Pulse Network, Inc. - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - Pulse Network, Inc.	Financial_Report.xls
EX-31.1 - CERTIFICATION - Pulse Network, Inc.	tpni_ex311.htm
EX-32.1 - CERTIFICATION - Pulse Network, Inc.	tpni_ex321.htm
EX-31.2 - CERTIFICATION - Pulse Network, Inc.	tpni_ex312.htm

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 December 31, 2013

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 February 12, 2014 was 90,700,000 shares.

THE PULSE NETWORK, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED DECEMBER 31, 2013

Index

		Page
PART 1 – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)		4

	Consolidated Balance Sheet as of December 31, 2013 and March 31, 2013		4

	Consolidated Statements of Operations for the three and nine months ended December 31, 2013 and 2012		5

	Consolidated Statements of Cash Flows for the nine months ended December 31, 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		14

Item 4.	Controls and Procedures		14

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings		15

Item 1A.	Risk Factors		15

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		15

Item 3.	Defaults Upon Senior Securities		15

Item 4.	Mine Safety Disclosures		15

Item 5.	Other Information		13

Item 6.	Exhibits		16

	Signatures		17

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.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE PULSE NETWORK, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2013 and MARCH 31, 2013 (UNAUDITED)

	December 31,			March 31,
	2013			2013
ASSETS

CURRENT ASSETS:
Cash	$	85,289		$	31,670
Accounts receivable		266,731			298,840
Prepaid expenses and deposits		-			65,711

Total current assets		352,020			396,221

PROPERTY AND EQUIPMENT, net		130,488			179,525

OTHER ASSETS		27,521			27,823


TOTAL ASSETS	$	510,030		$	603,569

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Note Payable - bank	$	150,000		$	130,000
Note Payable - other		30,000			50,000
Note Payable - stockholders		106,156			-
Converitble note payable - net		21,000			-
Accounts payable		492,194			247,756
Accrued compensation		815,060			239,087
Accrued expenses		17,791			62,269
Current portion of long-term debt		116,667			116,667
Current portion of capital lease obligations		21,364			18,337
Current portion of note payable related party		25,380			24,808
Deferred revenue		511,220			591,368
Client funds pass thru liability		28,649			221,582
Advances from stockholders		452,827			426,883
Due to affiliates		54,500			91,497
Deferred compensation		59,132			56,958

Total current liabilities		2,901,940			2,277,212

DEFERRED COMPENSATION, net of current portion		823,051			865,354
LONG TERM DEBT, net of current portion		136,111			223,611
CAPITAL LEASE OBLIGATIONS, net of current portion		23,916			37,077
NOTE PAYABLE RELATED PARTY, net of current portion		-			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		351,392			136,729
Accumulated deficit		(3,832,080	)		(3,060,522	)

Total stockholders' deficiency		(3,374,987	)		(2,818,792	)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)	$	510,030		$	603,569

The accompanying notes are an integral part of these consolidated interim financial statements

THE PULSE NETWORK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND ACCUMULATED DEFICIT (UNAUDITED)

	For The Three Months Ended					For The Nine Months Ended
	December 31, 2013			December 31, 2012		December 31, 2013			December 31, 2012

NET SALES	$	1,042,708		$	1,466,224	$	2,601,847		$	3,162,375

COST OF SALES		322,698			496,968		747,446			1,239,131

GROSS PROFIT		720,010			969,256		1,854,401			1,923,244

SELLING EXPENSES		137,441			114,159		439,775			328,886

GENERAL AND ADMINISTRATIVE EXPENSES		706,027			658,988		2,109,378			1,907,882

NET LOSS FROM OPERATIONS		(123,458	)		196,109		(694,752	)		(313,524	)
										0
INTEREST EXPENSE		25,247			4,271		76,806			9,737

NET LOSS	$	(148,705	)	$	191,838	$	(771,558	)	$	(323,261	)

NET LOSS PER COMMON SHARE, basic and diluted	$	(0.00	)	$	0.00	$	(0.01	)	$	(0.00	)

WEIGHTED AVERAGE SHARES USED IN PER SHARE
COMPUTATION, basic and diluted		90,700,000			90,000,000		90,406,909			90,000,000

