XOTC:PFNI Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2012 [ ] 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. (A Development Stage Company) Nevada 45-4928294 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) 2360 Corporate Circle, Suite 400, Henderson, NV 89074-7722 (Address of principal executive offices, including zip code) (702) 608-7360 (Issuer's telephone number, including area code) N/A (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ] 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-5 (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). Yes [X] No [ ] 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] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] APPLICABLE ONLY TO CORPORATE ISSUERS: The issuer has 83,656,667 outstanding shares of common stock outstanding as of June 30, 2012. <PAGE> TABLE OF CONTENTS Page ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements ........................................ 3 Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operation .................................... 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk... 20 Item 4. Controls And Procedures ..................................... 20 PART II - OTHER INFORMATION Item 1. Legal Proceedings ........................................... 21 Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds.. 21 Item 3. Defaults Upon Senior Securities ............................. 21 Item 4. Mine Safety Disclosures ..................................... 21 Item 5. Other Information ........................................... 21 Item 6. Exhibits .................................................... 22 2 <PAGE> PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INDEX TO FINANCIAL STATEMENTS BALANCE SHEETS............................................................. 4 STATEMENTS OF OPERATIONS .................................................. 5 STATEMENTS OF CASH FLOWS .................................................. 6 NOTES TO THE FINANCIAL STATEMENTS ......................................... 7 3 <PAGE> Psychic Friends Network, Inc. (Formerly "Web Wizard, Inc.") (A Development Stage Company) BALANCE SHEETS June 30, September 30, 2012 2011 ---------- ---------- (Unaudited) <S> <C> <C> ASSETS Current assets Cash $ 394,063 $ 108 ---------- ---------- Total current assets 394,063 108 Intangible assets (net of $975 and $0 of accumulated amortization) 22,425 -- ---------- ---------- Total Assets $ 416,488 $ 108 ========== ========== LIABILITIES Current Liabilities Accounts payable and accrued liabilities $ 12,354 $ 5,600 Loans from related parties -- 45,680 ---------- ---------- Total current liabilities 12,354 51,280 ---------- ---------- Total liabilities 12,354 51,280 STOCKHOLDERS' EQUITY Common stock; 750,000,000 shares authorized at $0.001 par value; 83,656,667 and 82,250,000 issued and outstanding at June 30, 2012 and September 30, 2011, respectively 83,657 82,250 Additional paid-in capital 603,246 (58,350) Deficit accumulated during development stage (282,769) (75,072) ---------- ---------- Total stockholders' equity 404,134 (51,172) ---------- ---------- Total liabilities and stockholders' equity $ 416,488 $ 108 ========== ========== The accompanying notes are an integral part of these financial statements. 4 <PAGE> Psychic Friends Network, Inc. (Formerly "Web Wizard, Inc.") (An Development Stage Company) STATEMENTS OF OPERATIONS (unaudited) From inception Three months ended Nine months ended (May 9, 2007) -------------------------- --------------------------- through June 30, June 30, June 30, June 30, June 30, 2012 2011 2012 2011 2012 ----------- ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> <C> REVENUE $ -- $ -- $ -- $ -- $ 1,434 ----------- ----------- ----------- ----------- ----------- OPERATING EXPENSES Payroll expenses 53,874 -- 53,874 -- 53,874 Depreciation and amortization 975 975 975 General and administrative 9,883 25 16,773 700 32,896 Consulting fees 79,952 -- 79,952 -- 79,952 Legal and professional 23,359 1,700 56,055 9,900 116,101 ----------- ----------- ----------- ----------- ----------- TOTAL OPERATING EXPENSES 168,043 1,725 207,629 10,600 283,798 ----------- ----------- ----------- ----------- ----------- NET LOSS FROM OPERATIONS (168,043) (1,725) (207,629) (10,600) (282,364) OTHER (INCOME) EXPENSE Bank charges and interest -- 18 68 54 405 ----------- ----------- ----------- ----------- ----------- TOTAL OTHER EXPENSE -- 18 68 54 405 ----------- ----------- ----------- ----------- ----------- NET LOSS BEFORE INCOME TAXES (168,043) (1,743) (207,697) (10,654) (282,769) PROVISION FOR INCOME TAX -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- NET LOSS FOR THE PERIOD $ (168,043) $ (1,743) $ (207,697) $ (10,654) $ (282,769) =========== =========== =========== =========== =========== BASIC AND DILUTED (LOSS) PER COMMON SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.00) =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES 83,534,140 82,250,000 82,901,935 82,250,000 =========== =========== =========== =========== The accompanying notes are an integral part of these financial statements. 