRENTLY LISTED ON THE OVER-THE-COUNTER BULLETIN BOARD QUOTATION
SYSTEM AND OUR COMMON STOCK IS SUBJECT TO "PENNY STOCK" RULES WHICH COULD
NEGATIVELY IMPACT OUR LIQUIDITY AND OUR SHAREHOLDERS' ABILITY TO SELL THEIR
SHARES.
Our common stock is currently quoted on the Over-the-counter Bulletin Board. We
must comply with numerous NASDAQ MarketPlace rules in order to maintain the
listing of our common stock on the Over-the-counter Bulletin Board. There can be
no assurance that we can continue to meet the requirements to maintain the
quotation on the Over-the-counter Bulletin Board listing of our common stock. If
we are unable to maintain our listing on the Over-the-counter Bulletin Board,
the market liquidity of our common stock may be severely limited.
VOLATILITY IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION.
The market for our common stock is characterized by significant price volatility
as compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
In the past, plaintiffs have often initiated securities class action litigation
against a company following periods of volatility in the market price of its
securities. We may, in the future, be the target of similar litigation.
Securities litigation could result in substantial costs and liabilities and
could divert management's attention and resources.
THE ELIMINATION OF MONETARY LIABILITY AGAINST OUR DIRECTORS, OFFICERS AND
EMPLOYEES UNDER NEVADA LAW AND THE EXISTENCE OF INDEMNIFICATION RIGHTS OF OUR
DIRECTORS, OFFICERS AND EMPLOYEES MAY RESULT IN SUBSTANTIAL EXPENDITURES BY OUR
COMPANY AND MAY DISCOURAGE LAWSUITS AGAINST OUR DIRECTORS, OFFICERS AND
EMPLOYEES.
Our articles of incorporation do not contain any specific provisions that
eliminate the liability of our directors for monetary damages to our company and
shareholders; however, we are prepared to give such indemnification to our
directors and officers to the extent provided for by Nevada law. We may also
have contractual indemnification obligations under our employment agreements
with our officers. The foregoing indemnification obligations could result in our
company incurring substantial expenditures to cover the cost of settlement or
damage awards against directors and officers, which we may be unable to recoup.
These provisions and resultant costs may also discourage our company from
bringing a lawsuit against directors and officers for breaches of their
fiduciary duties, and may similarly discourage the filing of derivative
litigation by our shareholders against our directors and officers even though
such actions, if successful, might otherwise benefit our company and
shareholders.
PFN HOLDINGS MAY BE ISSUED ADDITIONAL SHARES OF OUR COMMON STOCK, WHICH COULD
RESULT IN DILUTION TO OUR SHAREHOLDERS.
Pursuant to the asset purchase agreement with PFN Holdings described elsewhere
in this Current Report, we have agreed to raise a total of $745,000 in financing
in conjunction with the acquisition of the PFN Holdings assets. As of the
closing of the asset purchase agreement, we have raised a total of $245,000 and
have entered into a financing agreement with Right Power Services Ltd., pursuant
to which Right Power has agreed to provide us with an additional $500,000 in
financing. However, if we are not able to close on any of the $500,000
post-closing financing from Right Power or any other funding source, PFN
Holdings will receive an additional 70,000,000 shares of our common stock. If we
are able to close on only $250,000 of the post-closing financing, PFN Holdings
will receive an additional 40,000,000 shares of common stock.
14
These issuances of additional equity securities could result in dilution to our
shareholders. We cannot assure you that we will be able to close the financing
with Right Power, or any other funding source, and the additional issuances to
PFN Holdings could result in a significant dilution to your equity interest.
WE MAY NEED ADDITIONAL CAPITAL, AND THE SALE OF ADDITIONAL SHARES OR OTHER
EQUITY SECURITIES COULD RESULT IN ADDITIONAL DILUTION TO OUR SHAREHOLDERS.
In the future, we may require additional cash resources due to changed business
conditions or other future developments, including any investments or
acquisitions we may decide to pursue. If our resources are insufficient to
satisfy our cash requirements, we may seek to sell additional equity or debt
securities or obtain a credit facility. The sale of additional equity securities
could result in dilution to our shareholders. The incurrence of indebtedness
would result in increased debt service obligations and could result in operating
and financing covenants that would restrict our operations. We cannot assure you
that financing will be available in amounts or on terms acceptable to us, if at
all.
OUR BUSINESS IS SUBJECT TO CHANGING REGULATIONS RELATED TO CORPORATE GOVERNANCE
AND PUBLIC DISCLOSURE THAT HAVE INCREASED BOTH OUR COSTS AND THE RISK OF
NONCOMPLIANCE.
Because our common stock is publicly traded, we are subject to certain rules and
regulations of federal, state and financial market exchange entities charged
with the protection of investors and the oversight of companies whose securities
are publicly traded. These entities, including the Public Company Accounting
Oversight Board, the SEC and NASDAQ, have issued requirements and regulations
and continue to develop additional regulations and requirements in response to
corporate scandals and laws enacted by Congress, most notably the Sarbanes-Oxley
Act of 2002. Our efforts to comply with these regulations have resulted in, and
are likely to continue resulting in, increased general and administrative
expenses and diversion of management time and attention from revenue-generating
activities to compliance activities. Because new and modified laws, regulations
and standards are subject to varying interpretations in many cases due to their
lack of specificity, their application in practice may evolve over time as new
guidance is provided by regulatory and governing bodies. This evolution may
result in continuing uncertainty regarding compliance matters and additional
costs necessitated by ongoing revisions to our disclosure and governance
practices.
WE WILL INCUR INCREASED COSTS AND COMPLIANCE RISKS AS A RESULT OF BECOMING A
PUBLIC COMPANY.