The accompanying notes are an integral part of these consolidated interim financial statements

THE PULSE NETWORK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2013 AND 2012 (UNAUDITED)

	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(771,558	)	$	(323,261	)
Adjustments to reconcile net loss to net cash provided (used for)
by operating activities:
Stock-based compensation		43,863			-
Depreciation		57,326			52,768
Changes in operating assets and liabilities:
Accounts receivable		32,109			(268,169	)
Prepaid expenses and deposits		65,711			26,724
Other assets		302			132,339
Accounts payable		244,438			(19,910	)
Accrued compensation		575,973			71,864
Accrued expenses		(44,479	)		-
Deferred revenue		(80,148	)		(27,019	)
Client funds pass thru		(192,933	)		(380,437	)
Due to affiliates		(36,997	)		158,281
Deferred compensation		(40,129	)		(40,383	)

Net cash used for operating activities		(146,522	)		(617,203	)
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		20,000			250,000
(Repayment) proceeds from note payable - other		(20,000	)		50,000
Proceeds from note payable - stockholders		106,156			-
Proceeds from the issuance of convertible notes		52,500			-
Net Advances from stockholders		25,944			292,296
Repayment of long-term debt		(87,500	)		-
Payments of capital lease obligations		(13,827	)		14,180
Repayment of note payable related party		(18,535	)		-

Net cash provided by financing activities		204,738			606,476

NET INCREASE (DECREASE) IN CASH		53,619			(10,727	)
CASH:
Beginning of period		31,670			10,727

End of period	$	85,289		$	-
SUPPLEMENTAL CASH FLOWS DISCLOSURE
Property and equipment acquired through capital lease	$	3,693		$	-
Fair value of beneficial conversion feature recorded in additional paid in capital	$	31,500		$	-

The accompanying notes are an integral part of these consolidated interim financial statements

THE PULSE NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 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 December 31, 2013 the Company has an accumulated deficit of approximately $3,832,000 and has negative working capital of approximately $2,550,000. 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 December 31, 2013, the Company had sales to one customer that accounted for approximately 27% of total revenue. During the nine month period ended December 31, 2013, the Company had sales to two customers that accounted for 15% and 13% of total revenue.

Income Taxes – Income tax expense for the three and nine month periods ended December 31, 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 nine month periods ending December 31, 2013 and does not anticipate having any unrecognized tax benefits over the next twelve months.

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 December 31, 2013 and March 31, 2013 consists of the following:

	December 31, 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		(298,497	)		(241,171	)

Property and equipment, net	$	130,488		$	179,525

4. RELATED PARTY TRANSACTIONS

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. During the three and nine month periods ended December 31, 2013, $2,267 and $3,156, respectively, of the discount has been amortized through a charge to interest expense.

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.

Advances from stockholders consists of non-interest bearing advances of $415,958 and $36,869 from Stephen J. Saber, and Nicholas C. Saber, respectively at December 31, 2013 and $354,317 and $72,566 from Stephen and Nicholas, respectively at March 31, 2013, with no set repayment terms.

Due to affiliates at December 31, 2013 and March 31, 2013 consist of $50,000 and $66,340, respectively, due to Saber Realty for advances with no stated repayment terms, and $4,500 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 July 14, 2014. Future minimum rent payments under this agreement are $27,447 for the 6.5 months remaining on the lease. The Company is currently looking at other office space options. Total rent expense, including common area, maintenance, taxes, insurance and utilities, was $27,090 and $27,203 for the three month period ended December 31, 2013 and 2012 respectively, and $81,270 and $83,734 for the nine month period ended December 31, 2013 and 2012, respectively.

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 December 31, 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 December 31:

2014	$	59,132
2015		62,161
2016		65,345
2017		68,691
2018		72,209
Thereafter	$	554,645
Total	$	882,183

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. This agreement expires on February 8, 2016.

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 balance of the note and accrued interest is past due as of December 31, 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 through maturity on February 8, 2016. The note is secured by substantially all assets of the Company.