5 <PAGE> Psychic Friends Network, Inc. (Formerly "Web Wizard, Inc.") (An Development Stage Company) STATEMENTS OF CASH FLOWS (unaudited) From inception Nine months ended (May 9, 2007) --------------------------- through June 30, June 30, June 30, 2012 2011 2012 ---------- ---------- ---------- <S> <C> <C> <C> OPERATING ACTIVITIES Net loss $ (207,697) $ (10,654) $ (282,769) Adjustments to reconcile net loss from operations: Stock issued for services 75,000 -- 75,000 Amortization 975 -- 975 Change in operating assets and liabilities: Accounts payable and accrued liabilities 6,754 3,900 12,354 ---------- ---------- ---------- NET CASH USED IN OPERATING ACTIVITIES (124,968) (6,754) (194,440) ---------- ---------- ---------- INVESTING ACTIVITIES Capitalization of website development costs (23,400) -- (23,400) ---------- ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES (23,400) -- (23,400) ---------- ---------- ---------- FINANCING ACTIVITIES Proceeds from issuance of common stock 525,000 6,700 548,900 Advances from related parties 12,323 -- 58,003 Proceeds from issuance of convertible notes payable 5,000 -- 5,000 ---------- ---------- ---------- NET CASH PROVIDED BY FINANCING ACTIVITIES 542,323 6,700 611,903 ---------- ---------- ---------- NET (DECREASE) IN CASH AND CASH EQUIVALENTS 393,955 (54) 394,063 CASH AND CASH EQUIVALENTS -BEGINNING OF PERIOD 108 180 -- ---------- ---------- ---------- CASH AND CASH EQUIVALENTS -END OF PERIOD $ 394,063 $ 126 $ 394,063 ========== ========== ========== 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 purchase agreement $ 58,003 $ -- $ 58,003 ========== ========== ========== Stock issued in conversion of notes payable $ 5,000 $ -- $ 5,000 ========== ========== ========== The accompanying notes are an integral part of these financial statements. 6 <PAGE> PSYCHIC FRIENDS NETWORK, INC. (fka: Web Wizard, Inc.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 (Unaudited) 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 January 30, 2012 the Company's board passed a motion to change the corporate name to "Psychic Friends Network, Inc." pursuant to the plan of merger 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 unaudited interim 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 interim financial information. The financial information as of June 30, 2012 are derived from the audited financial statements presented in the Company's Annual Report on Form 10-K for the years ended September 30, 2011 and 2010. The unaudited interim financial statements should be read in conjunction with the Company's Annual Report on Form 10-K, which contains the audited financial statements and notes thereto, together with the Management's Discussion and Analysis, for the years ended September 30, 2011 and 2010. Certain information or footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The interim results for the three months ended June 30, 2012 are not necessarily indicative of results for the full fiscal year. 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 June 30, 2012, the Company has accumulated losses from inception (May 9, 2007) of $282,769. Likewise, net cash used in operations from inception (May 9, 2007) through June 30, 2012 is $194,440. 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 that 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. 7 <PAGE> PSYCHIC FRIENDS NETWORK, INC. (fka: Web Wizard, Inc.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 (Unaudited) 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, Development Stage Entities ("ASC-915"). Since its formation, the Company has not yet realized any revenues from its planned operations. RECLASSIFICATIONS The Company reclassified $25, $800 and $14,377 in "Transfer and filing fees"; $-0-, $-0- and $1,500 in "Travel and entertainment", to "General and administrative" expenses for the three and nine months ended June 30, 2012 and for the period from inception (May 9, 2007) through September 30, 2011, respectively to conform to the current presentation. The reclassifications had 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 The fair value of the Company's financial instruments, consisting of cash and accounts payable and accrued liabilities, is equal to fair value due to their short-term to maturity. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. 8 <PAGE> PSYCHIC FRIENDS NETWORK, INC. (fka: Web Wizard, Inc.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 (Unaudited) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED) 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 June 30, 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. As the Company has never granted any stock options the adoption of this accounting policy had no effect on its financial position or results of operations. 