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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2013
 
or
 
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                      to                     
 
Commission File Number: 000-54741
 
THE PULSE NETWORK, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
 
45-4798356
(State or other jurisdiction of 
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
437 Turnpike Street Canton, MA 02021
(Address of principal executive offices) (Zip Code)
 
(781) 821-6600
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x    No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x    No o
   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
£
Accelerated filer
£ 
Non-accelerated filer
£
Smaller reporting company
S
(Do not check if a smaller reporting company)
   
 
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes o    No x
 
The number of shares outstanding of the issuer’s common stock, par value $0.01 per share, at November 12, 2013 was 90,700,000 shares.
 


 
 

 
THE PULSE NETWORK, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 2013

Index

      Page  
PART 1 – FINANCIAL INFORMATION      
         
Item 1.  
Financial Statements (Unaudited)
    4  
           
 
Consolidated Balance Sheet as of September 30, 2013 and March 31, 2013
    4  
           
 
Consolidated Statements of Operations for the three and six months ended September 30, 2013 and 2012
    5  
           
 
Consolidated Statements of Cash Flows for the six months ended September 30, 2013 and 2012
    6  
           
 
Notes to Financial Statements
    7  
           
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
    11  
           
Item 3.
Quantitative and Qualitative Disclosure About Market Risk
    15  
           
Item 4.
Controls and Procedures
    16  
           
PART II – OTHER INFORMATION        
           
Item 1.  
Legal Proceedings
    17  
           
Item 1A.  
Risk Factors
    17  
           
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds     17  
           
Item 3.  
Defaults Upon Senior Securities
    17  
           
Item 4.  
Mine Safety Disclosures
    17  
           
Item 5.  
Other Information
    17  
           
Item 6.   
Exhibits
    18  
           
 
Signatures
    19  
 
 
2

 
 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q of The Pulse Network, Inc., a Nevada corporation (the “Company”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: the possibility that we will not receive sufficient customers to grow our business, the Company’s need for and ability to obtain additional financing, the exercise of the approximately 90.9% control the Company’s officers and directors hold of the Company’s voting securities, the inability for a substantive secondary market in the Company’s securities to develop, other factors over which we have little or no control; and other factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”).

Our management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
 
 
3

 
 
PART I.  FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS
 
THE PULSE NETWORK, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2013 and MARCH 31, 2013 (UNAUDITED)

 
   
September 30,
   
March 31,
 
   
2013
   
2013
 
ASSETS
           
             
CURRENT ASSETS:
           
   Cash
  $ 266,008     $ 31,670  
   Accounts receivable
    232,392       298,840  
   Prepaid expenses and deposits
    31,557       65,711  
                 
          Total current assets
    529,957       396,221  
                 
PROPERTY AND EQUIPMENT, net
    149,420       179,525  
                 
OTHER ASSETS
    27,521       27,823  
                 
                 
TOTAL ASSETS
  $ 706,898     $ 603,569  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
CURRENT LIABILITIES:
               
   Note Payable - bank
  $ 100,000     $ 130,000  
   Note Payable - other
    50,000       50,000  
   Note Payable - stockholders
    103,789       -  
   Accounts payable
    388,312       247,756  
   Accrued compensation
    726,897       239,087  
   Accrued expenses
    28,581       62,269  
   Current portion of long-term debt
    116,667       116,667  
   Current portion of capital lease obligations
    20,949       18,337  
   Current portion of note payable related party
    25,188       24,808  
   Deferred revenue
    827,611       812,950  
   Advances from stockholders
    346,850       426,883  
   Due to affiliates
    116,500       91,497  
   Deferred compensation
    58,399       56,958  
                 
          Total current liabilities
    2,909,743       2,277,212  
                 
DEFERRED COMPENSATION, net of current portion
    838,112       865,354  
LONG TERM DEBT, net of current portion
    165,277       223,611  
CAPITAL LEASE OBLIGATIONS, net of current portion
    29,480       37,077  
NOTE PAYABLE RELATED PARTY, net of current portion
    6,417       19,107  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
STOCKHOLDERS' EQUITY (DEFICIENCY):
               
