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 June 30, 2015

 

or

 

¨	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.)

 

10 Oceana Way Norwood, MA 02062

(Address of principal executive offices) (Zip Code) 

 

(781) 688-8000

(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	x
(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 August 14, 2015 was 153,767,271 shares. 

 

 

 

THE PULSE NETWORK, INC. 

 

TABLE OF CONTENTS

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			Page
PART 1 – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)		3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		16
Item 4.	Controls and Procedures		16
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		17
Item 1A.	Risk Factors		17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		17
Item 3.	Defaults Upon Senior Securities		17
Item 5.	Other Information		17
Item 6.	Exhibits		18

 

2

 

THE PULSE NETWORK, INC. 

CONSOLIDATED BALANCE SHEETS 

JUNE 30, 2015 and MARCH 31, 2015

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		June 30,				March 31,
		2015				2015
ASSETS
CURRENT ASSETS:
Cash		$	59,689			$	27,524
Accounts receivable, net of allowance for doubtful accounts of $7,041 at June 30, 2015 and March 31, 2015			207,862				225,253
Prepaid expenses and deposits			45,694				77,585
Total current assets			313,245				330,362
PROPERTY AND EQUIPMENT, net			73,855				87,796
INTANGIBLE ASSESTS, net			1,553,421				1,615,197
GOODWILL			694,133				694,133
OTHER ASSETS:
Other assets			34,802				34,923
TOTAL ASSETS		$	2,669,456			$	2,762,411
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving loan		$	2,542,797			$	2,512,922
Accounts payable			760,617				661,032
Accrued compensation			1,311,871				1,187,749
Accrued expenses			512,372				535,309
Current portion of capital lease obligations			10,058				11,963
Deferred revenue			386,659				456,115
Client funds pass thru liability			26,300				26,300
Advances from stockholders			91,397				91,397
Current portion of note payable related party			64,813				51,624
Note Payable - stockholders			110,100				110,100
Current portion of related party loan			121,500				121,500
Advances from affiliates			193,800				193,800
Current portion of deferred compensation			63,336				62,942
Total current liabilities			6,195,620				6,022,753
DEFERRED COMPENSATION, net of current portion			739,327				744,858
PROMISSORY NOTE			1,170,000				1,170,000
CONVERTIBLE DEBENTURE			122,000				122,000
CAPITAL LEASE OBLIGATIONS, net of current portion			5,686				7,463
NOTE PAYABLE RELATED PARTY, net of current portion			-				13,189
COMMITMENTS AND CONTINGENCIES
REDEEMABLE COMMON STOCK, 4,500,000 shares issued and outstanding at June 30, 2015			225,000				225,000
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, 500,000,000 shares; issued and outstanding, 149,267,271 and 100,002,563 shares, respectively			149,267				100,003
Additional paid-in capital			822,253				692,635
Accumulated deficit			(6,774,698	)			(6,350,491	)
Total stockholders' deficiency			(5,788,177	)			(5,542,852	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	2,669,456			$	2,762,411

 

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

 

3

 

THE PULSE NETWORK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE

THREE MONTHS ENDED JUNE 30, 2015 AND 2014

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		2015				2014
NET SALES		$	1,319,810			$	721,422
COST OF SALES			235,152				169,602
GROSS PROFIT			1,084,658				551,820
SELLING EXPENSES			57,118				61,251
GENERAL AND ADMINISTRATIVE EXPENSES			1,313,617				574,895
NET LOSS FROM OPERATIONS			(286,077	)			(84,326	)
INTEREST EXPENSE			138,130				160,356
NET LOSS		$	(424,207	)		$	(244,682	)
NET LOSS PER COMMON SHARE, basic and diluted		$	(0.00	)		$	(0.00	)
WEIGHTED AVERAGE SHARES USED IN PER SHARE COMPUTATION, basic and diluted			111,225,252				90,700,000

 

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

 

4

 

THE PULSE NETWORK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JUNE 30, 2015 AND 2014