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 $23,400 for the period from inception on May 9, 2007 through June 30, 2012. The Company's capitalized website amortization is included in depreciation and amortization in the Company's consolidated statements of operations, and totaled $975 for the period. ADVERTISING COSTS Advertising costs are to be expensed as incurred in accordance to Company policy; for the three and nine months ended June 30, 2012, Advertising expenses totaled $4,691. RECENT ACCOUNTING PRONOUNCEMENTS The Company has evaluated all of the recent accounting pronouncements through the filing date of these financial statements and feels that none of them will have a material effect on the Company's interim financial statements. 9 <PAGE> PSYCHIC FRIENDS NETWORK, INC. (fka: Web Wizard, Inc.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 (Unaudited) 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 ------ ------------ ------ -------------- <S> <C> <C> <C> <C> June 30, 2012: Capitalized website development costs $23,400 $ (975) $22,425 2.75 years ------- ------- ------- ---------- Total $23,400 $ (975) $22,425 2.75 years ======= ======= ======= ========== NOTE 4 - CONVERTIBLE NOTES PAYABLE On January 25, 2012, PFN Holdings issued a promissory note for $5,000 to a third party. The note bore no interest and was unsecured. The principle amount of the note, and all accrued interest was due and payable to PFN Holdings on or before January 25, 2014 unless, in connection with the Asset Purchase Agreement, the full amount was converted into Company common shares at $0.75 per share. No beneficial conversion feature resulted from the issuance of the note payable. In connection with the asset purchase agreement, on January 27, 2012, the note was fully converted to shares of the Company's common stock and PFN Holdings transferred the $5,000 to the Company. NOTE 5 - STOCKHOLDERS' EQUITY As summarized in Note 1, on February 7, 2012, our board of directors approved an agreement and plan of merger to merge with and into our wholly-owned subsidiary Psychic Friends Network, Inc., a Nevada corporation, to effect a name change from Web Wizard, Inc. to Psychic Friends Network Inc. Psychic Friends Network Inc. was formed solely to facilitate the change of name. In addition to the name change, our board of directors approved a 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. 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. 10 <PAGE> PSYCHIC FRIENDS NETWORK, INC. (fka: Web Wizard, Inc.) (A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS June 30, 2012 (Unaudited) NOTE 5 - STOCKHOLDERS' EQUITY - (CONTINUED) 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 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. 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. OPTIONS AND WARRANTS At June 30, 2012, the Company had no issued or outstanding stock options or warrants. NOTE 6 - RELATED PARTY TRANSACTIONS During the year ended September 30, 2009, the Company entered into a verbal loan agreement with an officer of the Company, whereby the Company borrowed amounts from time to time which are interest-free, payable on demand. During the nine months ended June 30, 2012, advances of $12,323 were made pursuant to this agreement. According to the terms of the "Asset Purchase Agreement" with PFN Holdings, all related party advances were fully repaid as of June 30, 2012, leaving a balance of $0 and $0 as of June 30, 2012 and September 30, 2011, respectively. NOTE 7 - SUBSEQUENT EVENTS On July 13, 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. This issuance represents the final tranche of the private placement agreement with Right Power Services, Ltd. for a total investment of $750,000. Other than the events as disclosed in the previous paragraphs, 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 11 <PAGE> ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION This report contains forward-looking statements. The forward-looking statements are contained principally in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned "Risk Factors" below. In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "would" and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements include, among other things, statements relating to: * our anticipated growth strategies and our ability to manage the expansion of our business operations effectively; * our ability to maintain or increase our market share in the competitive markets in which we do business; * our ability to keep up with rapidly changing technologies and evolving industry standards, including our ability to achieve technological advances; * our dependence on the growth in demand for our services; * our ability to diversify our service offerings and capture new market opportunities; and * the loss of key members of our senior management. Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report and the documents that we reference and filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future. USE OF CERTAIN DEFINED TERMS Except where the context otherwise requires and for the purposes of this report only: * the "Company," "we," "us," and "our" refer to the business of Psychic Friends Network Inc., a Nevada corporation (formerly, Web Wizard Inc.); * "Exchange Act" refers the Securities Exchange Act of 1934, as amended; * "SEC" refers to the Securities and Exchange Commission; * "Securities Act" refers to the Securities Act of 1933, as amended; and * "U.S. dollars," "dollars" and "$" refer to the legal currency of the United States. 12 <PAGE> OVERVIEW CORPORATE HISTORY AND BACKGROUND We were incorporated on May 9, 2007 under the laws of the state of Nevada. Our principal offices are located at 2360 Corporate Circle, Suite 400, Henderson, NV, 89074-7722. Our telephone number is 702-608-7360. Our year end is September 30. There are no bankruptcy, receivership, or similar proceedings against our company. Our website is www.psychicfriendsnetwork.com. We were originally incorporated and operated with an aim to providing web services and products that enable small and medium-sized businesses to establish, maintain, promote and optimize their Internet presence. We commenced business operations by selling a Web design solutions package to a restaurant located in Canada. We were not able to secure sufficient revenue or financing to continue our original business and on January 27, 2012 we entered into the agreements described above with the intention of changing our business to that providing psychic consultation services under the trade name "The Psychic Friends Network". ACQUISITION OF PSYCHIC FRIENDS NETWORK On January 27, 2012, we entered into three separate agreements regarding the acquisition of certain assets related to providing psychic consultation services under the trade name "The Psychic Friends Network". The agreements contemplated an acquisition of such assets, along with a concurrent financing. On March 30, 2012 we closed an asset purchase with PFN Holdings, INC. pursuant to which we acquired a number of assets related to providing psychic consultation services under the trade name "The Psychic Friends Network" in exchange for 50,600,000 shares of our common stock. In conjunction with this acquisition, our prior sole director and officer Ya Tang Chao cancelled 50,000,000 shares of our common stock. In conjunction with the asset purchase agreement, we also entered into financing agreements with Right Power Services Ltd., a British Virgin Islands company. Pursuant to the agreements, as of July 2012, Right Power has provided us with a total of $780,000 in financing at a price of $0.75 per share, for an aggregate issuance of 1,040,000 shares of our common stock. BUSINESS OUR SERVICES We are an entertainment company that plans to provide live psychic advice via telephone and the internet, as well as daily and weekly horoscopes. We plan to generate revenue via "per minute'" or "on demand" phone charges as well as web-based fees. Typically customers connect to their preferred psychic by telephone or website, and phone operations have been recently been updated to accept such calls. However, we are in the process of adding several new ways to connect. These include mobile applications, as well as audio, video and text chat by internet. These additional connection methods include the anticipated creation of mobile and web based applications, where customers will receive daily discounted readings, and other astrological content for an ongoing monthly 13 <PAGE> subscription fee. Our business is reliant on a large volume of small customers and because of this we are not dependent on any one group of customers. Our management operated a phone service during the 1990s under the same trademark of The Psychic Friends Network. At the peak of its popularity in the 1990s, The Psychic Friends Network averaged 14,000 calls per day, and the average customer spent approximately $350 over a 12-month period. Unfortunately, due to certain regulatory changes which allowed customers to retain their phone service while not paying for 900 number charges, the company was forced to file for bankruptcy reorganization protection in 1998. By 1999, Mike and Marc Lasky repurchased all of the intellectual property assets back from the bankruptcy trustee. Since our acquisition of the PFN Holdings' assets, we have begun working on a new updated website that we call PFN 2.0. The main focus will be to make better use of current technologies and social media in addition to increasing the overall experience for our customers. We anticipate that we will soon be able to provide customers with multiple methods of connection to our advisors, including toll free and click to call telephone services, audio, video and text chat internet services, and mobile phone applications and SMS services. At this time, we are providing the service of connecting customers for one on one telephone calls with psychics. The one-on-one