Undesignated convertible preferred stock, authorized 25,000,000 shares
         
    designated as follows:
               
Series A convertible preferred stock, $0.001 par value, authorized,
         
    issued and outstanding 1,000
    1       1  
Series B convertible preferred stock, $0.001 par value, authorized,
         
    issued and outstanding 15,000,000
    15,000       15,000  
Common stock: $0.001 par value, authorized, 200,000,000 shares;
         
     issued and outstanding, 90,700,000 and 90,000,000 shares, respectively
    90,700       90,000  
  Additional paid-in capital
    335,543       136,729  
  Accumulated deficit
    (3,683,375 )     (3,060,522 )
                 
          Total stockholders' deficiency
    (3,242,131 )     (2,818,792 )
                 
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
  $ 706,898     $ 603,569  
 
The accompanying notes are an integral part of these consolidated interim financial statements

 
4

 
 
THE PULSE NETWORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED)

 
   
For The Three Months Ended
   
For The Six Months Ended
 
   
September 30, 2013
   
September 30, 2012
   
September 30, 2013
   
September 30, 2012
 
                         
NET SALES
  $ 624,917     $ 650,457     $ 1,559,139     $ 1,696,150  
                                 
COST OF SALES
    195,766       228,723       424,748       782,363  
                                 
GROSS PROFIT
    429,151       421,734       1,134,391       913,787  
                                 
SELLING EXPENSES
    181,148       109,786       302,334       244,726  
GENERAL AND ADMINISTRATIVE EXPENSES
    705,250       593,616       1,403,351       1,178,694  
                                 
NET LOSS FROM OPERATIONS
    (457,247 )     (281,668 )     (571,294 )     (509,633 )
                              0  
INTEREST EXPENSE
    32,271       2,875       51,559       5,466  
                                 
NET LOSS
  $ (489,518 )   $ (284,543 )   $ (622,853 )   $ (515,099 )
                                 
NET LOSS PER COMMON SHARE, basic and diluted
  $ (0.01 )   $ (0.00 )   $ (0.01 )   $ (0.01 )
                                 
WEIGHTED AVERAGE SHARES USED IN PER SHARE
                         
  COMPUTATION, basic and diluted
    90,436,667       90,000,000       90,276,111       90,000,000  
 
The accompanying notes are an integral part of these consolidated interim financial statements

 
5

 
 
THE PULSE NETWORK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2013 AND 2012 (UNAUDITED)

 
   
2013
   
2012
 
         
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
  Net loss
  $ (622,853 )   $ (515,099 )
  Adjustments to reconcile net loss to net cash provided (used for)
               
    by operating activities:
               
        Stock-based compensation
    59,514       -  
        Depreciation
    38,394       22,906  
        Changes in operating assets and liabilities:
               
            Accounts receivable
    66,448       48,240  
            Prepaid expenses and deposits
    34,154       (105,284 )
            Other assets
    302       -  
            Accounts payable
    140,556       (33,026 )
            Accrued compensation
    487,810       -  
            Accrued expenses
    (33,688 )     -  
            Deferred revenue
    14,661       261,406  
            Due to affiliates
    25,003       (87,633 )
            Deferred compensation
    (25,801 )     725  
                 
               Net cash provided by (used for) operating activities
    184,500       (407,765 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
  Additions to property and equipment
    (4,596 )     -  
                 
               Net cash used for investing activities
    (4,596 )     -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
  Proceeds from the issuance of common stock
    140,000       -  
  Net Proceeds from note payable - bank
    (30,000 )     250,000  
  Proceeds from note payable - other
    -       50,000  
  Proceeds from note payable - stockholders
    103,789       -  
  Net Advances (to) from stockholders
    (80,033 )     113,297  
  Repayment of long-term debt
    (58,334 )     -  
  Payments of capital lease obligations
    (8,678 )     13,729  
  Repayment of note payable related party
    (12,310 )     -  
                 