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		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(424,207	)		$	(244,682	)
Adjustments to reconcile net loss to net cash provided (used for) by operating activities:
Stock-based compensation			11,382				14,310
Depreciation			13,941				15,825
Amortization of intangible assets			61,776				-
Non cash interest expense			-				85,018
Non cash financing expense			325,000				-
Changes in operating assets and liabilities:
Accounts receivable			17,391				(282,677	)
Prepaid expenses and deposits			31,891				529
Other assets			121				363
Accounts payable			99,585				38,664
Accrued compensation			124,122				36,890
Accrued expenses			(22,937	)			(26,001	)
Deferred revenue			(69,456	)			172,461
Client funds pass through liability			-				(246,364	)
Deferred compensation			(5,137	)			(14,689	)
Net cash provided (used) for operating activities			163,472				(450,353	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock			167,500				-
Net repayment of revolving loan			(295,125	)			-
Net proceeds from accounts receivable purchase agreement			-				242,500
Repayment of proceeds under accounts receivable purchase agreement			-				(48,963	)
(Repayment) proceeds from note payable - other			-				(10,000	)
Proceeds from convertible debenture			-				175,000
Repayment of long-term debt			-				(29,167	)
Net repayment of advances from stockholder			-				(81,458	)
Net proceeds from note payable related party			-				86,085
Payments of capital lease obligations			(3,682	)			(5,299	)
Net advances from affiliate			-				81,504
Net cash provided by (used for) financing activities			(131,307	)			410,202
NET INCREASE (DECREASE) IN CASH			32,165				(40,151	)
CASH:
Beginning of period			27,524				118,215
End of period		$	59,689			$	78,064
SUPPLEMENTAL CASH FLOWS DISCLOSURE
Fair value of beneficial conversion feature recorded in additional paid in capital		$	-			$	77,405

 

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

 

5

 

THE PULSE NETWORK, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

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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 June 30, 2015 the Company has an accumulated deficit of approximately $6,775,000 and has negative working capital of approximately $5,882,000. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of 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.

 

Concentrations of Sales to Certain Customers – During the three months ended June 30, 2015, the Company had sales to one customer that accounted for approximately 18% of total revenue. 

 

3. PROPERTY AND EQUIPMENT 

 

Property and equipment at June 30, 2015 and March 31, 2015 consists of the following: 

 

		June 30, 2015				March 31, 2015
Computer equipment		$	197,033			$	197,033
Audio and video equipment			109,071				109,071
Furniture and fixtures			12,478				12,478
Office equipment			55,189				55,189
Event equipment			82,020				82,020
			455,791				455,791
Accumulated depreciation			(381,936	)			(367,995	)
Property and equipment, net		$	73,855			$	87,796

  

6

 

4. RELATED PARTY TRANSACTIONS 

 

Advances from stockholder at June 30, 2015 and March 31, 2014 consists of non-interest bearing advances of $91,397 from Stephen Saber. These advances have no set repayment terms.  

 

Note payable related party consists of a loan from John C. Saber, the father of the three majority stockholders. Under the terms of the note agreement dated May 15, 2014 the Company borrowed $100,000 repayable in monthly principal and interest installments of $4,614 through maturity in May 2016. This note accrues interest at 10% per annum. The unpaid balance on this note is $64,813 at June 30, 2015 and March 31, 2015. 

 

Related party loan at June 30, 2015 consists of loans previously due to Stephen Saber in the amount of $111,500 and Nicholas C. Saber in the amount of $10,000. Accrued interest of $10,969 and $8,806 is included in accrued liabilities at June 30, 2015 and March 31, 2015, respectively. These loans were transferred to CrossTech Partners, LLC during the fourth quarter of fiscal 2014. Stephen, Nicholas and John Saber own 100% of Crosstech Partners, LLC. The loan bears interest at 6.5% and matures with all unpaid principal and interest due on September 3, 2015.  

 

Note payable – stockholders consists of a note dated September 3, 2013 under the terms of which the Company borrowed $110,100 from Saber Insurance Trust, of which the three majority stockholders are primary beneficiaries. The original loan terms stated repayment of the loan was to be made in full by June 1, 2014 including interest at 8.6% per annum. During the year ended March 31, 2015 the maturity date of the loan was extended to June 30, 2016. 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 was amortized through a charge to interest expense using the interest method over the original term of the loan. Accrued interest of $10,255 and $7,889 is included in accrued liabilities at June 30, 2015 and March 31, 2015, respectively. 

