Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 2013
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________________ to __________________
Commission file number: 001-33968
Psychic Friends Network, Inc.
(Exact name of registrant as specified in its charter)
Nevada 45-4928294
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2360 Corporate Circle, Suite 400, Henderson, NV 89074-7722
(Address of principal executive offices) (Zip Code)
1-702-608-7360
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. [ ] Yes [X] No
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act: [ ] Yes [X] No
Indicate by check mark whether the registrant(1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 day. [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter: $668,651 at March 31, 2013.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 84,907,543 shares of common
stock as of December 31, 2013.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference certain information from the registrant's
definitive proxy statement for the 2014 Annual Meeting of Shareholders to be
filed on or before January 30, 2014.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. All statements
other than statements of historical fact are "forward-looking statements" for
purposes of federal and state securities laws, including, but not limited to,
any projections of earnings, revenue or other financial items; any statements of
the plans, strategies and objections of management for future operations; any
statements concerning proposed new services or developments; any statements
regarding future economic conditions or performance; any statements or belief;
and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words "may," "could," "estimate,"
"intend," "continue," "believe," "expect" or "anticipate" or other similar
words. These forward-looking statements present our estimates and assumptions
only as of the date of this report. Except for our ongoing securities laws, we
do not intend, and undertake no obligation, to update any forward-looking
statement. Although we believe that the expectations reflected in any of our
forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed in any or our forward-looking
statements. Our future financial condition and results of operations, as well as
any forward-looking statements, are subject to change and inherent risks and
uncertainties. The factors impacting these risks and uncertainties include, but
are not limited to; increased competitive pressures from existing competitors
and new entrants; our ability to efficiently and effectively finance our
operations; deterioration in general or regional economic conditions; adverse
state or federal legislation or regulation that increases the costs of
compliance; ability to achieve future sales levels or other operating results;
the fact that our accounting policies and methods are fundamental to how we
report our financial condition and results of operations, and they may require
management to make estimates about matters that are inherently uncertain; the
psychic services market; our ability to develop a fully-functioning web portal;
changes in U.S. GAAP or in the legal, regulatory and legislative environments in
the markets in which we operate; inability to efficiently manage our operations;
the inability of management to effectively implement our strategies and business
plans; and the other risks and uncertainties detailed in this report.
Throughout this Annual Report on Form 10-K references to "we", "our", "us",
"PFN", "the Company", and similar terms refer to Psychic Friends Network, Inc.
2
PSYCHIC FRIENDS NETWORK, INC.
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 2013
INDEX TO FORM 10-K
Page
----
PART I
Item 1 Business....................................................... 4
Item 1A Risk Factors................................................... 5
Item 1B Unresolved Staff Comments...................................... 5
Item 2 Properties..................................................... 5
Item 3 Legal Proceedings.............................................. 5
Item 4 Mine Safety Disclosures........................................ 5
PART II
Item 5 Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.............. 6
Item 6 Selected Financial Data........................................ 7
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 7
Item 7A Quantitative and Qualitative Disclosures About Market Risk..... 9
Item 8 Financial Statements and Supplementary Data.................... 9
Item 9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure....................................... 9
Item 9A Controls and Procedures........................................ 9
Item 9B Other Information.............................................. 10
PART III
Item 10 Directors, Executive Officers and Corporate Governance......... 11
Item 11 Executive Compensation......................................... 11
Item 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters................................ 11
Item 13 Certain Relationships and Related Transactions, and Director
Independence................................................... 11
Item 14 Principal Accounting Fees and Services......................... 11
PART IV
Item 15 Exhibits, Financial Statement Schedules........................ 12
3
PART I
ITEM 1 BUSINESS
CORPORATE HISTORY AND BACKGROUND
Psychic Friends Network, Inc. (OTC:PFNI) hereinafter, ("the Company") was
incorporated in the State of Nevada on May 9, 2007 under the name "Web Wizard,
Inc.". On February 17, 2012 the Company's board passed a motion to change the
corporate name to "Psychic Friends Network, Inc." pursuant to an asset purchase
agreement executed on January 27, 2012. As part of this agreement, all of the
assets of PFN Holdings were purchased. These assets are an integral part of the
Company's business development and ultimately the realization of the Company's
anticipated cash flows.
BUSINESS
The Company is in the business of providing daily horoscopes and live psychic
advice by telephone, internet or our soon to be released mobile application. Our
website is www.psychicfriendsnetwork.com. First time customers will be offered
promotions and are able to choose their psychic friend by specialties and by
viewing their individual pictures bios and feedback.. They also are able to
establish an ongoing relationship with their advisor, or they can choose to try
someone new the next time they call. We will strive to stay on the cutting edge
of technology in an effort to deliver our content. Currently this includes live
audio and video chat including free trial chats, and several social media
platforms including Facebook applications. We will also be giving all of our
psychics their own website, so that we can reward them for bringing us new
customers.
MARKETING
We plan to advertise and market our services via the following avenues:
INFOMERCIALS and COMMERCIALS - we anticipate that paid advertisements on
television/radio will be used to provide information about our services and
direct traffic to our different mediums. Also as a new marketing venue, we have
begun airing our commercials on YouTube on a pay per view basis.