               Net cash provided by financing activities
    54,434       427,026  
                 
NET INCREASE IN CASH
    234,338       19,261  
                 
CASH:
               
  Beginning of period
    31,670       10,727  
                 
  End of period
  $ 266,008     $ 29,988  
  Supplemental Cash Flows Disclosure                
  Property and equipment acquired through capital lease
  $ 4,693     $ -  
 
The accompanying notes are an integral part of these consolidated interim financial statements

 
6

 
 
THE PULSE NETWORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2013 and 2012
 
1.
OUTLOOK
 
 
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has limited resources and operating history. As shown in the accompanying financial statements, as of September 30, 2013 the Company has an accumulated deficit of approximately $3,690,000 and has negative working capital of approximately $2,380,000. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its new business opportunities.
 
Management has plans to seek additional capital through private placements and public offerings of its common stock. There can be no assurance that the Company will be successful in accomplishing its objectives. Without such additional capital, the Company may be required to cease operations.
 
These conditions 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 of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
 
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Principles of Consolidation - The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.
 
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses.  Actual results could differ from these estimates.
 
Impairment of Long-Lived Assets – Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated future undiscounted net cash flows of the related asset or group of assets over their remaining lives. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized for the amount by which the carrying amount exceeds the estimated fair value of the asset. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent of other groups of assets. The impairment of long-lived assets requires judgments and estimates. If circumstances change, such estimates could also change.
 
Concentrations of Sales to Certain Customers – During the three month period ended September 30, 2013, the Company had sales to three customers A, B and C that accounted for approximately 41% of total revenue.  During the six month period ended September 30, 2013, the Company had sales to three customers A, C and D that accounted for approximately 44% of total revenue.
 
Income Taxes – Income tax expense for the three and six month periods ended September 30, 2013 is zero as a full valuation allowance on the tax benefits arising from the net operating losses was provided.
 
The Company recognizes in its financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company’ policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company did not have any unrecognized tax benefits or accrued interest and penalties during the three and six month periods ending September 30, 2013 and does not anticipate having any unrecognized tax benefits over the next twelve months. The Company is subject to audit by the IRS for tax periods commencing January 1, 2009.
 
 
 
 
 
7

 
 
 
Stock Based Compensation - The Company follows the authoritative guidance for accounting for stock-based compensation. This guidance requires that new, modified and unvested share-based payment transactions with employees, such as grants of stock options and stock, be recognized in the financial statements based upon their fair value at the grant date and recognized as compensation expense over their vesting periods. The Company also follows the guidance for equity instruments issued to consultants.
 
3. 
PROPERTY AND EQUIPMENT
 
Property and equipment at September 30, 2013 and March 31, 2013 consists of the following:
 
   
September 30,
2013
   
March 31,
2013
 
Computer equipment   $ 191,537     $ 186,941  
Audio and video equipment     87,761       87,761  
Furniture and fixtures     12,478       12,478  
Office equipment     55,189       51,496  
Event equipment     82,020       82,020  
      428,985       420,696  
Accumulated depreciation     (279,565 )     (241,171 )
                 
Property and equipment, net   $ 149,420     $ 179,525  
 
4.
RELATED PARTY TRANSACTIONS
 
Advances from stockholders consists of non-interest bearing advances of $309,675 and $37,175 from Stephen J. Saber, and Nicholas C. Saber, respectively at September 30, 2013 and $354,317 and $72,566 from Stephen and Nicholas, respectively at March 31, 2013, with no set repayment terms.
 
Note payable related party consists of a loan from John C. Saber, the father of the three majority stockholders.  Under the terms of the loan agreement, dated January 23, 2013, the Company borrowed $50,000 repayable in twenty-four monthly principal and interest installments of $2,150.  The note bears interest at 3.042% per annum and matures in January 2015.
 