 

Advances from affiliate consists of $193,800 at June 30, 2015 and March 31, 2015 for advances from Crosstech Partners, LLC with no stated repayment terms.  

 

The Company leases its office space under a non-cancelable lease agreement with a related party which expires April 30, 2024. Future minimum rent payments under this agreement are $98,577 for the year ending March 31, 2016. For each of the years ending March 31, 2017 through 2024 the minimal rent payment will be $131,433 and $21,906 for the year ending March 31, 2025.  

 

As of April 1, 2015, the Company subleased the office space to Crosstech Partners, LLC for fifty percent of the cost of the Company lease agreement. For the three months ended June 30, 2015, the Company received $21,613 in rent payments which reduced the rent expense and is included in the general and administrative expenses for the Company. 

 

The Company total rent expense, including common area, maintenance, taxes, insurance and utilities, was $48,142 and $25,578 for three months ended June 30, 2015 and 2014, respectively. 

  

5. ACCRUED COMPENSATION 

 

Accrued compensation at June 30, 2015 and March 31, 2015 includes $1,223,092 and $1,075,077, respectively, of amounts due to the three officers and directors payable under the terms of their employment agreements. These officers have elected to defer receipt of these amounts until the Company is in a better liquidity position.

  

7

 

6. 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 June 30, 2015 and March 31, 2015 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: 

 

Twelve months ending June 30:
2016		$	63,336
2017			66,580
2018			69,990
2019			73,575
2020			77,343
Thereafter			451,809
Total		$	802,663

 

7. REVOLVING LOAN 

 

On October 6, 2014, the Company borrowed $2,400,000 from TCA Global Credit Master Fund, LP (the "Lender") pursuant to the terms of a Senior Secured Revolving Credit Facility Agreement, dated September 30, 2014 (the "Credit Agreement"), among the Company, as borrower, and certain of its subsidiaries (the "Subsidiary Guarantors") as joint and several guarantors, and the Lender. The funds have been and will be used for general corporate purposes, including repayment of certain obligations of the Company. Under the Credit Agreement, the Company may borrow an amount equal to the lesser of 80% of the amount in a certain Lock Box Account (as defined in the Credit Agreement) and the revolving loan commitment, which initially is $1,400,000. The Company may request that the revolving loan commitment be raised by various specified amounts at specified times, up to a maximum of $5,000,000. In each case, the decision to grant any such increase in the revolving loan commitment is at the Lender's sole discretion. The original maturity date of this loan was on the earlier of March 30, 2015, subject to a six-month extension at the request of the Company, or upon 60 days written notice by the Lender. The Company may prepay the Revolving Loan (as defined in the Credit Agreement), without penalty, provided it is repaid more than 180 days prior to maturity date. If Company prepays more than eighty percent (80%) of the Revolving Loan Commitment within 9 days following the effective date, there is a prepayment penalty equal to 2.5% of the Revolving Loan Commitment (as defined in the Credit Agreement). 

 

The loan bears interest at the rate of 11% per annum, and the Company will pay certain fees, as set forth in the Credit Agreement. In addition, the Company paid an additional advisory fee of $450,000 to Lender during the quarter ended December 31, 2014. 

 

On October 30, 2014, the Company issued to the Lender 4,500,000 shares of redeemable common stock in payment of the advisory fee as stated in the credit agreement. The lender could require the Company to redeem these shares for an amount up to $450,000 one year from the effective date of the agreement. On December 16, 2014 the Company and the lender entered into the first amendment to the Credit Agreement under which the available borrowing amount was increased and the original advisory fee in the amount of $450,000 was added to the outstanding loan amount with the lender and the shares issued on October 30, 2014 were deemed to be in settlement of a new advisory fee in the amount of $225,000. Under the terms of the amendment these shares are redeemable at the option of the lender for an amount up to $225,000 as defined in the agreement. As the redemption option is outside the control of the Company the redemption value of these shares has been recorded in temporary equity on the Company's balance sheet at June 30, 2015 and March 31, 2015. In addition to the advisory fee described above the Company incurred fees totaling $896,350 in order to obtain this debt financing. These fees were included in general and administrative expense during the year ended March 31, 2015.  