9. CONVERTIBLE NOTE PAYABLE

On December 13, 2013 the Company issued a convertible promissory note. The Purchaser of the note has advanced the Company $52,500 in principle net of $2,500 of expense incurred by the purchaser. The principle and unpaid interest accrues at 10% per annum and is due and payable 12 months from the date of issuance. The note is convertible beginning 90 days from issuance at a 37.5% discount to the Volume weighted average price (VWAP) of the common stock for the 10 trading days immediately prior to the conversion date, or the VWAP on the issuance date. The Company has determined there is a beneficial conversion feature of $31,500 as of December 31, 2013 based on the intrinsic value of the beneficial conversion feature as calculated using the VWAP on the issuance date of the note. The value of the beneficial conversion feature has been recorded as a discount to the note on the balance sheet at December 31, 2013 and will be amortized using the interest method through the earliest conversion date.

10. 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 December 31, 2013 and March 31, 2013 is $45,280 and $55,414, respectively. The annual repayments of capital lease obligations at December 31, 2013 are as follows:

2014	$	6,446
2015		23,968
2016		14,250
2017		6,894
2018		1,036
Total minimum lease payments		52,594
Less amount representing interest		7,314
Present value of minimum lease payments		45,280
Present value of minimum lease payments due within one year		21,364
Present value of net minimum lease payments due beyond on year	$	23,916

11. STOCKHOLDERS’ EQUITY

On June 5, 2013 the Company issued 400,000 shares of its common stock and warrants to purchase an additional 400,000 shares of common stock at an exercise price of $0.30 per share in a private placement in exchange for cash proceeds of $80,000. On The Warrants vest immediately and have a three year term, expiring on August 5, 2016. The relative fair value of the Warrants is $31,840 and is included in additional paid-in capital on the balance sheet at December 31, 2013.

On August 19, 2013 the Company issued 300,000 shares of its common stock and warrants to purchase an additional 300,000 shares of common stock at an exercise price of $0.30 per share in a private placement in exchange for cash proceeds of $60,000. The Warrants vest immediately and have a three year term, expiring on August 19, 2016. The relative fair value of the Warrants is $23,704 and is included in additional paid-in capital on the balance sheet at December 31, 2013.

12. 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. The option shares vest over four years beginning April 3, 2013, As of December 31, 2013, no 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 ($15,571) and $43,863 during the three and nine months ended December 31, 2013, respectively. As of December 31, 2013, there was $192,811 unrecognized compensation cost related to non-vested stock options which will be recognized through July 2017.

Summary of Options Activity

	Stock Options
				Weighted Average Exercise
	Options			Price
Outstanding, Sep 30, 2013		4,125,000		$	0.17
Granted		-		$	-
Exercised		-		$	-
Forfeited or expired		(105,000	)	$	0.17
Outstanding, Dec 31, 2013		4,020,000		$	0.17

13. CLIENT FUNDS PASS THRU LIABILITY

The Company collects funds from attendees who register for our clients’ events. Per the terms of the contracts, the Company remits the balance of funds collected to our clients at 30 and 45 days post event.

14. SUBSEQUENT EVENTS

On January 29, 2014 the Company issued a promissory note in an amount up to $335,000. The lender has advanced $60,000 as of February 7, 2014. The note is convertible effective February 7, 2014 at a conversion price equal to the lesser of $.09 or 60% of the lowest traded price during the twenty-five trading days prior to the conversion. The Company may repay this note on or before 90 days from February 7, 2014 at 0% interest. A one-time interest charge of 12% shall be added to the principle amount if the note is not paid within 90 days of February 7, 2014.

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 February 4, 2014. 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 December 31, 2013 compared to three months ended December 31, 2012.

Net Sales and Cost of Sales

During the three months and nine months ended December 31, 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 December 31, 2013 and 2012

Total net sales for the three months ended December 31, 2013 decreased by 28.9% to $1,042,708 from $1,466,224 during the three months ended December 31, 2012. Sales from usage of the Pulse Network Platform decreased 42.7% due to the loss of certain clients. Sales to sponsors and attendees for conferences hosted by the company increased 3.2%. Sales from providing ongoing development and support for client content and digital marketing programs increased 34% due to acquiring additional clients.