Note payable stockholders consists of a note dated September 3, 2013 under the terms of which the Company borrowed $110,100 from Saber Insurance Trust, of which the three majority stockholders are primary beneficiaries.  The loan terms state repayment of the loan is to be made in full by June 1, 2014 including interest at 8.6% per annum.  The Company received net proceeds of $103,000 reflecting a discount in the amount of $7,100 representing the interest to be earned over the term of the note.  The discount is being amortized through a charge to interest expense using the interest method.  As of and for the three and six month periods ended September 30, 2013 $789 of the discount has been amortized through a charge to interest expense.
 
Due to affiliates at September 30, 2013 and March 31, 2013 consist of $76,500 and $66,340, respectively, due to Saber Realty for advances with no stated repayment terms, and $40,000 and $25,157, respectively, due to a partnership in which the stockholders of the Company have a controlling interest.  This amount represents a non-interest bearing loan from the partnership to the Company with no stated repayment terms.
 
The Company leases its office space under a non-cancelable lease agreement with a related party which expires August 1, 2015.  Future minimum rent payments under this agreement are $72,369 for the twelve month period ending September 30, 2014, and $66,338 for the twelve month period ending September 30, 2015.  Total rent expense, including common area, maintenance, taxes, insurance and utilities, was $27,090 and $29,328 for the three month period ended September 30, 2013 and 2012 respectively, and $54,180 and $56,531 for the six month period ended September 30, 2013 and 2012, respectively.
 
 
8

 
 
5.
DEFERRED COMPENSATION
 
In September 2004 the Company entered into a deferred compensation arrangement with a former stockholder.  Under the terms of the arrangement, beginning in January 2005, the former stockholder receives semi-monthly payments of $4,167 through December 2024.  The amount included on the Company’s balance sheets at September 30, 2013 and March 31, 2013 represents the net present value of the remaining payments calculated using a discount rate of 5%.  The amount of deferred compensation expected to be paid within twelve months of the balance sheet date is classified as a current liability with the remainder classified as non-current.  Future maturities of this obligation are as follows:
 
12 month periods ending September 30:
   
2014   $ 58,399  
2015     61,389  
2016     64,534  
2017     67,839  
2018     71,313  
Thereafter   $ 73,037  
         
Total   $ 896,511  
 
6.
NOTE PAYABLE - BANK
 
Note payable – bank consists of a revolving line of credit with Boston Private Bank & Trust Company.  Under the terms of the agreement the Company may borrow up to $150,000 and interest accrues at 4.5% of the outstanding balance.
 
7. 
NOTE PAYABLE – OTHER
 
The company received a $50,000 loan on July 26, 2012 in financing related to an exchange agreement which was terminated.  The interest rate is 12% per annum.  The entire balance of the note and accrued interest is past due as of September 30, 2013.
 
8. 
LONG-TERM DEBT
 
Long-term debt consists of a term note with Boston Private Bank & Trust Company. The note bears interest at 5% per annum and requires monthly payments of $9,722 plus accrued interest.  The note is secured by substantially all assets of the Company.  The note matures on February 8, 2016.
 
9.
CAPITAL LEASE OBLIGATIONS
 
The Company leases certain equipment under capital leases expiring in various years through 2018. The net book value of assets held under capital leases at September 30, 2013 and March 31, 2013 is $50,429 and $55,414, respectively. The annual repayments of capital lease obligations at September 30, 2013 are as follows:
 
 2014     $ 12,892  
 2015       23,968  
 2016       14,250  
 2017       6,894  
 2018       1,036  
 Total minimum lease payments       59,040  
 Less amount representing interest       8,611  
 Present value of minimum lease payments       50,429  
 Present value of minimum lease payments due within one year       20,949  
 Present value of net minimum lease payments due beyond on year     $ 29,480  
 
 
9

 
 
10. 
STOCKHOLDERS’ EQUITY
 
On June 5, 2013 the Company issued 400,000 shares of its common stock in a private placement in exchange for cash proceeds of $80,000.   On August 5, 2013, in connection with the exchange, the Company issued Common Stock Warrants for purchase at an exercise price of $.30.  The Warrants vest immediately and have a three year term, expiring on August 5, 2016.  The relative fair value of the Warrants is $119,000.
 