call service is the core business of The Psychic Friends Network. People can call from the comfort of their homes, offices, or wherever they choose, and they will be instantly connected to their favourite Master Psychic, for a confidential reading. Callers have the option to choose a psychic by category, such as, Tarot, Astrology, Love & Relationships, Money and Career, Dreams or even Past Lives. They may also choose to speak to the next available psychic or to speak to the same psychic each time they call, which allows them to establish an ongoing relationship, simply by calling that psychic's extension. Callers can choose to pay by credit card, debit card, pay by check, or by using pre-paid Gift Cards. The prices that we charge are flexible, so that we are able to test multiple pricing points to see what will optimize profits. We plan to offer first time caller promotional rates, such as 10 minutes for $10, or 3 minutes free. The key for us is to get new callers in the door. Historically, we found that over 60% of our callers end up calling back. This is primarily due to the stringent selection process we have for choosing the psychics we engage for our service. We also offer attractive bonuses to the psychics that reward them for getting call-backs. We measure our success by percentage of call-backs, not by total minutes spent on the phone by customers. We have instituted a policy to instruct our psychics to inform the callers on a regular basis as to the time they have spent on the call. We also include a money back guarantee for unsatisfied customers. With the advent of new technologies, like Mobile applications, VOIP, and social media tools, we are now able to offer psychics from all over the world, and we can now accept international calls from customers. We believe that these technological improvements will allow us to capture a large audience. As part of the PFN 2.0 website we are developing, we will be including a number of services which we were not previously able to offer. These are currently under development and include: 14 <PAGE> * ONE-ON-ONE WEB-BASED READINGS: A new feature that we plan to offer is the ability for customers to connect to their psychic through our new "Skype" like feature. This means that the customer can log into their account and in real time check the bios, specialty categories and availability of all of our psychics. Once they find their account and then choose their available psychic, they will be able to instantly chat with that psychic. We plan on integrating the ability to text chat, audio only chat and video chat. The video chat feature will allow customers to see the psychics and see the psychic's action, such as Tarot cards being flipped for the reading. In addition to the improvement in the customer service experience, this service will also allow us to increase the efficiency of our scheduling. If the psychic is unavailable, a customer can actually log in to their account and schedule a reading in the near future. This is advantageous to the customer as well as the psychic, who does not have to sit by their computer and phone, hoping for calls to come in. Like our phone-based readings, customers will have the option to pay by credit card, debit card, personal check, or by using pre-paid gift cards. They can choose to pre-pay for minute packages as well as get discounted monthly subscription rates. The purchases can be made online or by calling in over the phone. * MOBILE APPLICATIONS: Thanks to the advances in mobile technology, we plan to offer several ways for our customers to get our Psychic branded content through mobile phones in ways which we were not able to take advantage of previously. This includes PSMS, BilltoMobile, and Mobile Applications for the iPhone, Blackberrry and Android based phones. * PSMS or Premium SMS, allows the caller to send a text message with our branded keywords, to our short code. Through this type of service, we will be able to offer a daily horoscope sent to our customers' mobile phones. The billing for this service will show up as a monthly item on their mobile phone invoice. We also plan to offer live psychic advice through mobile devices that allow users to send a text to one of our live psychics and receive an immediate reply. We anticipate that we will be charging $0.99 per message received, also billed directly through the customer's mobile phone invoice. * BilltoMobile is a new service that we plan to offer, which will allow our customers to pay via their mobile phone, instead of by credit card, debit card, or check. This will be a convenient way for customers to pay for our services, instead of having to find a credit card or other form of payment. * We anticipate that mobile applications will become a major part of our psychic content offerings. We have begun developing various mobile applications that our customers will be able to download directly from 15 <PAGE> the application stores on their mobile phones. We plan to offer