As a public company, we will incur significant legal, accounting and other
expenses. We will incur costs associated with our public company reporting
requirements. We also anticipate that we will incur costs associated with
recently adopted corporate governance requirements, including certain
requirements under the Sarbanes-Oxley Act of 2002, as well as new rules
implemented by the SEC and the National Association of Securities Dealers
("NASD"). We expect these rules and regulations, in particular Section 404 of
the Sarbanes-Oxley Act of 2002, to significantly increase our legal and
financial compliance costs and to make some activities more time-consuming and
costly. Like many smaller public companies, we face a significant impact from
required compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Section
404 requires management of public companies to evaluate the effectiveness of
internal control over financial reporting and the independent auditors to attest
to the effectiveness of such internal controls and the evaluation performed by
management. The SEC has adopted rules implementing Section 404 for public
companies as well as disclosure requirements. The Public Company Accounting
Oversight Board, or PCAOB, has adopted documentation and attestation standards
that the independent auditors must follow in conducting its attestation under
Section 404. We are currently preparing for compliance with Section 404;
however, there can be no assurance that we will be able to effectively meet all
of the requirements of Section 404 as currently known to us in the currently
mandated timeframe. Any failure to implement effectively new or improved
internal controls, or to resolve difficulties encountered in their
implementation, could harm our operating results, cause us to fail to meet
reporting obligations or result in management being required to give a qualified
assessment of our internal controls over financial reporting or our independent
auditors providing an adverse opinion regarding management's assessment. Any
such result could cause investors to lose confidence in our reported financial
information, which could have a material adverse effect on our stock price.
15
We also expect these new rules and regulations may make it more difficult and
more expensive for us to obtain director and officer liability insurance and we
may be required to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar coverage. As a result,
it may be more difficult for us to attract and retain qualified individuals to
serve on our Board of Directors or as executive officers. We are currently
evaluating and monitoring developments with respect to these new rules, and we
cannot predict or estimate the amount of additional costs we may incur or the
timing of such costs.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements and Notes thereto of PFN Holdings appearing elsewhere in this Current
Report. The following discussion contains forward-looking statements relating to
future events or our future performance. Actual results may materially differ
from those projected in the forward-looking statements as a result of certain
risks and uncertainties set forth in this prospectus. Although management
believes that the assumptions made and expectations reflected in the
forward-looking statements are reasonable, there is no assurance that the
underlying assumptions will, in fact, prove to be correct or that actual results
will not be different from expectations expressed in this report.
RESULTS OF OPERATIONS
FROM INCEPTION ON DECEMBER 30, 2011 TO DECEMBER 31, 2011
We were incorporated on December 30, 2011 and our year end is December 31.
Consequently, our audit only includes one day of operations. During that day,
PFN Holdings was incorporated and acquired the assets which were eventually sold
to Psychic Friends Network Inc., our company. These assets were acquired from a
number of different, non-operating entities.
During the period ended December 31, 2011 we incorporated the company, hired an
attorney and hired an auditor for the preparation of this Current Report. Our
net loss since inception is $75 as a result of incurring expenses for
incorporation.
LIQUIDITY AND CAPITAL RESOURCES
As of the date of this Current Report, we have yet to generate any revenues from
our business operations.
As of December 31, 2011, we had no cash or current assets, as our intellectual
property assets were impaired to zero value due to prolonged inactivity. Our
total liabilities were $75, comprised entirely of a related party payable.
PLAN OF OPERATION AND FUNDING
We expect that working capital requirements will continue to be funded through a
combination of our existing funds and further issuances of securities. Our
working capital requirements are expected to increase in line with the growth of
our business.
We estimate that our expenses over the next 12 months will be approximately
$1,320,000 as described in the table below. These estimates may change
significantly depending on the nature of our future business activities and our
ability to raise capital from shareholders or other sources.
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Estimated Estimated
Description Completion Date Expenses ($)
Legal and accounting fees 12 months 100,000
Website and app development 4 months 175,000
Management and consulting costs 12 months 275,000
Marketing 8 months 600,000
Acquisition of fixed assets 12 months 100,000
General and administrative expenses 12 months 70,000
---------
TOTAL 1,320,000
=========
We have no lines of credit or other bank financing arrangements. We have entered
into an agreement with Right Power Services Ltd., to fund us an additional
$500,000 in equity financing, but there can be no assurance that we will be able
to close this financing and this financing will not be sufficient to meet our
needs for the upcoming 12 months. Generally, we have financed operations to date
through the proceeds of the private placement of equity and debt instruments. In
connection with our business plan, management anticipates additional increases
in operating expenses and capital expenditures relating to: (i) acquisition of
land; (ii) developmental expenses associated with a start-up business; and (iii)
development of our cultivation and propagation facilities. We intend to finance
these expenses with further issuances of securities, and debt issuances.
Thereafter, we expect we will need to raise additional capital and generate
revenues to meet long-term operating requirements. Additional issuances of
equity or convertible debt securities will result in dilution to our current
shareholders. Further, such securities might have rights, preferences or
privileges senior to our common stock. Additional financing may not be available
upon acceptable terms, or at all. If adequate funds are not available or are not
available on acceptable terms, we may not be able to take advantage of
prospective new business endeavours or opportunities, which could significantly
and materially restrict our business operations. We currently do not have a
specific plan of how we will obtain such funding; however, we anticipate that
additional funding will be in the form of equity financing from the sale of our
common stock. We have and will continue to seek to obtain short-term loans from
our directors, although no future arrangement for additional loans has been
made. We do not have any agreements with our directors concerning these loans.
We do not have any arrangements in place for any future equity financing.
INFLATION
Inflation and changing prices have not had a material effect on our business and
we do not expect that inflation or changing prices will materially affect our
business in the foreseeable future. However, our management will closely monitor
the price change in travel industry and continually maintain effective cost
control in operations.
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 or
capital expenditures or capital resources that is material to an investor in our
securities.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires our management to make
assumptions, estimates and judgments that affect the amounts reported, including
the notes thereto, and related disclosures of commitments and contingencies, if
any. We have identified certain accounting policies that are significant to the
preparation of our financial statements. These accounting policies are important
for an understanding of our financial condition and results of operation.
Critical accounting policies are those that are most important to the portrayal
of our financial conditions and results of operations and require management's
difficult, subjective, or complex judgment, often as a result of the need to
17
make estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods. Certain accounting estimates are particularly
sensitive because of their significance to financial statements and because of
the possibility that future events affecting the estimate may differ
significantly from management's current judgments. We believe the following
critical accounting policies involve the most significant estimates and
judgments used in the preparation of our financial statements:
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the balance sheet and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
LOSS PER COMMON SHARE
Basic loss per share is calculated using the weighted-average number of common
shares outstanding during each reporting period. Diluted loss per share includes
potentially dilutive securities such as outstanding options and warrants, using
various methods such as the treasury stock or modified treasury stock method in
the determination of dilutive shares outstanding during each reporting period.