On August 19, 2013 the Company issued 300,000 shares of its common stock in a private placement in exchange for cash proceeds of $60,000.  On August 19, 2013, in connection with the exchange, the Company issued Common Stock Warrants for purchase at an exercise price of $.30.  The Warrants vests immediately and have a three year term, expiring on August 19, 2016.  The relative fair value of the Warrants is $84,248.
 
11.
STOCK-BASED COMPENSATION
 
On August 12, 2013 the Company granted options to purchase 4,135,000 shares of its common stock to its employees.  These options have a 10-year term and were granted with an exercise price of $0.17.  3,265,000 shares vest one year from April 3, 2013, with the remaining vesting one year from the grant dates of July 3, 2013 and August 12, 2013. As of September 30, 2013, zero options had vested. All vested options are exercisable, in full or in part, at any time after vesting, until three months post termination of employment.
 
The Company recorded the stock-based compensation expense attributable to options of $0 and $59,194 during the three and six months ended September 30, 2013, respectively.  As of September 30, 2013, there was no unrecognized compensation cost related to non-vested stock options.
 
Summary of Options Activity
 
   
Stock Options
 
   
Options
   
Weighted Average Exercise Price
 
Outstanding, June 30, 2013
    -     $ -  
Granted
    4,135,000     $ 0.17  
Exercised
    -     $ -  
Forfeited or expired
    (10,000 )   $ 0.17  
Outstanding, September 30, 2013
    4,125,000     $ 0.17  
 
12. 
SUBSEQUENT EVENTS
 
Management of the Company has evaluated subsequent events through the date these financial statements were issued and determined there are no subsequent events that require disclosure.
 
 
10

 
 
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
The following information should be read in conjunction with (i) the consolidated financial statements of The Pulse Network, Inc., a Nevada corporation, and the notes thereto appearing elsewhere in this Form 10-Q together with (ii) the more detailed business information and the March 31, 2013 audited financial statements and related notes included in the Company’s most recent Amendment No. 1 to Annual Report on Form 10-K (File No. 000-54741), as filed with the SEC on November 4, 2013.  Statements in this section and elsewhere in this Form 10-Q that are not statements of historical or current fact constitute “forward-looking” statements.

Results of operations for three months ended September 30, 2013 compared to three months ended September 30, 2012.
 
Net Sales and Cost of Sales
 
During the three months ended September 30, 2013 and 2012 the Company generated revenues from 3 primary business segments, being:
 
    Sales from usage of the Pulse Network Platform for management and support of client events or conferences.
 
    Sales to sponsors and attendees for conferences hosted by the Company.
 
    Sales from providing ongoing development and support for client content and digital marketing programs.
 
Three Months Ended September 30, 2013 and 2012
 
Total net sales for the three months ended September 30, 2013 decreased by 3.9% to $624,917 from $650,457 in the three months ended September 30, 2012.
 
The decrease for the three months ended September 30, 2013 is mainly attributable to a certain client’s event in 2012 that only occurs every four years.
 
The Company showed a 106% growth with the digital marketing programs during the three months ended September 30, 2013 compared to the same period in the prior year.
 
 
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Cost of sales for the three months ended September 30, 2013 decreased by 14.4% to $195,766 from $228,723 in the three months ended September 30, 2012.  The decrease for the three months ended September 30, 2013 is mainly attributable to the reduced cost in management and support of client events and conferences.
 