live psychic readings, as well as Astrological content. The applications will be free to download, but after a short free trial, the content will be paid. MARKETING During the 1990's and early 2000's, our management operated Psychic Friends, LLC, a company involved in connecting customers for one on one telephone calls with psychics under the same trademark: "The Psychic Friends Network". This company only had market presence in the U.S and Canada; made up primarily of women, 30-60 years old, and skewed towards African Americans. We believe that the our target market is much larger today, due in part to new technologies like the Internet, mobile phones and social media. We believe that our new offerings will expand our market to individuals from 18-65, of all races. This market will likely still be predominated by women, but we believe that more men will be interested in our Internet and social media offerings than they would be in one on one phone interaction. We believe that the market for psychic services is substantial. An example of the size of the potential market, and also a potential advertising venue for our services, is a syndicated radio show called Coast to Coast. The show attracts an estimated 4.5 million listeners every night, making it the most listened to late night show in North America. In addition, we can now access customers in international jurisdictions because of the new technologies that allow anyone to connect directly to one of our psychics at the push of a button in real time. Additionally, many of the new markets which will have access to our services, such as China and India, already have strong traditions or connections to psychic phenomenon. During the peak of The Psychic Friends Network, operated by Psychic Friends, LLC, the company was averaging 14,000 calls per day, and 90% of the callers were generated through TV advertising. Currently, there are virtually no psychic phone services being advertised on television. The few competitors that we have are almost exclusively adverting on the Internet. This provides us an opportunity to take advantage of a vastly underserved market. We plan to advertise and market our services via the following avenues: INFOMERCIALS - we anticipate that paid advertisements on television/radio will be used to provide information about our services and direct traffic to our different mediums. WEB-BASED ANALYTICS - we plan to use advertisements, social media and search engine optimization to help inform our target audience as well as make us stand out from our peers. WORD OF MOUTH - from historical experience, we believe that our clients will tend to be repeat customers and friends of past customers. Word of mouth and positive client experiences are a very important source of marketing and based on providing a high level of service. 16 <PAGE> RESULTS OF OPERATIONS The following discussion of the financial condition and results of operations should be read in conjunction with the unaudited interim 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. FOR THE THREE MONTHS ENDED JUNE 30, 2012 AND 2011: Revenue We generated no revenues during the three months ended June 30, 2012 and 2011. Operating Expenses During the three months ended June 30, 2012, total operating expenses for the Company were $168,043 compared to $1,725 for the three months ended June 30, 2011. The increase in expenses was due to the commencement of business operations and related payroll, as well as website development and increased professional fee costs incurred as an operating public company versus a shell public company. Net Loss Our net loss for the three months ended June 30, 2012 was $168,043 as compared to a net loss of $1,743 for the three months ended June 30, 2011. This increase in net loss was due to our increased operating expenses. FOR THE NINE MONTHS ENDED JUNE 30, 2012 AND 2011: Revenue We generated no revenues during the nine months ended June 30, 2012 and 2011. Operating Expenses During the nine months ended June 30, 2012, total operating expenses for the Company were $207,629 compared to $10,600 for the nine months ended June 30, 2011. The increase in expenses was due to the commencement of business operations and related payroll, as well as website development and increased professional fee costs incurred as an operating public company versus a shell public company, and the professional fee costs incurred in our acquisition of PFN Holdings, Inc. in March 2012. Net Loss Our net loss for the nine months ended June 30, 2012 was $207,697 as compared to a net loss of $10,654 for the nine months ended June 30, 2011. This increase in net loss was due to our increased operating expenses. FROM INCEPTION (MAY 9, 2007) TO JUNE 30, 2012: Revenue We generated nominal net revenues in the amount of $1,434 during the period from May 9, 2007 (inception) to June 30, 2012. None of these revenues were generated in our operations as Psychic Friends Network. 