Cost of sales for the three months ended December 31, 2013 decreased by 35.1% to $322,698 from $496,968 during the three months ended December 31, 2012. The decrease for the three months ended December 31, 2013 is mainly attributable to lower shipping, materials, and travel expense costs related to sales from the usage of the Pulse Network Platform. Also, costs for food and beverage, decorator, venue, audio visual and electrical costs related to sales to sponsors and attendees for conferences hosted by the company were reduced.

Cost of sales also includes a $5,773 credit during the three month period ended December 31, 2013 to reverse stock based compensation recognized in the prior quarter that was related to unvested options that were forfeited this quarter. There was no stock based compensation recognized during the three months ended December 31, 2012.

Selling expenses for the three months ended December 31, 2013 increased by 20.3% to $137,441 from $114,159 for the three months ended December 31, 2012. The increase in selling and marketing expenses is attributable to additional sales employees and increase in meals and entertainment expenses from sales related travel for new business development.

Selling expenses also includes a $20,529 credit during the three month period ended December 31, 2013 to reverse stock based compensation recognized in the prior quarter that was related to unvested options that were forfeited this quarter. There was no stock based compensation recognized during the three months ended December 31, 2012.

General and administrative expenses for the three months ended December 31, 2013 increased by 7.1% to $706,027 from $658,988 for the three months ended December 31, 2012. The increase is mainly attributed to an increase in accounting fees, investor related fees, and officers payroll.

General and administrative expenses includes $10,651 of stock-based compensation expense for the three months ended December 31, 2013 compared to $0 for the three months ended December 31, 2012.

Nine Months Ended December 31, 2013 and 2012

Total net sales for the nine months ended December 31, 2013 decreased by 17.7% to $2,601,847 from $3,162,375 in the nine months ended December 31, 2012. Sales from usage of the Pulse Network Platform decreased 36.1% due to the loss of certain clients. Sales to sponsors and attendees for conferences hosted by the company increased 3.4%. Sales from providing ongoing development and support for client content and digital marketing programs increased 55.9% due to acquiring additional clients.

Cost of sales for the nine months ended December 31, 2013 decreased by 39.7% to $747,446 from $1,239,131 in the nine months ended December 31, 2012. The decrease for the nine months ended December 31, 2013 is mainly attributable to lower shipping, materials, and travel expense costs related to sales from the usage of the Pulse Network Platform. Also, costs for food and beverage, decorator, and venues related to sales to sponsors and attendees for conferences hosted by the company were reduced.

Cost of sales also includes $1,056 of stock-based compensation expense for the nine months ended December 31, 2013 compared to $0 for the nine months ended December 31, 2012.

Selling expenses for the nine months ended December 31, 2013 increased by 33.7 % to $439,775 from $328,886 for the nine months ended December 31, 2012. The increase in selling and marketing expenses is attributable to additional sales employees, stock-based compensation expense, and increase in meals and entertainment expenses from sales related travel for new business development.

Selling expenses also includes $10,529 of stock-based compensation expense for the nine months ended December 31, 2013 compared to $0 for the nine months ended December 31, 2012.

General and administrative expenses for the nine months ended December 31, 2013 increased by 10.6% to 2,109,378 from $1,907,882 for the nine months ended December 31, 2012. The increase is mainly attributable to an increase in officers payroll.

General and administrative expenses includes $32,278 of stock-based compensation expense for the nine months ended December 31, 2013 compared to $0 for the six months ended December 31, 2012.

Liquidity and Capital Resources

For the nine months ended December 31, 2013 the Company’s operating activities used cash totaling $146,522. The Company financed its operations with proceeds from the issuance of a convertible promissory note of $52,500, proceeds totaling $140,000 from the issuance of common stock and warrants, net proceeds from the bank line of credit of $20,000, and net advances from stockholders of 106,156. As a result, the Company had net working capital deficit of $2,549,920 at December 31, 2013 compared with working capital deficit of $1,880,991 at March 31, 2013.

Off-Balance Sheet Arrangements

As of December 31, 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.

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.

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 December 31, 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.

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.

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.

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: February 12, 2014	By:	/s/ Stephen Saber
		Stephen Saber
		Chief Executive Officer (principal executive officer, principal accounting officer and principal financial officer)

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

(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

Pulse Network, Inc. - FORM 10-Q - February 13, 2014

Attached files

Pulse Network, Inc. Reports