Cost of sales also includes $6,829 of recognized stock-based compensation expenses for the three months ended September 30, 2013 compared to $0 for the three months ended September 30, 2012.
 
Six Months Ended September 30, 2013 and 2012
 
Total net sales for the six months ended September 30, 2013 decreased by 8.1% to $1,559,139 from $1,696,150 in the six months ended September 30, 2012.
 
The decrease for the six months ended September 30, 2013 is mainly attributable to the discontinuation of one client and their events.
 
The company showed a 62.6% growth with the digital marketing programs.
 
Cost of sales for the six months ended September 30, 2013 decreased by 45.7 % to $424,748 from $782,363 in the six months ended September 30, 2012.  The decrease for the six months ended September 30, 2013 is mainly attributable to the reduced cost in running our own hosted events and in reduced cost in management and support of client events.
 
Cost of sales also includes $6,829 of recognized stock-based compensation expenses for the six months ended September 30, 2013 compared to $0 for the six months ended September 30, 2012.
 
For the six months ended September 30, 2013 gross profit increased 24.1% to $1,134,391 from $913,787 for the six months ended September 30, 2012.
 
Selling
 
Three Months Ended September 30, 2013 and 2012
 
Selling expenses for the three months ended September 30, 2013 increased by 65% to $181,148 from $109,786 for the three months ended Sep 30, 2012. The increase in selling and marketing expenses is attributable to additional sales employees, recognized stock-based compensation expenses, and increase in meals and entertainment expenses.
 
Selling expenses also includes $31,058 of recognized stock-based compensation expenses for the three months ended September 30, 2013 compared to $0 for the three months ended September 30, 2012.
 
Six Months Ended September 30, 2013 and 2012
 
Selling expenses for the six months ended September 30, 2013 increased by 23.5 % to $302,334 from $244,726 for the six months ended September 30, 2012.  The increase in selling and marketing expenses is attributable to additional sales employees, recognized stock-based compensation expenses, and increase in meals and entertainment expenses.
 
Selling expenses also includes $31,058 of recognized stock-based compensation expenses for the six months ended September 30, 2013 compared to $0 for the six months ended September 30, 2012.
 
 
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General and Administrative
 
Three Months Ended September 30, 2013 and 2012
 
General and administrative expenses for the three months ended September 30, 2013 increased by 18.8% to $705,250 from $593,616 for the three months ended September 30, 2012. The increase is mainly attributable to an increase in consulting fees, advertising expenses, and IT payroll.
 
General and administrative expenses also includes $17,563 of property, plant and equipment depreciation for the three months ended September 30, 2013 compared to $22,906 for the three months ended September 30 2012.
 
General and administrative expenses also includes $21,627 of stock-based compensation expenses for the three months ended September 30, 2013 compared to $0 for the three months ended September 30  2012.
 
Six Months Ended September 30, 2013 and 2012
 
General and administrative expenses for the six months ended September 30, 2013 increased by 19.1% to $1,403,351 from $1,178,684 for the six months ended September 30, 2012. The increase is mainly attributable to an increase in legal and accounting fees, consulting fees, advertising expenses, IT payroll, and employee benefits.
 
General and administrative expenses also includes $38,394 of property, plant and equipment depreciation for the six months ended September 30, 2013 compared to $22,906 for the six months ended September 30, 2012.
 
General and administrative expenses also includes $21,627 of stock-based compensation expenses for the six months ended September 30, 2013 compared to $0 for the six months ended September 30  2012.
 
Net Loss Attributable to the Company
 
Three Months Ended September 30, 2013 and 2012
 
The net loss attributable to the Company for the three months ended September 30, 2013 increased 72.0% to ($489,518) compared to ($284,543) for three months ended September 30, 2012. The net loss increase for the three months ended September 30, 2013 and September 30, 2012 was mainly attributable to the increase in officers' compensation.
 