WEB-BASED ANALYTICS - we plan to use advertisements, social media, affiliate
marketing and search engine optimization to help inform our target audience as
well as make us stand out from our peers.
WORD OF MOUTH - from historical experience, we believe that our clients will
tend to be repeat customers and friends of past customers. Word of mouth and
positive client experiences are a very important source of marketing and based
on providing a high level of service. With the strength of our brand name both
psychics and customers are very excited about the re-launch.
COMPETITION
The market for psychic services is competitive. We compete with a significant
number of online, telephone and brick and mortar psychic service companies, the
largest of which are Keen, California Psychics, Ask Now. Psychic Source and Live
Person.
Many of our competitors have significant advantages over our Company in terms of
scale, operating histories, number of locations in operation, capital and other
resources. We are a start-up company that has just begun to commence commercial
operations. Accordingly, there can be no assurances that the Company can
successfully compete in our market.
EMPLOYEES
As of September 30, 2013, the Company had two full time consultants and no
employees. Our personnel are responsible for performing or overseeing all
operations of the Company. Specifically, our personnel direct responsibilities
include, but are not limited to, developing our website and mobile application,
4
seeking the investment capital necessary to commence and build commercial
operations, creating our marketing, branding and sales strategy, driving the
overall services strategy, customer service, operations, and all financial
reporting and general administrative duties.
ITEM 1A RISK FACTORS
Not required for a smaller reporting company.
ITEM 1B UNRESOLVED STAFF COMMENTS
Not required for a smaller reporting company.
ITEM 2 PROPERTIES
Our principle corporate offices are located at 2360 Corporate Circle, Suite 400,
Henderson, NV 89074.
Our sales, customer service and administrative offices are located at 5209
Wilshire Blvd., Los Angeles, CA 90036. We are leasing approximately 500 square
feet of office space for a term of Month/Month at a price of $1100 per month.
ITEM 3 LEGAL PROCEEDINGS
None.
ITEM 4 MINE SAFETY DISCLOSURES
Not applicable.
5
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our Common Stock is listed to trade in the over-the-counter securities market
through OTC Markets OTCQB under the symbol "PFNI".
The following table sets forth the quarterly high and low bid prices for our
Common Stock since we began trading on April 17, 2012, as reported by Yahoo!
Finance. The quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission, and may not necessarily represent actual transactions.
Bid Prices ($)
------------------
Quarter Ending High Low
-------------- ---- ---
June 30, 2012 1.10 0.72
September 30, 2012 0.75 0.35
December 31, 2012 0.63 0.07
March 31, 2013 0.12 0.01
June 30, 2013 0.04 0.01
September 30, 2013 0.02 0.01
On January 14, 2014, the closing price for our common stock on the OTCQB was
$0.04 per share.
HOLDERS
As of January 14, 2014, we had approximately 30 holders of our common stock.
DIVIDEND POLICY
The payment of dividends in the future rests within the discretion of our Board
of Directors and will depend upon our earnings, capital requirements and
financial condition, as well as other relevant factors. We do not intend to pay
any cash dividends in the foreseeable future, but intend to retain all earnings,
if any, for use in our business.
EQUITY COMPENSATION PLAN INFORMATION
On September 17, 2012, the Company adopted the 2012 PFN Stock Plan ("the Plan").
The total number of shares of stock which may be granted directly by options,
stock awards or restricted stock purchase offers, shall not exceed 8,250,000.
The Plan indicates that the exercise price of an award is equivalent to the
market value of the Company's common stock on the grant date.
The following table gives information about our common stock that may be issued
under our existing equity compensation plans as of September 30, 2013.
6
Number of Securities
Number of Securities to be Remaining Available for
Issued Upon Exercise of Weighted-Average Exercise Future Issuance Under
Outstanding Options, Price of Outstanding Options, Equity Compensation Plans
Warrants and Rights Warrants and Rights (excluding column (a))
Plan Category (a) (b) (c)
------------- ------------------- ------------------- -------------------------
Equity Compensation Plans 0 -- 8,250,000
Approved by Security
Holders
Equity Compensation Plans Not 0 -- n/a
Approved by Security Holders
Total 0 -- 8,250,000
RECENT SALES OF UNREGISTERED SECURITIES
None.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 6 SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations
should be read in conjunction with the financial statements included herewith.
This discussion should not be construed to imply that the results discussed
herein will necessarily continue into the future, or that any conclusion reached
herein will necessarily be indicative of actual operating results in the future.
YEAR ENDED SEPTEMBER 30, 2013 AND 2012 AND FOR THE PERIOD FROM MAY 9, 2007
(INCEPTION) TO SEPTEMBER 30, 2013:
REVENUE
The Company generated limited gross revenues from its prior business of $1,434
during the period from inception to September 30, 2010, no revenues during the
years ended September 30, 2012 or 2011, and $987 for the year ended September
30, 2013. The Company has commenced commercial operations as of September 30,
2013.
During the development stage, the Company has been primarily focused on
corporate organization and development of our web site and mobile application.
We do not anticipate earning significant revenues until such time that we have
sufficient capital to market our services.