We do not have any potentially dilutive instruments.
ACCOUNTING BASIS
We use the accrual basis of accounting and accounting principles generally
accepted in the United States of America.
FINANCIAL STATEMENTS
The audited financial statements of PFN Holdings for the period from December
30, 2011 to December 31, 2011 have been included as follows, commencing on page
F-1.
PFN HOLDINGS
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2011
Report of Independent Registered Public Accounting Firm....................F-1
Balance Sheet..............................................................F-2
Statement of Operations and Comprehensive Loss.............................F-3
Statement of Cash Flows....................................................F-4
Statement of Stockholders' Equity..........................................F-5
Notes to the Financial Statements..........................................F-6
18
SADLER, GIBB & ASSOCIATES, LLC
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
PFN Holdings
(A Development Stage Company)
We have audited the accompanying balance sheet of PFN Holdings as of December
31, 2011, and the related statement of operations, stockholders' deficit and
cash flows from inception on December 30, 2011 through December 31, 2011. 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 audits.
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 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 provides 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 PFN Holdings as of December 31,
2011, and the results of their operations and their cash flows from inception on
December 30, 2011 through December 31, 2011, 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 5 to the
financial statements, the Company had accumulated losses of $75 as of December
31, 2011, 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
-------------------------------------------
Salt Lake City, UT
February 23, 2012
F-1
PFN HOLDINGS
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
December 31, 2011
-----------------
ASSETS $ --
---------
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Note Payable - Related Parties 75
---------
Total Liabilities $ 75
---------
STOCKHOLDERS DEFICIT
Common stock, par $0.01; 7,500,000 shares authorized
10,000 shares issued and outstanding 100
Additional Paid-in Capital (100)
Deficit accumulated during the development stage (75)
---------
Total Stockholders' deficit (75)
---------
TOTAL LIABILITIES & STOCKHOLDERS DEFICIT $ --
=========
The accompanying notes are an integral part of the financial statements.
F-2
PFN HOLDINGS
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
From Inception on
December 30, 2011
through
December 31,
2011
--------
Gross Revenues $ --
Operating Expenses 75
--------
Loss From Operations (75)
--------
Other Losses --
--------
Net Loss Before Income Taxes (75)
--------
Provision for Income Taxes --
Net Loss $ (75)
========
Net Loss Per Share $ 0.00
Weighted Average Number of Shares Outstanding $ 10,000
========
The accompanying notes are an integral part of the financial statements.
F-3
PFN HOLDINGS
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIT
PERIOD FROM DECEMBER 30, 2011 (INCEPTION) TO DECEMBER 31, 2011
Common Stock Additional
---------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
INCEPTION, DECEMBER 30, 2011 -- $ -- $ -- $ -- $ --
Common stock issued to founders 10,000 100 (100) -- --
Net loss -- -- -- (75) (75)
------ ------ ------ ------ ------
BALANCE DECEMBER 31, 2011 10,000 $ 100 $ (100) $ (75) $ (75)
====== ====== ====== ====== ======
The accompanying notes are an integral part of the financial statements.
F-4
PFN HOLDINGS
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
From Inception on
December 30, 2011
through
December 31,
2011
--------
CASH FLOW FROM OPERATING ACTIVITIES
Net loss for the period $ (75)
Adjustments to reconcile Net Income
to net cash provided by operations: --
--------
Net cash provided by Operating Activities (75)
--------
CASH FLOW FROM INVESTING ACTIVITIES
Net cash provided by Investing Activities --
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance on Note
Payable-Related Parties 75
--------
Net cash provided by Financing Activities 75
--------
Net cash increase for period --
--------
Cash and Cash Equivalents-Beginning --
--------
Cash and Cash Equivalents-Ending --
--------
Cash at end of period $ --
========
Supplemental Cash Flow Information
Cash paid for interest $ --
Cash paid for income taxes --
Non-Cash Financing Activities
Common Stock Issues to Founders $ 100
The accompanying notes are an integral part of the financial statements.
F-5
PFN HOLDINGS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2011
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
PFN HOLDINGS ("the Company") was incorporated under the laws of the State of
Nevada, U.S. on December 30, 2011. The Company is in the development stage and
it intends to market and sell psychic services.
The Company has not generated any revenue to date and consequently its
operations are subject to all risks inherent in the establishment of a new
business enterprise.
BASIS OF PRESENTATION
The financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of America and are
presented in US dollars.
ACCOUNTING BASIS
The Company uses the accrual basis of accounting and accounting principles
generally accepted in the United States of America ("GAAP" accounting). The
Company has adopted a December 31 fiscal year end.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of notes payable approximate their fair value due to the
short period of these instruments.
DEVELOPMENT STAGE COMPANY
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles related to development-stage companies.
A development-stage company is one in which planned principal operations have
not commenced or if its operations have commenced, there has been no significant
revenues there from.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the balance sheet and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
F-6
PFN HOLDINGS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2011
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes. Under
the liability method deferred tax assets and liabilities are determined based on
the differences between financial reporting basis and the tax basis of the
assets and liabilities and are measured using enacted tax rates and laws that
will be in effect, when the differences are expected to reverse. An allowance
against deferred tax assets is recognized, when it is more likely than not, that
such tax benefits will not be realized.
Any deferred tax asset is considered immaterial and has been fully offset by a
valuation allowance because at this time the Company believes that it is more
likely than not that the future tax benefit will not be realized as the Company
has no current operations.
LOSS PER COMMON SHARE
Basic loss per share is calculated using the weighted-average number of common
shares outstanding during each reporting period. Diluted loss per share includes
potentially dilutive securities such as outstanding options and warrants, using
various methods such as the treasury stock or modified treasury stock method in
the determination of dilutive shares outstanding during each reporting period.
The Company does not have any potentially dilutive instruments.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2010, the Financial Accounting Standards Board (FASB) issued amended
guidance on subsequent events. Under this amended guidance, SEC filers are no
longer required to disclose the date through which subsequent events have been
evaluated in originally issued and revised financial statements. This guidance
was effective immediately and the Company adopted this new guidance in 2011.