Six Months Ended September 30, 2013 and 2012
 
The net loss attributable to the Company for the six months ended September 30, 2013 increased 20.9% to ($622,853) compared to ($515,099) for six months ended September 30, 2012. The net loss increase for the six months ended September 30, 2013 and September 30, 2012 was mainly attributable to the increase in officers' compensation.
 
Liquidity and Capital Resources
 
As of September 30, 2013 the Company’s total current assets were $529,957 and our total current liabilities were $2,909,743. On September 30, 2013, we had an accumulated deficit of $3,683,375. For the three months ended September 30, 2013 the Company financed its business with net cash flows generated by its operating activities, $60,000 in proceeds from common stock, and $103,789 related party loan from the stockholders. As a result, the Company had negative working capital of $2,379,786 on September 30, 2013 compared with negative working capital of $1,880,991 at March 31, 2013.
 
 
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Cash and cash equivalents on September 30, 2013 were $266,008, an increase of $234,338 from March 31, 2013.
 
Operating activities provided cash of $184,500 in the six months ended September 30, 2013 compared to using cash of $407,765 for the six months ended September 30, 2012. The company investing activities in the six months ended September, 2013 totaled $4,596 which included the purchase of a video editing station. There were no investing activities in the comparable period ended September 30, 2012.
 
Financing activities provided cash of $54,434 in the six months ended September 30, 2013, compared to providing cash of $427,026 in the six months ended September 30, 2012.
 
2013 financing activities primarily consist of proceeds totaling $140,000 from the issuance of common stock in a private placement, $103,789 in an interest bearing related party loan, less repayment of bank debt, stockholders borrowings and capital lease obligations.
 
2012 financing activities included $113,297 of primary shareholder advances, $50,000 in an interest bearing loan, and a $250,000 secured bank line, less repayment of capital lease obligations.
 
Off-Balance Sheet Arrangements
 
As of September 30, 2013, the Company had no off balance sheet arrangements that have had or that would be expected to be reasonably likely to have a future material effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
 
Subsequent Events

None through the date of this filing.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the policies below as critical to our business operations and to the understanding of our financial results:

Basis of Presentation - Unaudited Interim Financial Information - The Company prepares its unaudited interim consolidated financial statements and related notes in accordance with US GAAP for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended March 31, 2013 and notes thereto contained in the Company’s Annual Report on Form 10-K filed with the SEC on July 1, 2013.

 
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Principles of Consolidation - The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from these estimates.

Impairment of Long-Lived Assets Long-lived assets, such as property, equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated future undiscounted net cash flows of the related asset or group of assets over their remaining lives. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized for the amount by which the carrying amount exceeds the estimated fair value of the asset. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent of other groups of assets. The impairment of long-lived assets requires judgments and estimates. If circumstances change, such estimates could also change.

Concentrations of Sales to Certain Customers – During the three month period ended September 30, 2013, the Company had sales to three customers A, B and C that accounted for approximately 41% of total revenue.  During the six month period ended September 30, 2013, the Company had sales to three customers A, C and D that accounted for approximately 44% of total revenue.

Income Taxes – Income tax expense for the three and six month periods ended September 30, 2013 is zero as a full valuation allowance on the tax benefits arising from the net operating losses was provided.
 
The Company recognizes in its financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company’ policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company did not have any unrecognized tax benefits or accrued interest and penalties during the three and six month periods ending September 30, 2013 and does not anticipate having any unrecognized tax benefits over the next twelve months. The Company is subject to audit by the IRS for tax periods commencing January 1, 2009.
 
Other Recently Issued, but Not Yet Effective Accounting Pronouncements - Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
 
Item 3.   Quantitative and Qualitative Disclosures About Market Risk.
 
As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 3.
 
 
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Item 4.   Controls and Procedures.
 
DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, our principal executive officer and our principal financial officer are responsible for conducting an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the fiscal year covered by this report. Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective as of September 30, 2013.

There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
 
 
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PART II. OTHER INFORMATION

Item 1.   Legal Proceedings.
 
