10-K
2012-09-30
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Psychic Friends Network Inc.
0001421981
--09-30
84016334
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<!--egx--><pre>NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS</pre><pre> </pre><pre>Psychic Friends Network, Inc. (OTC:PFNI) hereinafter, ("the Company") was</pre><pre>incorporated in the State of Nevada on May 9, 2007 under the name "Web Wizard,</pre><pre>Inc.". On February 17, 2012 the Company's board passed a motion to change the</pre><pre>corporate name to "Psychic Friends Network, Inc." pursuant to an asset purchase</pre><pre>agreement executed on January 27, 2012. As part of this agreement, all of the</pre><pre>assets of PFN Holdings were purchased. These assets are an integral part of the</pre><pre>Company's business development and ultimately the realization of the Company's</pre><pre>anticipated cash flows.</pre><pre> </pre><pre>The Company is in the business of providing daily horoscopes and live psychic</pre><pre>advice by telephone, internet or our soon to be released mobile application. Our</pre><pre>website is www.psychicfriendsnetwork.com. First time customers will be offered</pre><pre>promotions and are able to choose their psychic friend by specialties. They also</pre><pre>are able to establish an ongoing relationship with their advisor, or they can</pre><pre>choose to try someone new the next time they call. We will strive to stay on the</pre><pre>cutting edge of technology in an effort to deliver our content. Currently this</pre><pre>includes facebook applications, and twitter pages, that reward our customers</pre><pre>with free credits towards readings for sharing, liking or tweeting about PFN. We</pre><pre>will also be giving all of our psychics their own website, to find new</pre><pre>customers.</pre><pre> </pre><pre>BASIS OF PRESENTATION</pre><pre> </pre><pre>The Company is considered to be a development stage company and has not</pre><pre>generated significant revenues from operations. There is no bankruptcy,</pre><pre>receivership, or similar proceedings against our company.</pre><pre> </pre><pre>The accompanying audited financial statements have been prepared in accordance</pre><pre>with accounting principles generally accepted in the United States of America</pre><pre>and the rules and regulations of the United States Securities and Exchange</pre><pre>Commission for annual financial information.</pre><pre> </pre><pre>GOING CONCERN</pre><pre> </pre><pre>The accompanying financial statements have been prepared assuming the Company</pre><pre>will continue as a going concern. Its ability to continue as a going concern is</pre><pre>dependent upon the ability of the Company to obtain the necessary financing to</pre><pre>meet its obligations and pay its liabilities arising from normal business</pre><pre>operations when they come due. Furthermore, as of September 30, 2012, the</pre><pre>Company has accumulated losses from inception (May 9, 2007) of $454,634.</pre><pre>Likewise, net cash of $316,255 has been used in operations during the same</pre><pre>period. The outcome of these matters cannot be predicted with any certainty at</pre><pre>this time and raise substantial doubt that the Company will be able to continue</pre><pre>as a going concern. These financial statements do not include any adjustments to</pre><pre>the amounts and classification of assets and liabilities which may be necessary</pre><pre>should the Company be unable to continue as a going concern. Management believes</pre><pre>that the Company will need to obtain additional funding by borrowing funds from</pre><pre>its directors and officers, or a private placement of common stock through</pre><pre>various sales and public offerings.</pre>
<!--egx--><pre>NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES</pre><pre> </pre><pre>The financial statements of the Company have been prepared in accordance with</pre><pre>generally accepted accounting principles in the United States of America.</pre><pre>Because a precise determination of many assets and liabilities is dependent upon</pre><pre>future events, the preparation of financial statements involves the use of</pre><pre>estimates, which have been made using judgment. Actual results may vary from</pre><pre>these estimates.</pre><pre> </pre><pre>The financial statements have, in management's opinion, been prepared within the</pre><pre>framework of the significant accounting policies summarized below:</pre><pre> </pre><pre>DEVELOPMENT STAGE COMPANY</pre><pre> </pre><pre>The Company is considered to be in the development stage, as defined under</pre><pre>Accounting Codification Standard, (ASC 915) "Development Stage Entities". Since</pre><pre>its formation, the Company has not yet realized significant revenues from its</pre><pre>planned operations.</pre><pre> </pre><pre>RECLASSIFICATIONS</pre><pre> </pre><pre>The Company reclassified $780 and $14,377 in "Transfer and filing fees"; $-0-</pre><pre>and $1,500 in "Travel and entertainment", to "General and administrative"</pre><pre>expenses for the year ended September 30, 2011 and for the period from inception</pre><pre>(May 9, 2007) through September 30, 2011, respectively to conform to the current</pre><pre>presentation. The reclassifications had no effect on the Company's financial</pre><pre>condition, results of operation, or cash flows.