As a result, these changes impact how companies reference GAAP in their
financial statements and in their significant accounting policies. The Company
implemented the Codification in this Report by providing references to the
Codification topics alongside references to the corresponding standards.
With the exception of the pronouncements noted above, no other accounting
standards or interpretations issued or recently adopted are expected to have a
material impact on the Company's financial position, operations or cash flows.
NOTE 2 - CAPITAL STOCK
The authorized capital of the Company is 7,500,000 common shares with a par
value of $ 0.01 per share.
In December of 2011, the Company issued 10,000 shares of common stock to its
founders.
F-7
PFN HOLDINGS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2011
NOTE 3 - NOTE PAYABLE - RELATED PARTY
On December 30, 2011, the Company's Director and President, loaned the Company
$75. The loans are non-interest bearing, unsecured and due on demand.
NOTE 4 - INCOME TAXES
For the period ended December 31, 2011, the Company has incurred net losses and,
therefore, has no tax liability. The net deferred tax asset generated by the
loss carry-forward has been fully reserved. The cumulative net operating loss
carry-forward is approximately $75 at December 31, 2011, and will expire
beginning in the year 2031.
The cumulative tax effect at the expected rate of 34% of significant items
comprising our net deferred tax amount is as follows:
2011
--------
Income tax expense at statutory rate $ 25
Valuation allowance (25)
--------
Income tax expense per books $ --
========
Net deferred tax assets consist of the following components as of:
2011
--------
NOL Carryover $ 25
Valuation allowance (25)
--------
Net deferred tax asset $ --
========
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying financial
statements, the Company incurred losses of $75 since its inception and has not
yet produced revenues from operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event that the
Company cannot continue as a going concern. Management anticipates that it will
be able to raise additional working capital through the issuance of stock and
through additional loans from investors.
The ability of the Company to continue as a going concern is dependent upon the
Company's ability to attain a satisfactory level of profitability and obtain
suitable and adequate financing. There can be no assurance that management's
plan will be successful.
F-8
PFN HOLDINGS
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2011
NOTE 6 - SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations
subsequent to year end and has determined that the only material subsequent
event to disclose in these financial statements is described in the following
paragraph.
The Company intends to enter an agreement (the "Acquisition") with Psychic
Friends Network, Inc. ("the Purchaser") to sell all Company assets in exchange
for 50,060,000 shares of the Purchaser's stock.
In connection with the anticipated Acquisition, on January 27, 2012, the Company
entered into a convertible note to borrow $5,000 from Right Power Services, Ltd.
("Right Power") to be repaid 2 years from the date of funding of the note. Upon
completion of the Acquisition, the convertible note will be non-interest bearing
and convertible into shares of the Purchaser at $0.75 per share, with a
corresponding discount for any beneficial conversion value arising at the time
of Acquisition. If the Acquisition fails to close before six months from the
date of the convertible note, the conversion right will be cancelled and the
convertible note will then bear annual interest of 10 percent.
F-9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of our
common stock as of March 30, 2012 (i) by each person who is known by us to
beneficially own more than 5% of our common stock; (ii) by each of our officers
and directors; and (iii) by all of our officers and directors as a group. Unless
otherwise specified, the address of each of the persons set forth below is in
care of the Company, 2360 Corporate Circle, Suite 400, Henderson, NV,
89074-7722.
Amount and
Nature of
Name and Address Beneficial Percent of
of Beneficial Owner Office, If Any Title of Class Ownership (1) Class (2)
------------------- -------------- -------------- ------------- ---------
OFFICERS AND DIRECTORS
Marc Lasky CEO, CFO, Director Common stock, 50,600,000 (3) 61.5%
$0.001 par value
Mike Lasky President, Director Common stock, 50,600,000 (3) 61.5%
$0.001 par value
ALL OFFICERS AND DIRECTORS
AS A GROUP
Common stock, 50,600,000 61.5%
$0.001 par value
5% SECURITY HOLDERS
Peter Martin Newton Common stock, 50,600,000 (3) 61.5%
$0.001 par value
----------
(1) Beneficial Ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Each of the beneficial owners listed above has direct ownership
of and sole voting power and investment power with respect to the shares of
our common stock.
(2) Based on 83,263,334 shares issued and outstanding as of March 30, 2012.
(3) Marc Lasky, Mike Lasky, and Peter Martin Newton share voting and
dispositive control over PFN Holdings which holds 50,600,000 shares of our
common stock.
CHANGES IN CONTROL
We do not currently have any arrangements which, if consummated, may result in a
change of control of our company.
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth information about our directors and executive officers
as of the date of this report:
Name Age Position
---- --- --------
Marc Lasky 44 Chief Executive Officer, Chief Financial Officer,
Director
Mike Lasky 70 President, Director
MR. MARC LASKY. Since April of 1994, Marc Lasky has operated Pikesville
Pictures, a production company that specializes in infomercials and direct
response advertising. In March of 2005, Pikesville began to expand to become a
full service internet production company, which includes design, development and
e-commerce for websites. Mr. Lasky is also a winner of the prestigious NIMA
award for Best Infomercial Production, Best Infomercial Script and best Direct
Response show.
19
Marc Lasky is the creator of the original Psychic Friends Network(TM) brand
name. He produced and directed the Psychic Friends infomercials, Psychic Revival
Network, Psychic Television Network, The Love Psychic and The Psychic Friends
Network, grossing over $180M in year one, and eventually generating over $1
billion in revenue during the 1990s. During this time, he gained valuable
experience in media purchasing and a wide variety of operational
responsibilities also working for Bernard Dunn Advertising. Marc has also been
responsible for the launch of several internet based businesses, and has gained
experience working with the top designers, developers and internet marketers.
We appointed Mr. Marc Lasky to our board of directors due to his extensive
experience in information technology, marketing and history with the Psychic
Friends Network trademark.