 

On April 1, 2015, the Company and the lender entered into a second amendment to the Credit Agreement under which additional financing fees totaling $325,000 were added to the balance of the revolving loan and the maturity date was extended to November 1, 2016. The advisory fees are included in general and administrative expenses for the quarter ended June 30, 2015. 

 

The balance of the revolving loan is $2,542,797 at June 30, 2015.

 

8

  

8. CONVERTIBLE DEBENTURE 

 

On April 29, 2014, the Company issued a non-interest bearing convertible debenture. The purchaser of the debenture advanced the Company $175,000 in principle due three years from the issuance date. At any time the purchaser may convert the amount outstanding at a conversion rate equal to 65% of the second lowest closing bid price of the Company's common stock for the 20 trading days immediately preceding the date of conversion of the debenture. The Company determined there was a beneficial conversion feature with an intrinsic value of $77,404 as of June 30, 2014. The debenture is convertible as of the effective date of the agreement and therefore the entire discount related to the beneficial conversion feature has been recorded in additional paid-in capital and charged to interest expense as of June 30, 2014. The Company also issued 500,000 shares of common stock with an aggregate fair value of $32,000 to the purchaser in connection with this agreement which is included in general and administrative expenses in the statement of operations for the quarter ended June 30, 2014.

 

On November 4, 2014, the purchaser elected to convert $35,000 of the principle amount into 2,153,846 shares of the Company's common stock. On January 27, 2015 the purchaser elected to convert $18,000 of the principle amount into 4,615,384 shares of the Company's common stock. On April 30, 2015 the original purchaser of this convertible debenture sold the note to a third party for $122,000.

 

9. CAPITAL LEASE OBLIGATIONS 

 

The Company leases certain equipment under capital leases expiring in various years through 2018. The net book value of assets held under capital leases at June 30, 2015 and March 31, 2015 is $21,314 and $25,716 respectively. The annual repayments of capital lease obligations at June 30, 2015 are as follows: 

 

2016			11,582
2017			5,968
Total minimum lease payments			17,550
Less amount representing interest			1,806
Present value of minimum lease payments			15,744
Present value of minimum lease payments due within one year			10,058
Present value of net minimum lease payments due beyond on year		$	5,686

 

10. CLIENT FUNDS PASS THROUGH LIABILITY  

 

The Company collects and receives funds from attendees who register for our clients' upcoming events. Per the terms of the contracts, the Company remits the balance of funds collected to its clients at 30 and 45 days post event. The Company client funds pass through liability at June 30, 2015 and March 31, 2015 is $26,300. 

 

9

 

11. STOCKHOLDERS' EQUITY

 

On June 15, 2015, the Company issued an aggregate of 27,205,884 shares of common stock to Stephen Saber, Nicholas Saber and John Saber, the Company's three officers and directors, at a purchase price of $0.0034 per share, for aggregate cash proceeds of $92,500. 

 

Stephen Saber, the Company's Chief Executive Officer and a Director, purchased 11,246,912 of these shares for $38,240; Nicholas Saber, the Company's President, Secretary, Treasurer and a Director, purchased 7,979,486 of these shares for $27,130; and John Saber, the Company's Chief Information Officer and a Director, purchased 7,979,486 of these shares for $27,130.  

 

On June 23, 2015, the Company issued an aggregate of 22,058,824 shares of common stock to Stephen Saber, Nicholas Saber and John Saber, the Company's three officers and directors, at a purchase price of $0.0034 per share, for aggregate cash proceeds of $75,000.  

 

Stephen Saber, the Company's Chief Executive Officer and a Director, purchased 9,119,118 of these shares for $31,004; Nicholas Saber, the Company's President, Secretary, Treasurer and a Director, purchased 6,469,853 of these shares for $21,998 and John Saber, the Company's Chief Information Officer and a Director, purchased 6,469,853 of these shares for $21,998. 