EXPENSES
During the year ended September 30, 2012, total operating expenses for the
Company were $379,494 compared to $444,040 for the year ended September 30,
2013. The majority of the operating expenses incurred during both years were
7
consulting, legal, professional and general and administrative costs, and
website development. Total operating expenses for the period from inception
through September 30, 2013 were $900,690.
NET LOSS
Our net loss for the year ended September 30, 2012 was $379,562 as compared to a
net loss of $444,040 for the year ended September 30, 2013. Our accumulative net
loss for the period from inception to September 30, 2013 was $898,674.
LIQUIDITY AND FINANCIAL CONDITION
As of September 30, 2013, the Company had current assets of $75,393 consisting
solely of cash and current liabilities of $58,683.
The Company believes it currently does not have sufficient funds to execute its
business plan. We anticipate that additional capital will be required to
implement our business plan to pay for marketing efforts to support our revenue
forecast for 2014. In order to obtain the necessary capital, the Company may
need to sell additional shares of common stock or borrow funds from private
lenders.
Even if we are able to raise the funds required, it is possible that we could
incur unexpected costs and expenses, fail to collect significant amounts owed to
us or experience unexpected cash requirements that would force us to seek
alternative financing. Further, if we issue additional equity or debt securities
as a means of raising additional capital, stockholders may experience dilution
or the new equity securities may have rights, preferences or privileges senior
to those of existing holders of common stock.
PLAN OF OPERATIONS
We launched our website in 2013 at www.psychicfriendsnetwork.com.
Our plan is to take a multi-faceted approach towards marketing. This will
include both online and offline marketing.
Our Online marketing will include a robust pay per click campaign with google,
bing and yahoo. So that we can hit the ground running we have contacted experts
in the PPC field. We will also do affiliate marketing on a CPA (Cost per
Acquisition) basis. Using this model, we will only pay the affiliated for a paid
customer, and they pay for their own marketing, so it is a very targeted brand
of marketing. We will also be doing some banner ads and contextual marketing,
where we can serve people ads only after they express some sort of interest in
psychics or horoscopes.
Regarding our offline advertising, this is our true strength, as witnessed from
our previous run of success. We already have new television spots produced that
we expect to perform extremely well. These spots were all produced by the same
team that produced the original Psychic Friends Network infomercials.
In addition, we are expecting our mobile app to be finished during the first
half of 2014. We believe that our mobile app will be the most successful of all
of our platforms. Mobile advertising has the best ROI, of all forms of
advertising simply because the market is still relatively new, and as such is
not near a saturation point. Furthermore, mobile applications are truly tailor
made for Psychic Friends. For the first time ever we can contact our customer in
their pockets or purses. We can let them know about promo offers, or send them a
horoscope or with them a happy birthday with a discount code. And, the customer
is just a few clicks away from connecting to one of our hand chosen psychics
anytime or anywhere that they have their mobile smart phones.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
See Note 2 to the notes to our financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
None.
8
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See F-1.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934 (the "Exchange Act"), are our controls
and other procedures that are designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Act is accumulated and communicated to our management, including our Chief
Executive and Financial Officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. Rules
13a-15(b) and 15d-15(b) under the Exchange Act, requires us to carry out an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures as of September 30, 2012, being the date of our most
recently completed fiscal year end. This evaluation was implemented under the
supervision and with the participation of our Chief Executive and Financial
Officer.
Based on that evaluation, our management, including our Chief Executive and
Financial Officer have concluded that, as of the end of the period covered by
this report, our disclosure controls and procedures are effective in ensuring
that information required to be disclosed in our Exchange Act reports is (1)
recorded, processed, summarized and reported in a timely manner, and (2)
accumulated and communicated to our management, including our Chief Executive
and Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Our internal control system was designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation and fair presentation of our financial statements for external
purposes in accordance with generally accepted accounting principles. Because of
its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Our officers have assessed the effectiveness of our internal controls over
financial reporting as of September 30, 2013. In making this assessment,
management used the criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based upon its assessment, management concluded that, as of
September 30, 2013, our internal control over financial reporting was not
effective.
9
This Annual Report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to an exemption for smaller reporting companies under
Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the final quarter of the year ended September 30, 2013, there were no
changes in our internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 9B OTHER INFORMATION
None.
10
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated by reference from our 2014 Proxy Statement.
ITEM 11 EXECUTIVE COMPENSATION
Incorporated by reference from our 2014 Proxy Statement.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Incorporated by reference from our 2014 Proxy Statement.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Incorporated by reference from our 2014 Proxy Statement.
ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES
Incorporated by reference from our 2014 Proxy Statement.
11
PART IV
ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Number Exhibit
------ -------
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
31 Rule 13a-14(a) Certification of Principal Executive and Financial
Officer
32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 of Principal
Executive and Financial Officer
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
----------
(1) Incorporated by reference to the exhibits to the registrant's registration
statement on Form SB-2 dated January 11, 2008.
* Pursuant to applicable securities laws and regulations, we are deemed to
have complied with the reporting obligation relating to the submission of
interactive data files in such exhibits and are not subject to liability
under any anti-fraud provisions of the federal securities laws as long as
we have made a good faith attempt to comply with the submission
requirements and promptly amend the interactive data files after becoming
aware that the interactive data files fail to comply with the submission
requirements. Users of this data are advised that, pursuant to Rule 406T,
these interactive data files are deemed not filed and otherwise are not
subject to liability.