MR. MIKE LASKY. Since June of 2006, Mr. Mike Lasky has been retired. He has come
out of retirement in order to focus on the development of Psychic Friends
Network. Mr. Lasky is the creator of Mike Warren Associates, a leader in sports
information services. Started in 1972, it was soon averaging $20 million in
annual sales. After setting up Mike Warren Associates, Mr. Lasky formed
Inphomation Communication in the early 1990's. Inphomation became one the top
infomercial companies in the world. Mike most successful venture and
Inphomation's lead program was The Psychic Friends Network(TM). He pioneered the
"at home network" whereby all the psychics worked at home and received calls
from a single 900 number national network. An industry magazine, Electronic
Retail named Mike the 'Man of the Year' in 1995. In addition his company created
such successes as Barbara D'Angelis' Making Love Work(TM), Roland Martin's
Helicopter Lure(TM), and 4CapitalM, a start up mortgage company.
We appointed Mr. Mike Lasky to our board of directors due to his extensive
experience in media, early stage companies, and history with the Psychic Friends
Network trademark.
SIGNIFICANT EMPLOYEES
Other than the foregoing named officers and directors, we do not have any
employees who are key to our business and operations.
FAMILY RELATIONSHIPS
Marc Lasky is the son of Mike Lasky. There are no other family relationships
among our board of directors.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
To the best of our knowledge, none of our directors or executive officers has,
during the past ten years:
1. been convicted in a criminal proceeding or been subject to a pending
criminal proceeding (excluding traffic violations and other minor
offences);
2. had any bankruptcy petition filed by or against the business or
property of the person, or of any partnership, corporation or business
association of which he was a general partner or executive officer,
either at the time of the bankruptcy filing or within two years prior
to that time;
3. been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction
or federal or state authority, permanently or temporarily enjoining,
barring, suspending or otherwise limiting, his involvement in any type
of business, securities, futures, commodities, investment, banking,
savings and loan, or insurance activities, or to be associated with
persons engaged in any such activity;
4. been found by a court of competent jurisdiction in a civil action or
by the SEC or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated;
20
5. been the subject of, or a party to, any federal or state judicial or
administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated (not including any settlement of a
civil proceeding among private litigants), relating to an alleged
violation of any federal or state securities or commodities law or
regulation, any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease-and-desist order, or
removal or prohibition order, or any law or regulation prohibiting
mail or wire fraud or fraud in connection with any business entity; or
6. been the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act (15
U.S.C. 78c(a)(26))), any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any
equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with a
member.
Except as set forth in our discussion below in "Certain Relationships and
Related Transactions, and Director Independence - Transactions with Related
Persons," none of our directors, director nominees or executive officers has
been involved in any transactions with us or any of our directors, executive
officers, affiliates or associates which are required to be disclosed pursuant
to the rules and regulations of the SEC.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE -- FISCAL YEAR ENDED DECEMBER 31, 2011
The following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to the named persons for services
rendered in all capacities during the noted periods. No other executive officer
received total annual salary and bonus compensation in excess of $100,000.
Stock Option All Other
Salary Bonus Awards Awards Compensation Total
Name and Principal Position Year ($) ($) ($) ($) ($) ($)
--------------------------- ---- ------ ----- ------ ------ ------------ -----
Marc Lasky (1) 2011 0 0 0 0 0 0
Mike Lasky (2) 2011 0 0 0 0 0 0
----------
(1) On March 30, 2012, we acquired the assets of PFN Holdings in a reverse
acquisition transaction that was structured as an asset acquisition; and in
connection with that transaction Mr. Marc Lasky became our Chief Executive
Officer and Chief Financial Officer. Prior to the effective date of the
reverse acquisition, Mr. Marc Lasky served as the Chief Executive Officer
and Chief Financial Officer of PFN Holdings. The annual, long term and
other compensation shown in this table include the amount Mr. Marc Lasky
received from PFN Holdings prior to the consummation of the reverse
acquisition.
(2) On March 30, 2012, we acquired the assets of PFN Holdings in a reverse
acquisition transaction that was structured as an asset acquisition; and in
connection with that transaction Mr. Mike Lasky became our President. Prior
to the effective date of the reverse acquisition, Mr. Mike Lasky served as
the President of PFN Holdings. The annual, long term and other compensation
shown in this table include the amount Mr. Mike Lasky received from PFN
Holdings prior to the consummation of the reverse acquisition.
SUMMARY OF EMPLOYMENT AGREEMENTS AND MATERIAL TERMS
We do not have currently any employment contract with our officers and
directors.
21
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
For the year ended December 31, 2011, no director or executive officer has
received compensation from us pursuant to any compensatory or benefit plan.
There is no plan or understanding, express or implied, to pay any compensation
to any director or executive officer pursuant to any compensatory or benefit
plan, although we anticipate that we will compensate our officers and directors
for services to us with stock or options to purchase stock, in lieu of cash.
COMPENSATION OF DIRECTORS
No member of our board of directors received any compensation for his services
as a director during the year ended December 31, 2011.
CODE OF ETHICS
We adopted a Code of Ethics applicable to our senior financial officers and
certain other finance executives, which is a "code of ethics" as defined by
applicable rules of the SEC. Our Code of Ethics is attached as an exhibit to
this Current Report on Form8-K as Exhibit 14.1. If we make any amendments to our
Code of Ethics other than technical, administrative, or other non-substantive
amendments, or grant any waivers, including implicit waivers, from a provision
of our Code of Ethics to our chief executive officer, chief financial officer,
or certain other finance executives, we will disclose the nature of the
amendment or waiver, its effective date and to whom it applies in a Current
Report on Form 8-K filed with the SEC.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
TRANSACTIONS WITH RELATED PERSONS
The following includes a summary of transactions since the beginning of the 2010
year, or any currently proposed transaction, in which we were or are to be a
participant and the amount involved exceeded or exceeds the lesser of $120,000
or one percent of the average of our total assets at year end for the last two
completed fiscal years, and in which any related person had or will have a
direct or indirect material interest (other than compensation described under
"Executive Compensation"). We believe the terms obtained or consideration that
we paid or received, as applicable, in connection with the transactions
described below were comparable to terms available or the amounts that would be
paid or received, as applicable, in arm's-length transactions.