 

12. STOCK-BASED COMPENSATION 

 

The Company recorded the stock-based compensation expense attributable to options of $11,382 and $14,310 for three months ended June 30, 2015 and 2014, respectively. At June 30, 2015, there was $95,857 unrecognized compensation cost related to non-vested stock options and $122,729 unrecognized compensation related to vested stock options which will be recognized through September 30, 2016. 

 

Summary of Options Activity 

 

	Stock Options
						Weighted
						Average
						Exercise
		Options				Price
Outstanding, April 1, 2015			1,715,000			$	-
Granted			-			$	-
Exercised			-			$	-
Forfeited or expired			(35,000	)		$	0.17
Outstanding, June 30, 2015			1,680,000			$	0.17

 

10

 

13. COMMITMENTS AND CONTINGENCIES

 

Employment agreements – On April 1, 2013 the Company entered into employment agreements with three of its executive stockholders. Each of these agreements has a five year term beginning April 1, 2013 and ending on April 1, 2018. Unless otherwise terminated each of these agreements shall annually extend for one additional year beginning on the second anniversary date of each agreement. Compensation under these agreements is as follows. 

 

Stephen Saber, chief executive officer of the Company is to receive an annual base salary of $350,000 and a monthly bonus equal to 1.5% of all monthly net revenues of the Company. The bonus is to be paid within fifteen days of the end of each month. If the executive is terminated other than for cause, the executive is entitled to an amount equal to the executive's annual base salary in effect at the time of termination. 

 

Nicholas Saber, president of the Company is to receive an annual base salary of $275,000 and a monthly bonus equal to 1.5% of all monthly net revenues of the Company. The bonus is to be paid within fifteen days of the end of each month. If the executive is terminated other than for cause, the executive is entitled to an amount equal to the executive's annual base salary in effect at the time of termination. 

 

John Saber, chief information officer of the Company is to receive an annual base salary of $225,000 and a monthly bonus equal to 1.5% of all monthly net revenues of the Company. The bonus is to be paid within fifteen days of the end of each month. If the executive is terminated other than for cause, the executive is entitled to an amount equal to the executive's annual base salary in effect at the time of termination. 

 

Effective January 1, 2014, amendments were approved to the existing employment agreements with its three officers and directors: Stephen Saber, Nicholas Saber and John Saber. 

 

The amendments to the individual agreements provide for an initial base salary, commencing January 1, 2014, of $250,000 for Stephen Saber, $200,000 for Nicholas Saber, and $200,000 for John Saber. The amendment has removed the provision to automatically increase the officers' base salaries 7% on April 1 of each year. The amendment also removed providing bonus compensation equal to 1.5% of all monthly net revenues of the Company. 

 

Effective September 26, 2014, amendment No. 2 was approved to the existing employment agreements with its three officers and directors: Stephen Saber, Nicholas Saber and John Saber. 

 

Amendment No. 2 to the individual agreements provide for an initial base salary, commencing September 16, 2014, of $350,000 for Stephen Saber, $275,000 for Nicholas Saber, and $225,000 for John Saber. Amendment No. 2 automatically increases the officers' base salaries 7% on April 1 of each year. Amendment No. 2 also provides bonus compensation equal to 1.5% of all monthly net revenues of the Company. 

 

Amendment No. 3 to the individual agreements provide for an initial base salary, commencing April 1, 2015, and removes the officers' base salaries increase of 7% on April 1 for the year ending March 31, 2016. Amendment No. 3 also removes bonus compensation equal to 1.5% of all monthly net revenues of the Company for the year ending March 31, 2016. 

 

11

 

Separation Agreement - On March 10, 2015, the Company terminated the employment agreement with Michael Koenigs, seller of You Everywhere Now, LLC. As part of the separation agreement, both parties agreed to a settled amount of $279,566 payable to Michael Koenigs. As of June 30, 2015, the Company had a balance of $259,566 in accrued expenses related to the separation agreement. 

 

The Company also transferred certain equipment and furniture, located at the Company office at 591Camino De La Reina, Suite 1210, San Diego, CA 92108, with an agreed fair value of $80,000 to Seller. As a result, the amount of goodwill recorded by the Company as part of the acquisition of You Everywhere Now, LLC was reduced by $50,000 and the fixed assets recorded in the acquisition in the amount of $30,000 were removed from the Company's balance sheet. The amount due under the promissory note payable to Michael Koenigs, seller of You Everywhere Now, LLC was also reduced by $80,000 as of March 31, 2015.