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Psychic Friends Network, Inc.
Date: January 14, 2014 /s/ Marc Lasky
-----------------------------------
Marc Lasky, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Michael Lasky President and Director January 14, 2014
--------------------------
Michael Lasky
/s/ Marc Lasky Director and Chief Executive Officer January 14, 2014
-------------------------- (Principal Executive, Financial and
Marc Lasky Accounting Officer)
13
[LETTERHEAD OF SADLER, GIBB & ASSOCIATES, LLC]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Psychic Friends Network, Inc.
We have audited the accompanying balance sheet of Psychic Friends Network, Inc.
(the Company) as of September 30, 2013 and 2012 and the related statements of
operations, stockholders' equity (deficit) and cash flows for the years then
ended and for the cumulative period from May 9, 2007 (date of inception) through
September 30, 2013. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits 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 audits provide a
reasonable basis for our opinion.
In our opinion the financial statements referred to above present fairly, in all
material respects, the financial position of Psychic Friends Network, Inc. as of
September 30, 2013 and 2012, and the results of their operations and cash flows
for the years then ended and for the cumulative period from May 9, 2007 (date of
inception) through September 30, 2013, in conformity with U.S. generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company had accumulated losses of $898,674 for the
period from inception through September 30, 2013 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
January 14, 2014
F-1
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
CONDENSED BALANCE SHEETS
September 30, September 30,
2013 2012
---------- ----------
ASSETS
Current assets
Cash $ 75,393 $ 499,898
Prepaid expenses -- 1,000
---------- ----------
Total current assets 75,393 500,898
Intangible assets
Website development costs (net of $28,764 and $5,503
of accumulated amortization, respectively) 55,672 41,247
---------- ----------
Total Assets $ 131,065 $ 542,145
========== ==========
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities $ 58,683 $ 37,697
---------- ----------
Total current liabilities 58,683 37,697
---------- ----------
Total Liabilities 58,683 37,697
---------- ----------
STOCKHOLDERS' EQUITY
Common stock; 750,000,000 shares authorized at $0.001 par value;
84,907,543 and 84,016,334 issued and outstanding at
September 30, 2013 and September 30, 2012, resspectively 84,908 84,017
Additional paid-in capital 886,148 875,065
Deficit accumulated during development stage (898,674) (454,634)
---------- ----------
Total stockholders' equity 72,382 504,448
---------- ----------
Total liabilities and stockholders' equity $ 131,065 $ 542,145
========== ==========
The accompanying notes are an integral part of
these condensed financial statements.
F-2
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
From inception
For the Year Ended (May 9, 2007)
------------------------------------ through
September 30, September 30, September 30,
2013 2012 2013
------------ ------------ ------------
REVENUE $ 987 $ -- $ 2,421
------------ ------------ ------------
OPERATING EXPENSES
Payroll expenses 144,891 91,579 236,470
Depreciation and amortization 23,261 5,503 28,764
General and administrative 131,665 59,861 207,649
Consulting fees 73,636 141,652 215,288
Legal and professional 71,574 80,899 212,519
------------ ------------ ------------
TOTAL OPERATING EXPENSES 445,027 379,494 900,690
------------ ------------ ------------
NET LOSS FROM OPERATIONS (444,040) (379,494) (898,269)
OTHER EXPENSE
Bank charges and interest -- 68 405
------------ ------------ ------------
TOTAL OTHER EXPENSE -- 68 405
------------ ------------ ------------
NET LOSS BEFORE INCOME TAXES (444,040) (379,562) (898,674)
PROVISION FOR INCOME TAX -- -- --
------------ ------------ ------------
NET LOSS FOR THE PERIOD $ (444,040) $ (379,562) $ (898,674)
============ ============ ============
BASIC AND DILUTED (LOSS)
PER COMMON SHARE $ (0.01) $ (0.00)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES (BASIC AND DILUTED) 84,321,659 83,239,447
============ ============
The accompanying notes are an integral part of
these condensed financial statements.