On March 30, 2012, in connection with the closing of the asset purchase
agreement with PFN Holdings, we issued 50,600,000 shares of our common stock to
PFN Holdings which is controlled Marc and Mike Lasky, our directors and
officers. Additionally, at the same time, we cancelled 50,000,000 shares of our
common stock held by our former director and officer, Ya Tang Chao and accepted
a release from all liabilities provided to us by Mr. Chao, which had the effect
of eliminating any debts owed by us to Mr. Chao.
PROMOTERS AND CERTAIN CONTROL PERSONS
We did not have any promoters at any time during the past five fiscal years.
DIRECTOR INDEPENDENCE
We currently do not have any independent directors, as the term "independent" is
defined by the rules of the NASDAQ Stock Market.
LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal
proceedings which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties and an adverse result in these or other
22
matters may arise from time to time that may harm our business. Except as set
forth below, we are currently not aware of any such legal proceedings or claims
that we believe will have a material adverse affect on our business, financial
condition or operating results.
MARKET PRICE AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Our common stock is not traded on any exchange. Our common stock is quoted on
OTC Bulletin Board under the trading symbol "WWZD.OB". We cannot assure you that
there will be a market in the future for our common stock. On February 27, 2012,
FINRA approved the processing of a name change and split of our common stock. On
April 5, 2012, our symbol is scheduled to change to PFNI.
OTC Bulletin Board securities are not listed and traded on the floor of an
organized national or regional stock exchange. Instead, OTC Bulletin Board
securities transactions are conducted through a telephone and computer network
connecting dealers. OTC Bulletin Board issuers are traditionally smaller
companies that do not meet the financial and other listing requirements of a
national or regional stock exchange.
The first trade in our stock did not occur until February 24, 2012. Since
February 24, 2012, we traded a total of 3,400 shares at prices ranging from
$1.01 to $2.00 per share.
HOLDERS
As of March 30, 2012 there were approximately 25 stockholders of record of our
common stock. This number does not include shares held by brokerage clearing
houses, depositories or others in unregistered form.
DIVIDENDS
Any decisions regarding dividends will be made by our board of directors. We
currently intend to retain and use any future earnings for the development and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. Our board of directors has complete discretion on whether to
pay dividends, subject to the approval of our stockholders. Even if our board of
directors decides to pay dividends, the form, frequency and amount will depend
upon our future operations and earnings, capital requirements and surplus,
general financial condition, contractual restrictions and other factors that the
board of directors may deem relevant.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
We do not have in effect any compensation plans under which our equity
securities are authorized for issuance and we do not have any outstanding stock
options.
RECENT SALES OF UNREGISTERED SECURITIES
Reference is made to the disclosure set forth Item 3.02 of this report, which
disclosure is incorporated by reference into this section.
DESCRIPTION OF SECURITIES
COMMON STOCK
We are authorized to issue up to 750,000,000 shares of common stock, par value
$0.001 per share. Each outstanding share of common stock entitles the holder
thereof to one vote per share on all matters. Our bylaws provide that any
vacancy occurring in the board of directors may be filled by the affirmative
vote of a majority of the remaining directors though less than a quorum of the
23
board of directors. Stockholders do not have pre-emptive rights to purchase
shares in any future issuance of our common stock.
The holders of shares of our common stock are entitled to dividends out of funds
legally available when and as declared by our board of directors. Our board of
directors has never declared a dividend and does not anticipate declaring a
dividend in the foreseeable future. Should we decide in the future to pay
dividends, as a holding company, our ability to do so and meet other obligations
depends upon the receipt of dividends or other payments from our operating
subsidiary and other holdings and investments. In addition, our operating
subsidiary in the PRC, from time to time, may be subject to restrictions on
their ability to make distributions to us, including as a result of restrictive
covenants in loan agreements, restrictions on the conversion of local currency
into U.S. dollars or other hard currency and other regulatory restrictions. In
the event of our liquidation, dissolution or winding up, holders of our common
stock are entitled to receive, ratably, the net assets available to stockholders
after payment of all creditors.
All of the issued and outstanding shares of our common stock are duly
authorized, validly issued, fully paid and non-assessable. To the extent that
additional shares of our common stock are issued, the relative interests of
existing stockholders will be diluted.
ANTI-TAKEOVER EFFECTS OF OUR ARTICLES OF INCORPORATION AND BY-LAWS
Our amended and restated articles of incorporation and bylaws contain certain
provisions that may have anti-takeover effects, making it more difficult for or
preventing a third party from acquiring control of the Company or changing its
board of directors and management. According to our bylaws and articles of
incorporation, neither the holders of the Company's common stock nor the holders
of the Company's preferred stock have cumulative voting rights in the election
of our directors. The combination of the present ownership by a few stockholders
of a significant portion of the Company's issued and outstanding common stock
and lack of cumulative voting makes it more difficult for other stockholders to
replace the Company's board of directors or for a third party to obtain control
of the Company by replacing its board of directors.
ANTI-TAKEOVER EFFECTS OF NEVADA LAW
BUSINESS COMBINATIONS
The "business combination" provisions of Sections 78.411 to 78.444, inclusive,
of the Nevada Revised Statutes, or NRS, prohibit a Nevada corporation with at
least 200 stockholders from engaging in various "combination" transactions with
any interested stockholder: for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
transaction is approved by the board of directors prior to the date the
interested stockholder obtained such status; or after the expiration of the
three-year period, unless:
* the transaction is approved by the board of directors or a majority of
the voting power held by disinterested stockholders, or
* if the consideration to be paid by the interested stockholder is at
least equal to the highest of: (a) the highest price per share paid by
the interested stockholder within the three years immediately
preceding the date of the announcement of the combination or in the
transaction in which it became an interested stockholder, whichever is
higher, (b) the market value per share of common stock on the date of
announcement of the combination and the date the interested
stockholder acquired the shares, whichever is higher, or (c) for
holders of preferred stock, the highest liquidation value of the
preferred stock, if it is higher.
A "combination" is defined to include mergers or consolidations or any sale,
lease exchange, mortgage, pledge, transfer or other disposition, in one
transaction or a series of transactions, with an "interested stockholder"
having: (a) an aggregate market value equal to 5% or more of the aggregate
market value of the assets of the corporation, (b) an aggregate market value
equal to 5% or more of the aggregate market value of all outstanding shares of
the corporation, or (c) 10% or more of the earning power or net income of the
corporation.