 

The Company has also agreed to transfer the office sublease agreement for the office space located at 591 Camino De La Reina, San Diego, CA to Michael Koenigs, at a rent of $3,000 per month. The sublease agreement expires on March 31, 2018. Future minimum rent payments under the separation agreement are $36,000 for each of the twelve month periods ending March 31, 2016 through March 31, 2018. Total rent expense, including common area, maintenance, taxes, insurance and utilities was $9,000 and $0 for the three months ended June 30, 2015 and 2014, respectively. 

 

14. SUBSEQUENT EVENTS 

 

On July 24, 2015, the purchaser of the convertible debenture elected to convert $14,000 of the principle amount into 6,730,769 shares of the Company common stock. 

 

On August 3, 2015, the Company issued an aggregate of 7,692,308 shares of common stock to Stephen Saber, Nicholas Saber and John Saber, the Company's three officers and directors, at a purchase price of $0.0065 per share, for aggregate cash proceeds of $50,000. 

 

Stephen Saber, the Company's Chief Executive Officer and a Director, purchased 3,180,000 of these shares for $20,670; Nicholas Saber, the Company's President, Secretary, Treasurer and a Director, purchased 2,256,154 of these shares for $14,665; and John Saber, the Company's Chief Information Officer and a Director, purchased 2,256,254 of these shares for $14,665.  

 

The offering was made pursuant to the exemption from registration afforded by Section 4(a) (2) of the Securities Act of 1933, as amended, in a nonpublic offering to three sophisticated offerees who had access to registration-type of information. 

 

Management of the Company has evaluated subsequent events through the date these financial statements were issued and determined there are no other subsequent events that require disclosure. 

 

12

 

FORWARD-LOOKING STATEMENTS 

 

This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. 

 

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 except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. 

 

The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. As used in this quarterly report, the terms "we", "us", "our company", and "Pulse" mean The Pulse Network, Inc., unless otherwise indicated. All dollar amounts refer to US dollars unless otherwise indicated. 

 

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 

 

Results of operations for three months ended June 30, 2015 compared to three months ended June 30, 2014. 

 

Revenues and Cost of Revenues 

 

During the three months ended June 30, 2015 and 2014 the Company generated revenues from 3 primary business segments, being: 

 

	·	Revenues earned from usage of the ICTG Platform for software marketing tools, including simulated live webinars.
	·	Revenues earned from usage of the Pulse Network Platform for management and support of client events or conferences.
	·	Revenues earned by providing ongoing development and support for client content and digital marketing programs.

 

Total revenues for the three months ended June 30, 2015 increased by 82.9% to $1,319,810 from $721,422 during the three months ended June 30, 2014.  

 

The increase for the three months ended June 30, 2015 is mainly attributable to the revenue earned from usage of the ICTG Platform for software marketing tools, including simulated live webinars.  

 

Cost of revenues for the three months ended June 30, 2015 increased by 38.6% to $235,152 from $169,602 during the three months ended June 30, 2014. This increase is mainly attributable to increase in revenue as described above. 

 

Cost of revenue expenses includes $(2,196) of stock-based compensation for the three months ended June 30, 2015 compared to $203 for the three months ended June 30, 2014 

 

Selling and Marketing 

 

Selling and marketing expenses for the three months ended June 30, 2015 decreased by 6.7% to $57,118 from $61,251 for the three months ended June 30, 2014. The decrease in selling and marketing expenses is attributable to a decrease in sales payroll. 

 

Selling and marketing expenses includes $3,537 of stock-based compensation for the three months ended June 30, 2015 compared to $3,537 for the three months ended June 30, 2014 

 

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General and Administrative 

 

General and administrative expenses for the three months ended June 30, 2015 increased by 128.5% to $1,313,617 from $574,895 for the three months ended June 30, 2014. The increase in general and administrative expenses is mainly attributable to the $325,000 of financing fees related to the revolving loan, increase in commissions, software services, amortization expense, officer's payroll and customer service payroll.  