The Company is not currently subject to any legal proceedings. From time to time, the Company may become subject to litigation or proceedings in connection with its business, as either a plaintiff or defendant. There are no such pending legal proceedings to which the Company is a party that, in the opinion of management, is likely to have a material adverse effect on the Company’s business, financial condition or results of operations.
 
Item 1A.  Risk Factors.
 
As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 1A.
 
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

None.
 
Item 3.   Defaults Upon Senior Securities.

None.
 
Item 4.   Mine Safety Disclosures.
 
None.
 
Item 5.   Other Information
 
None.

 
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Item 6.   Exhibits.

(a)  Exhibits required by Item 601 of Regulation SK:

Exhibit
 
Description
     
2.1
 
Share Exchange Agreement, dated March 29, 2013, by and among the Registrant, The Pulse Network, Inc., a Massachusetts corporation, and the holders of common stock of The Pulse Network, a Massachusetts corporation. (2)
2.2
 
Form of Articles of Share Exchange (2)
3.1.1
 
Form of Articles of Incorporation (1)
3.1.2
 
Form of Certificate of Amendment to Articles of Incorporation (2)
3.1.3
 
Form of Certificate of Change (2)
3.1.4
 
Form of Certificate of Designation for Series A Preferred Stock (2)
3.1.5
 
Form of Certificate of Designation for Series B Preferred Stock (2)
3.1.6
 
Form of Amendment to Certificate of Designation for Series B Preferred Stock (2)
3.1.7
 
Bylaws (1)
4.1
 
2013 Stock Option Plan (2)
31.1
 
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
 
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
 
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *
 
XBRL Instance Document
101.SCH *
 
XBRL Taxonomy Extension Schema Document
101.CAL *
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF *
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB *
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE *
 
XBRL Taxonomy Extension Presentation Linkbase Document

*
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
(1)
Filed and incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-174443), as filed with the Securities and Exchange Commission on May 24, 2011.

(2)
Filed and incorporated by reference to the Company’s Current Report on Form 8-K (File No. 000-54741), as filed with the Securities and Exchange Commission on March 29, 2013.

 
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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 thereunto duly authorized.

 
The Pulse Network, Inc.
     
Date: November 14, 2013
By:
/s/ Stephen Saber
   
Stephen Saber
   
Chief Executive Officer (principal executive officer, principal accounting officer and principal financial officer)
     
 

 
 
19

 
 
EXHIBIT INDEX
 
Exhibit
 
Description
     
2.1
 
Share Exchange Agreement, dated March 29, 2013, by and among the Registrant, The Pulse Network, Inc., a Massachusetts corporation, and the holders of common stock of The Pulse Network, a Massachusetts corporation. (2)
2.2
 
Form of Articles of Share Exchange (2)
3.1.1
 
Form of Articles of Incorporation (1)
3.1.2
 
Form of Certificate of Amendment to Articles of Incorporation (2)
3.1.3
 
Form of Certificate of Change (2)
3.1.4
 
Form of Certificate of Designation for Series A Preferred Stock (2)
3.1.5
 
Form of Certificate of Designation for Series B Preferred Stock (2)
3.1.6
 
Form of Amendment to Certificate of Designation for Series B Preferred Stock (2)
3.1.7
 
Bylaws (1)
4.1
 
2013 Stock Option Plan (2)
31.1
 
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
 
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
 
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *
 
XBRL Instance Document
101.SCH *
 
XBRL Taxonomy Extension Schema Document
101.CAL *
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF *
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB *
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE *
 
XBRL Taxonomy Extension Presentation Linkbase Document

*
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
 
(1)
Filed and incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-174443), as filed with the Securities and Exchange Commission on May 24, 2011.

(2)
Filed and incorporated by reference to the Company’s Current Report on Form 8-K (File No. 000-54741), as filed with the Securities and Exchange Commission on March 29, 2013.

 
 
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