24
In general, an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 10% or more of
a corporation's voting stock. The statute could prohibit or delay mergers or
other takeover or change in control attempts and, accordingly, may discourage
attempts to acquire our company even though such a transaction may offer our
stockholders the opportunity to sell their stock at a price above the prevailing
market price.
Our Articles of Incorporation state that we have elected not to be governed by
the "business combination" provisions, therefore such provisions currently do
not apply to us.
We do not have any provisions in our Articles, by laws, or employment or credit
agreements to which we are party that have anti-takeover consequences. We do not
currently have any plans to adopt anti-takeover provisions or enter into any
arrangements or understandings that would have anti-takeover consequences. In
certain circumstances, our management may issue additional shares to resist a
third party takeover transaction, even if done at an above market premium and
favoured by a majority of independent shareholders.
CONTROL SHARE ACQUISITIONS
The "control share" provisions of Sections 78.378 to 78.3793, inclusive, of the
NRS, which apply only to Nevada corporations with at least 200 stockholders,
including at least 100 stockholders of record who are Nevada residents, and
which conduct business directly or indirectly in Nevada, prohibit an acquirer,
under certain circumstances, from voting its shares of a target corporation's
stock after crossing certain ownership threshold percentages, unless the
acquirer obtains approval of the target corporation's disinterested
stockholders. The statute specifies three thresholds: one-fifth or more but less
than one-third, one-third but less than a majority, and a majority or more, of
the outstanding voting power. Once an acquirer crosses one of the above
thresholds, those shares in an offer or acquisition and acquired within 90 days
thereof become "control shares" and such control shares are deprived of the
right to vote until disinterested stockholders restore the right. These
provisions also provide that if control shares are accorded full voting rights
and the acquiring person has acquired a majority or more of all voting power,
all other stockholders who do not vote in favor of authorizing voting rights to
the control shares are entitled to demand payment for the fair value of their
shares in accordance with statutory procedures established for dissenters'
rights.
Our Articles of Incorporation state that we have elected not to be governed by
the "control share" provisions, therefore, they currently do not apply to us.
TRANSFER AGENT AND REGISTRAR
Our independent stock transfer agent is Empire Stock Transfer. Their mailing
addresses 1859 Whitney Mesa Dr., Henderson NV, 89104.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.138 of the NRS provides that a director or officer will not be
individually liable unless it is proven that (i) the director's or officer's
acts or omissions constituted a breach of his or her fiduciary duties, and (ii)
such breach involved intentional misconduct, fraud or a knowing violation of the
law.
Section 78.7502 of NRS permits a company to indemnify its directors and officers
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with a threatened, pending or completed
action, suit or proceeding if the officer or director (i) is not liable pursuant
to NRS 78.138 or (ii) acted in good faith and in a manner the officer or
director reasonably believed to be in or not opposed to the best interests of
the corporation and, if a criminal action or proceeding, had no reasonable cause
to believe the conduct of the officer or director was unlawful.
Section 78.751 of NRS permits a Nevada company to indemnify its officers and
directors against expenses incurred by them in defending a civil or criminal
action, suit or proceeding as they are incurred and in advance of final
disposition thereof, upon receipt of an undertaking by or on behalf of the
officer or director to repay the amount if it is ultimately determined by a
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court of competent jurisdiction that such officer or director is not entitled to
be indemnified by the company. Section 78.751 of NRS further permits the company
to grant its directors and officers additional rights of indemnification under
its articles of incorporation or bylaws or otherwise.
Section 78.752 of NRS provides that a Nevada company may purchase and maintain
insurance or make other financial arrangements on behalf of any person who is or
was a director, officer, employee or agent of the company, or is or was serving
at the request of the company as a director, officer, employee or agent of
another company, partnership, joint venture, trust or other enterprise, for any
liability asserted against him and liability and expenses incurred by him in his
capacity as a director, officer, employee or agent, or arising out of his status
as such, whether or not the company has the authority to indemnify him against
such liability and expenses.
Our Articles of Incorporation provide that no director or officer of the Company
will be personally liable to the Company or any of its stockholders for damages
for breach of fiduciary duty as a director or officer; provided, however, that
the foregoing provision shall not eliminate or limit the liability of a director
or officer (i) for acts or omissions which involve intentional misconduct, fraud
or knowing violation of law, or (ii) the payment of dividends in violation of
Section 78.300 of NRS. In addition, our Bylaws implement the indemnification and
insurance provisions permitted by Chapter 78 of the NRS by providing that:
* The Company shall indemnify its directors to the fullest extent
permitted by the NRS and may, if and to the extent authorized by the
board of directors, so indemnify its officers and any other person
whom it has the power to indemnify against liability, reasonable
expense or other matter whatsoever.
* The Company may at the discretion of the board of directors purchase
and maintain insurance on behalf of any person who holds or who has
held any position identified in the paragraph above against any and
all liability incurred by such person in any such position or arising
out of his status as such.
Insofar as indemnification by us for liabilities arising under the Securities
Act may be permitted to our directors, officers or persons controlling the
company pursuant to provisions of our articles of incorporation and bylaws, or
otherwise, we have been advised that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. In the event that a claim for indemnification by
such director, officer or controlling person of us in the successful defense of
any action, suit or proceeding is asserted by such director, officer or
controlling person in connection with the securities being offered, we will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by us is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
At the present time, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of ours in which indemnification
would be required or permitted. We are not aware of any threatened litigation or
proceeding, which may result in a claim for such indemnification.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
During the company's two most recent fiscal years George Stewart, CPA performed
the year end audits for the periods September 30, 2011 and 2010. The Company
terminated George Stewart, CPA on March 30, 2012. Preceding the termination of
George Stewart, CPA, there were no disagreements with George Stewart, CPA, which
were not resolved on any matter concerning accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of George Stewart, CPA would
have caused George Stewart, CPA to make reference to the subject matter of the
disagreements in connection with its reports. George Stewart, CPA as the
Company's principal independent accountants, for the periods, did not provide an
adverse opinion or disclaimer of opinion to the Company's financial statements,
nor modify its opinion as to uncertainty, audit scope or accounting principles.