F-3
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
From Inception May 9, 2007 through September 30, 2013
Deficit
Accumulated Total
Common Stock Additional During Stockholders'
------------------------- Paid-in Development Equity
Issued Amount Capital Stage (Deficit)
---------- ---------- ---------- ---------- ----------
Balance at inception - May 9, 2007 -- $ -- $ -- $ -- $ --
Shares issued for cash - June 5, 2007
at $0.001 per share 74,000,000 74,000 (66,600) -- 7,400
Shares issued for cash - July 31, 2007
at $0.02 per share 8,250,000 8,250 8,250 -- 16,500
Net (loss) for period from inception on
May 9, 2007 to September 31, 2007 -- -- -- 1,398 1,398
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 31, 2007 82,250,000 82,250 (58,350) 1,398 25,298
Net (loss) for the year ended September 31, 2008 -- -- -- (37,052) (37,052)
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 31, 2008 82,250,000 82,250 (58,350) (35,654) (11,754)
Net (loss) for the year ended September 31, 2009 -- -- -- (11,134) (11,134)
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 31, 2009 82,250,000 82,250 (58,350) (46,788) (22,888)
Net (loss) for the year ended September 31, 2010 -- -- -- (7,832) (7,832)
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 31, 2010 82,250,000 82,250 (58,350) (54,620) (30,720)
Net (loss) for the year ended September 31, 2011 -- -- -- (20,452) (20,452)
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 31, 2011 82,250,000 82,250 (58,350) (75,072) (51,172)
Shares issued for conversion of debt -
January 27, 2012 at $0.75 per share 6,667 7 4,993 -- 5,000
Shares issued for cash - January 27, 2012
at $0.75 per share 326,667 327 244,673 -- 245,000
Shares issued for asset purchase agreement -
January 27, 2012 at $.097 per share 600,000 600 57,403 -- 58,003
Shares issued for cash - February 9, 2012
at $0.75 per share 40,000 40 29,960 -- 30,000
Shares issued for consulting services - April 25, 2012
at $0.75 per share 25,000 25 18,725 -- 18,750
Shares issued for consulting services - April 15, 2012
at $0.75 per share 75,000 75 56,175 -- 56,250
Shares issued for cash - April 30, 2012 at $0.75
per share 333,333 333 249,667 -- 250,000
Shares issued for consulting services - July 1, 2012
at $0.75 per share 25,000 25 18,725 -- 18,750
Shares issued for cash - July 13, 2012 at $0.75
per share 334,667 335 250,665 -- 251,000
Stock options issued for services - September 17, 2012 -- -- 2,429 -- 2,429
Net loss for the year ended September 30, 2012 -- -- -- (379,562) (379,562)
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 30, 2012 84,016,334 84,017 875,065 (454,634) 504,448
Shares issued for consulting services -
November 29, 2012 at $0.34876 per share 16,209 16 5,637 -- 5,653
Shares issued for consulting services -
May 15, 2013 at $0.01 per share 750,000 750 6,750 -- 7,500
Forfeited stock options -- -- (2,429) -- (2,429)
Shares issued for consulting services -
Sept 06, 2013 at $0.01 per share 125,000 125 1,125 -- 1,250
Net loss for the year ended September 30, 2013 -- -- -- (444,040) (444,040)
---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 30, 2013 84,907,543 $ 84,908 $ 886,148 $ (898,674) $ 72,382
========== ========== ========== ========== ==========
The accompanying notes are an integral part of
these condensed financial statements.
F-4
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
From inception
For the Year Ended (May 9, 2007)
---------------------------------- through
September 30, September 30, September 30,
2013 2012 2013
---------- ---------- ----------
OPERATING ACTIVITIES
Net loss $ (444,040) $ (379,562) $ (898,674)
Adjustments to reconcile net loss from operations:
Expenses paid for by director 4,411 -- 4,411
Stock-based compensation for options issued (2,429) 96,179 93,750
Amortization expense 23,261 5,503 28,764
Common stock issued for services 14,403 -- 14,403
Change in operating assets and liabilities:
Decrease in prepaid expenses 1,000 (1,000) --
Increase (Decrease) in accounts payable and accrued liabilities 20,986 32,097 58,683
---------- ---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (382,408) (246,783) (698,663)
---------- ---------- ----------
INVESTING ACTIVITIES
Capitalization of website development costs (37,686) (46,750) (84,436)
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (37,686) (46,750) (84,436)
---------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 781,000 804,900
Proceeds from related parties -- 12,323 58,003
Repayments of amounts due to director (4,411) -- (4,411)
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES (4,411) 793,323 858,492
---------- ---------- ----------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (424,505) 499,790 75,393
CASH AND CASH EQUIVALENTS
-BEGINNING OF PERIOD 499,898 108 --
---------- ---------- ----------
CASH AND CASH EQUIVALENTS
-END OF PERIOD $ 75,393 $ 499,898 $ 75,393
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ -- $ -- $ --
========== ========== ==========
Cash paid for taxes $ -- $ -- $ --
========== ========== ==========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued in asset acquisition $ -- $ 58,003 $ 58,003
========== ========== ==========
Liabilities assumed in asset acquisition $ -- $ 400 $ 400
========== ========== ==========
The accompanying notes are an integral part of
these condensed financial statements.
F-5
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2013
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Psychic Friends Network, Inc. (PFNI.BB) hereinafter, ("the Company") was
incorporated in the State of Nevada on May 9, 2007 under the name "Web Wizard,
Inc.". On February 17, 2012 the Company's board passed a motion to change the
corporate name to "Psychic Friends Network, Inc." pursuant to an asset purchase
agreement executed on January 27, 2012. As part of this agreement, all of the
assets of PFN Holdings were purchased. These assets are an integral part of the
Company's business development and ultimately the realization of the Company's
anticipated cash flows.
The Company is in the business of website development. 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.
BASIS OF PRESENTATION
The Company is considered to be a development stage company and has not
generated significant revenues from operations. There is no bankruptcy,
receivership, or similar proceedings against our company.
The accompanying audited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the rules and regulations of the United States Securities and Exchange
Commission for annual financial information.
GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. Its ability to continue as a going concern is
dependent upon the ability of the Company to obtain the necessary financing to
meet its obligations and pay its liabilities arising from normal business
operations when they come due. Furthermore, as of September 30, 2013, the
Company has accumulated losses from inception (May 9, 2007) of $898,674.
Likewise, net cash of $698,663 has been used in operations during the same
period. The outcome of these matters cannot be predicted with any certainty at
this time and raise substantial doubt that the Company will be able to continue
as a going concern. These financial statements do not include any adjustments to
the amounts and classification of assets and liabilities which may be necessary
should the Company be unable to continue as a going concern. Management believes
that the Company will need to obtain additional funding by borrowing funds from
its directors and officers, or a private placement of common stock through
various sales and public offerings.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of America.
Because a precise determination of many assets and liabilities is dependent upon
future events, the preparation of financial statements involves the use of
estimates, which have been made using judgment. Actual results may vary from
these estimates.
The financial statements have, in management's opinion, been prepared within the
framework of the significant accounting policies summarized below:
DEVELOPMENT STAGE COMPANY
The Company is considered to be in the development stage, as defined under
Accounting Codification Standard, (ASC 915) "Development Stage Entities". Since
its formation, the Company has not yet realized any revenues from its planned
operations.
F-6
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2013
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
RECLASSIFICATIONS
The Company reclassified certain amounts in the Statement of Operations for the
year ended ended September 30, 2012 financial statements to conform to the
current presentation in the September 30, 2013 financial statements. The
reclassifications have no effect on the Company's financial condition, results
of operation, or cash flows.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid financial instruments purchased with a
maturity of three months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value accounting establishes a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements). The three levels of the fair value
hierarchy are described below:
LEVEL 1 Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or liabilities;
LEVEL 2 Quoted prices in markets that are not active, or inputs that are
observable, either directly or indirectly, for substantially the full
term of the asset or liability; and
LEVEL 3 Prices or valuation techniques that require inputs that are both
significant to the fair value measurement and unobservable (supported
by little or no market activity).
The Company's financial instruments consist of cash, accounts payable and
accrued liabilities. The carrying amount of these financial instruments
approximates fair value due to either length of maturity or interest rates that
approximate prevailing market rates unless otherwise disclosed in these
financial statements.
REVENUE RECOGNITION
The Company recognizes revenue on an accrual basis. The Company generally earns
revenue through the online sale of service minutes. These purchases obligate the
Company to arrange a telephonic conversation with a designated service provider
of the customers choosing. The Company remits a portion of the fee to the
service provider and retains the balance. At the time of sale, the formal
arrangements are made and the Company has fulfilled its obligation. Furthermore,
the Company's portions of any fees collected are non-refundable. Revenue is
generally realized or realizable and earned when all of the following criteria
are met: 1) persuasive evidence of an arrangement exists between the Company and
our customer(s); 2) services have been rendered; 3) our price to our customer is
fixed or determinable; and 4) collectability is reasonably assured. For the year
ended September 30, 2013 and 2012, the Company recognized revenues of $987 and
$-0-, respectfully for which each of the four aforementioned criteria were
satisfied.
F-7
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2013
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
CONCENTRATION OF CREDIT RISK
Credit risk represents the accounting loss that would be recognized at the
reporting date if counter parties failed completely to perform as contracted.
Concentrations of credit risk (whether on or off balance sheet) that arise from
financial instruments exist for groups of customers or counter parties when they
have similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or other
conditions described below.
Financial instruments that potentially subject the Company to significant
concentration of credit risk consist primarily of cash, cash equivalents, and
marketable debt securities. The primary focus of the Company's investment
strategy is to preserve capital and meet liquidity requirements. The Company's
investment policy addresses the level of credit exposure by limiting the
concentration in any one corporate issuer or sector. To manage the risk
exposure, the Company maintains its portfolio of cash and cash equivalents and
short-term and long-term investments.
PER SHARE DATA
In accordance with "ASC 260 - Earnings per Share", the basic loss per common
share is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the potential common shares had been issued and
if the additional common shares were dilutive. At September 30, 2013 and 2012,
the Company had no stock equivalents that were anti-dilutive and excluded in the
loss per share computation.
STOCK-BASED COMPENSATION
The Company records stock based compensation in accordance with the guidance in
ASC Topic 718 which requires the Company to recognize expenses related to the
fair value of its employee stock option awards. This eliminates accounting for
share-based compensation transactions using the intrinsic value and requires
instead that such transactions be accounted for using a fair-value-based method.
Accordingly, the Company recognized other income of ($2,429) and an expense of
$96,179 during the years ended September 30, 2013 and 2012, respectively (see
Note 4).
WEBSITE DEVELOPMENT COSTS
The Company capitalizes its costs to develop its website and when preliminary
development efforts are successfully completed, management has authorized and
committed project funding, and it is probable that the project will be completed
and the website will be used as intended. Such costs are amortized on a
straight-line basis over the estimated useful life of the related asset, which
approximates three years. Costs incurred prior to meeting these criteria,
together with costs incurred for training and maintenance, are expensed as
incurred. Costs incurred for enhancements that are expected to result in
additional material functionality are capitalized and expensed over the
estimated useful life of the upgrades.