 

General and administrative expenses includes $10,041 of stock-based compensation for the three months ended June 30, 2015 compared to $10,570 for the three months ended June 30, 2014. 

 

Net Loss Attributable to the Company 

 

The net loss attributable to the Company for the three months ended June 30, 2015 increased 73.3% to $424,207 compared to $244,682 for three months ended June 30, 2014. The net loss increase is mainly attributable to the $738,000 increase in general and administrative expenses. 

 

Liquidity and Capital Resources 

 

As of June 30, 2015, the Company's total current assets were $313,245 and total current liabilities were $6,195,620 resulting in a working capital deficit of $5,882,375. On June 30, 2015, the Company had an accumulated deficit of $6,774,698. 

 

For the period ended June 30, 2015 the Company's accrued payroll balance increased $124,122 as a result of officers deferring receipt of their contractual compensation in order to help provide cash for operations.  

 

Cash and cash equivalents on June 30, 2015 were $59,689, an increase of $32,165 from March 31, 2015. 

 

For the three months ended June 30, 2015 the Company financed its operations with proceeds from issuance of common stock in the amount of $167,500.  

 

Operating activities provided cash of $163,472 during the three months ended June 30, 2015 compared to using cash of $450,353 during the three months ended June 30, 2014. There were no investing activities in the three months ended June 30, 2015 or June 30, 2014. 

 

Financing activities used cash of $131,307 during the three months ended June 30, 2015, compared to providing cash of $410,202 during the three months ended June 30, 2014.  

 

2015 financing activities primarily consist of proceeds from issuance of common stock in the amount of $167,500 less the net repayment of the revolving debt in the amount of $295,125.

 

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Off-Balance Sheet Arrangements 

 

As of June 30, 2015, 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. 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item. 

 

Item 4. Controls and Procedures. 

 

During the period ended June 30, 2014, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

 

Evaluation of Disclosure Controls and Procedures 

 

Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we are responsible for conducting an evaluation of the effectiveness of the design and operation of our internal 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 ("SEC") 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 June 30, 2015. 

 

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings. 

 

We are not currently involved in any legal proceedings. From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. 

 

Item 1A. Risk Factors. 

 

There have been no material changes from the risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended March 31, 2015, as filed with the Securities and Exchange Commission on July 14, 2015.

 

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

 

None

 

Item 3. Defaults Upon Senior Securities.

 

As of June 30, 2015, we are not in default with respect to any indebtedness. 

 

Item 5. Other Information

 

There is no other information to report at this time. 

 

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Item 6. Exhibits.

 

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 ("The Pulse Network"), and the holders of common stock of The Pulse Network. (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)
10.1		Lease Agreement dated April 2005, by and between Canton Realty Associates Limited Partnership and The Pulse Network, Inc., a Massachusetts corporation (then named, Exgenex, Inc.) (2)
10.2		Amendment of Lease dated June 2005 by and between Canton Realty Associates Limited Partnership and The Pulse Network, Inc., a Massachusetts corporation (then named, Exgenex, Inc.) (2)
10.3		Second Amendment of Lease dated July 1, 2006 by and between Canton Realty Associates Limited Partnership and The Pulse Network, Inc., a Massachusetts corporation (then named, Exgenex, Inc.) (2)
10.4		Employment Agreement dated March 29, 2013, by and between the Registrant and Stephen Saber (2)
10.5		Employment Agreement dated March 29, 2013, by and between the Registrant and Nicholas Saber (2)
10.6		Employment Agreement dated March 29, 2013, by and between the Registrant and John Saber (2)
10.7		Stock Redemption Agreement dated March 29, 2013 by and between the Registrant and Mohamed Ayad (2)
21		Subsidiaries of the Registrant
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *		XBRL Instance Document
101.SCH *		XBRL Taxonomy Extension Schema Document
101.CAL *		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF *		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB *		XBRL Taxonomy Extension Label Linkbase Document
101.PRE *		XBRL Taxonomy Extension Presentation Linkbase Document

_______

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

 

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

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

 

 

	The Pulse Network, Inc.
Date: August 14, 2015	By:	/s/ Stephen Saber
		Stephen Saber
		Chief Executive Officer   (Principal Executive Officer)

 

 

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