The audit opinions were modified to contain a going concern qualification during
the Company's two most recent fiscal years.
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On March 30, 2012, the company approved and authorized the engagement of Sadler
Gibb & Associates, LLC who audited the December 31, 2011 financial statements of
PFN Holdings, as the principal independent accountant for the Company.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
On February 9, 2012 we issued 40,000 shares at $0.75 per share to one non-US
investor for total proceeds of $30,000. These shares were issued without a
prospectus, in reliance on the exemption from registration found in Regulation S
of the Securities Act of 1933, as amended.
On March 30, 2012, we issued 50,600,000 shares of our common stock to PFN
Holdings, in consideration of the transfer of certain assets associated with the
operations of a psychic business under the trademark Psychic Friends Network.
The number of our shares issued to PFN Holdings was determined based on an
arms-length negotiation. The issuance of our shares to PFN Holdings was made in
reliance on the exemption provided by Section 4(2) of the Securities Act for the
offer and sale of securities not involving a public offering and Regulation D
promulgated thereunder.
In instances described above where we indicate that we relied upon Section 4(2)
of the Securities Act in issuing securities, our reliance was based upon the
following factors: (a) the issuance of the securities was an isolated private
transaction by us which did not involve a public offering; (b) there were only a
limited number of offerees; (c) there were no subsequent or contemporaneous
public offerings of the securities by us; (d) the securities were not broken
down into smaller denominations; and (e) the negotiations for the sale of the
stock took place directly between the offeree and us.
ITEM 4.01 CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
(a) Previous independent registered public accounting firm
On March 30, 2012, we formally informed George Stewart, CPA of their dismissal
as our independent registered public accounting firm.
The reports of George Stewart, CPA on our consolidated financial statements as
of and for the fiscal year ended September 30, 2011 contained no adverse opinion
or disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle except to indicate that there was
substantial doubt about the Company ability to continue as a going concern.
Our Board of Directors participated in and approved the decision to change
independent registered public accounting firms.
During the fiscal year ended September 30, 2011, and through March 30, 2012,
there have been no disagreements with George Stewart, CPA on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
George Stewart, CPA would have caused them to make reference thereto in
connection with their report on the financial statements for such years.
We have requested that George Stewart, CPA furnish it with a letter addressed to
the SEC stating whether or not it agrees with the above statements. A copy of
the letter provided by George Stewart, CPA is filed as Exhibit 16.1 to this Form
8-K.
(b) New independent registered public accounting firm
On March 30, 2012, we engaged Sadler Gibb & Associates, LLC as its new
independent registered public accounting firm. Sadler Gibb & Associates, LLC
completed the audit for the period ended December 31, 2011 for PFN Holdings.
During the two most recent fiscal years and through March 30, 2012, we had not
consulted with Sadler Gibb & Associates, LLC regarding any of the following:
(i) The application of accounting principles to a specific transaction,
either completed or proposed;
27
(ii) The type of audit opinion that might be rendered on our consolidated
financial statements, and none of the following was provided to us:
(a) a written report, or (b) oral advice that Sadler Gibb &
Associates, LLC concluded was an important factor considered by us in
reaching a decision as to accounting, auditing or financial reporting
issue; or
(iii)Any matter that was subject of a disagreement, as that term is
defined in Item 304(a)(1)(iv) of Regulation S-K.
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT
Reference is made to the disclosure set forth under Item 2.01 of this report,
which disclosure is incorporated herein by reference. In connection with the
acquisition of the PFN Holdings assets, PFN Holdings acquired approximately
61.5% of the total outstanding shares of our capital stock and 61.5% total
voting power of all our outstanding voting securities.
ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF
CERTAIN OFFICERS
On March 30, 2012, (i) Ya Tang Chao tendered his resignation from all director
and officer positions with our company, (ii) Mr. Marc Lasky was duly appointed
as our Chief Executive Officer, Chief Financial Officer and a member of our
Board of Directors, and (ii) Mr. Mike Lasky was duly appointed as our President
and a member of our Board of Directors.
For certain biographical and other information regarding the newly appointed
officers and directors, see the disclosure under Item 2.01 of this report, which
disclosure is incorporated herein by reference.
ITEM 5.06 CHANGE IN SHELL COMPANY STATUS
As a result of the consummation of the Share Exchange described in Item 2.01 of
this Current Report on Form 8-K, we believe that we are no longer a "shell
company", as that term is defined in Rule 405 under the Securities Act and Rule
12b-2 under the Exchange Act.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Filed herewith are:
* Audited financial statements of PFN Holdings for the period from
December 30, 2011 to December 31, 2011, starting on page F-1 of this
Current Report.
(d) Exhibits
Exhibit No. Description
----------- -----------
2.1 Asset Acquisition Agreement, dated January 27, 2012, among the
Psychic Friends Network Inc. (formerly Web Wizard Inc.), PFN
Holdings, and Ya Tang Chao [incorporated by reference to Exhibit
10.1 to our Current Report on Form 8-K filed on February 1,
2012].
3.1 Articles of Incorporation [incorporated by reference to Exhibit
3.1 to our Registration Statement on Form SB-2 (SEC File No.
333-148623) filed on January 11, 2008]
3.2 Articles of Merger [incorporated by reference to Exhibit 3.1 to
our Current Report on Form 8-K filed on February 24, 2012]
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3.3 Certificate of Change [incorporated by reference to Exhibit 3.1
to our Current Report on Form 8-K filed on February 24, 2012]
3.4 Bylaws [incorporated by reference to Exhibit 3.1 to our Form 8A
filed on February 14, 2008]
10.1 Financing Agreement with Right Power Services Ltd., dated January
27, 2012 [incorporated by reference to Exhibit 3.1 to our Current
Report on Form 8-K filed on February 1, 2012]
10.2 Release from Ya Tang Chao dated January 27, 2012 [incorporated by
reference to Exhibit 3.1 to our Current Report on Form 8-K filed
on February 1, 2012]
14.1 Code of Ethics
16.1 Letter from George Steward, CPA to the SEC, dated March 30, 2012
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 30, 2012 PSYCHIC FRIENDS NETWORK INC.
By: /s/ Marc Lasky
-----------------------------------
Marc Lasky, Chief Executive Officer
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