The Company capitalized website costs of $37,686 during the year ended September
30, 2013. The Company's capitalized website amortization is included in
depreciation and amortization in the Company's consolidated statements of
operations, and totaled $23,261 for the period.
ADVERTISING COSTS
Advertising costs are to be expensed as incurred in accordance to Company
policy; for the year ended September 30, 2013 and 2012 advertising expenses
totaled $28,523 and $23,778, respectfully.
F-8
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2013
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
INCOME TAXES
The Company records income taxes under the asset and liability method, whereby
deferred tax assets and liabilities are recognized based on the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and attributable to operating loss and tax credit
carryforwards. Accounting standards regarding income taxes requires a reduction
of the carrying amounts of deferred tax assets by a valuation allowance, if
based on the information available it is more likely than not that such assets
will not be realized. Accordingly, the need to establish valuation allowances
for deferred tax assets is assessed at each reporting period based on a
more-likely-than-not realization threshold. This assessment considers, among
other matters, the nature, frequency and severity of current and cumulative
losses, forecasts of future profitability, the duration of statutory
carryforward periods, the Company's experience with operating loss and tax
credit carryforwards not expiring unused, and tax planning alternatives.
RECENT ACCOUNTING PRONOUNCEMENTS
Management has evaluated all recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force), the American Institute of Certified
Public Accountants, and the SEC did not, or are not believed by management to,
have a material impact on the Company's present or future financial position,
results of operations or cash flows.
NOTE 3 - INTANGIBLE ASSET
The following table presents the detail of other intangible assets for the
periods presented:
Gross
Carrying Accumulated Net Carrying Weighted-Average
Amount Amortization Amount Remaining Life
------ ------------ ------ --------------
September 30, 2013:
Capitalized website
development costs $ 84,456 $(28,764) $ 55,672 1.98 years
-------- -------- -------- ----------
Total $ 84,456 $(28,764) $ 55,672 1.98 years
======== ======== ======== ==========
NOTE 4 - STOCKHOLDERS' EQUITY
As summarized in Note 1, on January 27, 2012, our board of directors approved to
effect a name change from Web Wizard, Inc. to Psychic Friends Network Inc. In
addition to the name change, our board of directors approved a ten (10) new for
one (1) old forward stock split of our authorized and issued and outstanding
shares of common stock. Upon effect of the forward stock split, our authorized
capital was increased from 75,000,000 to 750,000,000 shares of common stock and
correspondingly, our issued and outstanding shares of common stock was increased
from 8,225,000 to 82,250,000 shares of common stock as of September 30, 2011,
all with a par value of $0.001.
COMMON STOCK ISSUED
In June 2007, the Company issued 74,000,000 shares of common stock at a price of
$0.001 per share, for total proceeds of $7,400.
In July 2007, the Company issued 8,250,000 shares of common stock at a price of
$0.001 per share, for total proceeds of $16,500.
F-9
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2013
NOTE 4 - STOCKHOLDERS' EQUITY - (CONTINUED)
In February 2012, the Company issued 40,000 shares of common stock at a price of
$0.75 per share, for total proceeds of $30,000.
In January 2012, the Company authorized the issuance of 6,667 shares of common
stock at a price of $0.75 per share, for total proceeds of $5,000.
In January 2012, the Company authorized the issuance of 326,667 shares of common
stock at a price of $0.75 per share, for total proceeds of $245,000.
In January 2012, the Company issued common shares previously payable of 600,000
at a price of $0.097 per share as described in detail below.
In April 2012, the Company authorized the issuance of 100,000 shares of common
stock at a price of $0.75 per share, for consulting services valued at $75,000.
In April 2012, the Company authorized the issuance of 333,333 shares of common
stock at a price of $0.75 per share, for total proceeds of $250,000.
In July 2012, the Company authorized the issuance of 25,000 shares of common
stock at a price of $0.75 per share, for consulting services valued at $18,750.
In July 2012, the Company received cash of $251,000 for 334,667 common shares
issued at a price of $0.75 per share pursuant to a financing agreement.
On November 29, 2012 the Company issued 16,209 shares of common stock to a
consultant for consulting services rendered valued at $5,653 or $0.35 per share.
On May 15, 2013 the Company issued 750,000 shares of common stock to a
consultant for legal services rendered valued at $7,500 or $0.01 per share.
On September 6, 2013 the Company issued 125,000 shares of common stock to a
consultant for marketing and advertising services rendered valued at $1,250 or
$0.01 per share.
ASSET PURCHASE AGREEMENT
Pursuant to the "Asset Purchase Agreement" (Note 1), on January 27, 2012 the
Company issued 50,600,000 post-split shares of common stock for the purchase of
intangible assets with a fair value of $-0- from PFN Holdings. In connection
with the issuance of stock, the majority shareholder of the Company agreed to
forgive $58,403 in related party advances and cancel 50,000,000 post-split
shares of common stock held by the shareholder. The value of the liabilities
assumed was reduced to $58,003 through the assumption of $400 of liabilities of
PFN Holdings by the Company. The Company has presented the common stock issued
in this transaction on a net basis on the statement of stockholders' deficit.
As the assets purchased had a fair value of $-0- on the date of the transaction,
the value of the shares issued was based on the net value of the liabilities
extinguished of $58,003, which was recorded as additional paid-in capital due to
the fact that the liabilities were owed to a related party.