17 <PAGE> Operating Expenses Total operating expenses for the period from May 9, 2007 (inception) through June 30, 2012 were $283,798. Net Loss Our accumulative net loss for the period from May 9, 2007 (inception) to June 30, 2012 was $282,769. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2012, we have yet to generate any revenues from our business operations. As of June 30, 2012, we had $394,063 cash and $416,878 current assets, of which $22,815 was due to website development. Our total liabilities were $12,534. In July 2012, we received the final tranche of $250,000 in investment financing from the sale of common stock pursuant to our financing agreement with Right Power Services, Ltd. and therefore our cash position as of August 9, 2012 was approximately $595,000. PLAN OF OPERATION AND FUNDING We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business. As of June 30, 2012, we estimate that our expenses over the next 12 months will be approximately $1,225,000 as described in the table below. These estimates may change significantly depending on the nature of our future business activities and our ability to raise capital from shareholders or other sources. Estimated Completion Date Estimated Description (from 3/31/12) Expenses ($) ----------- -------------- ------------ Legal and accounting fees 12 months 75,000 Website and app development 4 months 75,000 Management and consulting costs 12 months 300,000 Marketing 8 months 600,000 Acquisition of fixed assets 12 months 100,000 General and administrative expenses 12 months 75,000 --------- TOTAL 1,225,000 ========= We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need 18 <PAGE> to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavours or opportunities, which could significantly and materially restrict our business operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock. INFLATION Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor the price change in travel industry and continually maintain effective cost control in operations. OFF BALANCE SHEET ARRANGEMENTS We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities. CRITICAL ACCOUNTING POLICIES The 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, Development Stage Entities ("ASC-915"). Since its formation, the Company has not yet realized any revenues from its planned operations. Cash and Cash Equivalents The Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. 19 <PAGE> 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 The fair value of the Company's financial instruments, consisting of cash and accounts payable and accrued liabilities, is equal to fair value due to their short-term to maturity. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. 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 December 31, 2011, 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. As the Company has never granted any stock options the adoption of this accounting policy had no effect on its financial position or results of operations. Recent Accounting Pronouncements The Company has evaluated all of the recent accounting pronouncements through the filing date of these financial statements and feels that none of them will have a material effect on the Company's interim financial statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. ITEM 4. CONTROLS AND PROCEDURES EVALUATION AND DISCLOSURE CONTROLS AND PROCEDURES (A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities 20 <PAGE> Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer, principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure. As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (our principal executive officer, principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. 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. (B) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There were no significant changes in the Company's internal control over financial reporting during the three months ended June 30, 2012. PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are not currently a party to any legal proceedings nor are we aware of any threatened proceedings against us. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES N/A ITEM 5. OTHER INFORMATION None. 21 <PAGE> ITEM 6. EXHIBITS Exhibit Number Description ------ ----------- 31* Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32* Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101** Interactive data files pursuant to Rule 405 of Regulation S-T. ---------- * Filed herewith ** To be provided by amendment 22 <PAGE> SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PSYCHIC FRIENDS NETWORK, INC. Date: August 13, 2012 By: /s/ Marc Lasky ------------------------------------------- Marc Lasky Chief Executive and Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) 23

XOTC:PFNI Quarterly Report 10-Q Filling

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XOTC:PFNI Quarterly Report 10-Q Filing - 6/30/2012
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