F-10
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2013
NOTE 4 - STOCKHOLDERS' EQUITY - (CONTINUED)
OPTIONS AND WARRANTS
During July 2012, the Company's shareholders approved its 2012 Stock Option Plan
("the Plan"). Under the Plan, the Company may issue up to 8,250,000 shares at
its discretion. On September 17, 2012, the Company granted 200,000 stock options
to a director of the Company which shall vest on September 17, 2013. The options
expire ten (10) years following the vesting date and carry a strike price of
$0.35
These options were valued using the Black-Scholes model and the following
inputs: 1 year vesting term, 10 year life, volatility of 139.6%, interest rate
of 1.85%, and 0% forfeiture rate. The resulting value was $0.34 per option for a
total value of $68,259. Accordingly for options granted during the years
pursuant to ASC Topic 718, during the year ended September 30, 2013 and 2012,
the Company valued the related recognizable expense of $39,798 and $2,429,
respectively. The aforementioned 200,000 options expired on May 2, 2013 due to
the termination of the director and subsequent failure to exercise within the
time period allotted by the agreement. As a result of the expired options, the
Company recognized other income against consulting fees in the amount of $42,227
during the fourth quarter of 2013 (see Note 7).
A summary of the status of the options granted at September 30, 2013 and 2012
and changes during the periods then ended is presented below:
September 30, 2013 September 30, 2012
----------------------------- -----------------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
------ -------------- ------ --------------
Outstanding at
beginning of period 200,000 $ 0.35 -- $ --
Granted -- -- 200,000 0.35
Exercised -- -- -- --
Expired or canceled (200,000) 0.35 -- --
-------- -------- -------- --------
Outstanding at end
of period -- $ -- 200,000 $ 0.35
-------- -------- -------- --------
Exercisable -- $ -- -- $ --
======== ======== ======== ========
NOTE 5 - INCOME TAXES
The Company provides for income taxes under FASB ASC 740, Accounting for Income
Taxes. FASB ASC 740 requires the use of an asset and liability approach in
accounting for income taxes. Deferred tax assets and liabilities are recorded
based on the differences between the financial statement and tax bases of assets
and liabilities.
FASB ASC 740 requires the reduction of deferred tax assets by a valuation
allowance, if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In the
Company's opinion, it is uncertain whether they will generate sufficient taxable
income in the future to fully utilize the net deferred tax asset. Accordingly, a
valuation allowance equal to the deferred tax asset has been recorded. The total
deferred tax asset since inception is $249,708 which is calculated by
multiplying a 34% estimated tax rate by the cumulative net operating loss (NOL)
adjusted for the following items:
F-11
Psychic Friends Network, Inc.
(Formerly "Web Wizard, Inc.")
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2013
NOTE 5 - INCOME TAXES - (CONTINUED)
For the period ended September 30, 2013 2012
---------------------------------- ---------- ----------
Book loss for the year $ (444,040) $ (379,562)
Adjustments:
Meals and entertainment 4,065 1,496
Stock based compensation 54,201 93,750
Unpaid payroll taxes 29,542 16,829
---------- ----------
Tax loss for the year $ (356,232) $ (267,487)
Estimated effective tax rate 34% 34%
---------- ----------
Deferred tax asset $ (121,120) $ (90,946)
========== ==========
The total valuation allowance is $249,707. Details for the last two periods are
as follows:
For the period ended September 30, 2013 2012
---------------------------------- ---------- ----------
Deferred tax asset $ 121,120 $ 90,946
Valuation allowance (121,120) (90,946)
---------- ----------
Net deferred tax asset -- --
---------- ----------
Income tax expense $ -- $ --
========== ==========
Below is a chart showing the estimated corporate federal cumulative net
operating loss (NOL) carry forward of $698,791 and the years in which it will
expire.
Year Amount Expiration
---- ------ ----------
2013 $ 356,232 2033
2012 $ 267,487 2032
Prior to 2012 $ 75,072 Prior to 2032
NOTE 6 - RELATED PARTY TRANSACTIONS
During the year ended September 30, 2013, the President and a director of the
Company paid for operating expenses in the amount of $4,411 and the Company
repaid this amount in full during the year. This resulted in no balance in
related party payables at year end.
NOTE 7 - FOURTH QUARTER ADJUSTMENTS
The following relates to adjustments to previously stated interim period ending
June 30, 2013:
Nine months ending
June 30, 2013
-------------
Net loss as previously stated: $(379,956)
Adjustments (1) 42,227 (1)
---------
Net loss as adjusted $(332,729)
=========
Basic and diluted net loss per common
share (no change resulting) $ (0.00)
=========
(1)- Adjustment relates to forfeiture of stock options before vesting of
director due to service period not being met (see Note 4). The event
occurred during the third quarter, at which time the expense should have
been recaptured. This had no effect on the Company's net loss per share for
any period presented.
NOTE 8 - SUBSEQUENT EVENTS
The Company has evaluated events subsequent to the balance sheet date through
the issuance date of these financial statements in accordance with FASB ASC 855
and has determined there are no such events that would require adjustment to, or
disclosure in, the financial statements
F-1