</pre><pre> </pre><pre>CASH AND CASH EQUIVALENTS</pre><pre> </pre><pre>The Company considers highly liquid financial instruments purchased with a</pre><pre>maturity of three months or less to be cash equivalents.</pre><pre> </pre><pre>USE OF ESTIMATES</pre><pre> </pre><pre>The preparation of financial statements in conformity with generally accepted</pre><pre>accounting principles requires management to make estimates and assumptions that</pre><pre>affect the reported amounts of assets and liabilities and disclosure of</pre><pre>contingent assets and liabilities at the date of the financial statements and</pre><pre>the reported amounts of revenues and expenses during the reporting period.</pre><pre>Actual results could differ from those estimates.</pre><pre> </pre><pre>FAIR VALUE OF FINANCIAL INSTRUMENTS</pre><pre> </pre><pre>The fair value of the Company's financial instruments, consisting of cash and</pre><pre>accounts payable and accrued liabilities, is equal to fair value due to their</pre><pre>short-term to maturity. Unless otherwise noted, it is management's opinion that</pre><pre>the Company is not exposed to significant interest, currency or credit risks</pre><pre>arising from these financial instruments.</pre><pre> </pre><pre>REVENUE RECOGNITION</pre><pre> </pre><pre>The Company recognizes revenue on an accrual basis. Revenue is generally</pre><pre>realized or realizable and earned when all of the following criteria are met: 1)</pre><pre>persuasive evidence of an arrangement exists between the Company and our</pre><pre>customer(s); 2) services have been rendered; 3) our price to our customer is</pre><pre>fixed or determinable; and 4) collectability is reasonably assured. For the</pre><pre>years ended September 30, 2012 and 2011, the Company recognized no revenues.</pre><pre> </pre><pre>PER SHARE DATA</pre><pre> </pre><pre>In accordance with "ASC 260 - Earnings per Share", the basic loss per common</pre><pre>share is computed by dividing net loss available to common stockholders by the</pre><pre>weighted average number of common shares outstanding. Diluted loss per common</pre><pre>share is computed similar to basic loss per common share except that the</pre><pre>denominator is increased to include the number of additional common shares that</pre><pre>would have been outstanding if the potential common shares had been issued and</pre><pre>if the additional common shares were dilutive. At September 30, 2012 and 2011,</pre><pre>the Company had no stock equivalents that were anti-dilutive and excluded in the</pre><pre>loss per share computation.</pre><pre> </pre><pre>STOCK-BASED COMPENSATION</pre><pre> </pre><pre>The Company records stock based compensation in accordance with the guidance in</pre><pre>ASC Topic 718 which requires the Company to recognize expenses related to the</pre><pre>fair value of its employee stock option awards. This eliminates accounting for</pre><pre>share-based compensation transactions using the intrinsic value and requires</pre><pre>instead that such transactions be accounted for using a fair-value-based method.</pre><pre>Accordingly, the Company recognized expenses of $2,429 and $0 during the years</pre><pre>ended September 30, 2012 and 2011, respectively (see Note 5).</pre><pre> </pre><pre>WEBSITE DEVELOPMENT COSTS</pre><pre> </pre><pre>The Company capitalizes its costs to develop its website and when preliminary</pre><pre>development efforts are successfully completed, management has authorized and</pre><pre>committed project funding, and it is probable that the project will be completed</pre><pre>and the website will be used as intended. Such costs are amortized on a</pre><pre>straight-line basis over the estimated useful life of the related asset, which</pre><pre>approximates three years. Costs incurred prior to meeting these criteria,</pre><pre>together with costs incurred for training and maintenance, are expensed as</pre><pre>incurred. Costs incurred for enhancements that are expected to result in</pre><pre>additional material functionality are capitalized and expensed over the</pre><pre>estimated useful life of the upgrades.</pre><pre> </pre><pre>The Company capitalized website costs of $46,750 during the year ended September</pre><pre>30, 2012. The Company's capitalized website amortization is included in</pre><pre>depreciation and amortization in the Company's consolidated statements of</pre><pre>operations, and totaled $5,503 for the period.</pre><pre> </pre><pre>ADVERTISING COSTS</pre><pre> </pre><pre>Advertising costs are to be expensed as incurred in accordance to Company</pre><pre>policy; for the year ended September 30, 2012, Advertising expenses totaled</pre><pre>$23,778.</pre><pre> </pre><pre>INCOME TAXES</pre><pre> </pre><pre>The Company records income taxes under the asset and liability method, whereby</pre><pre>deferred tax assets and liabilities are recognized based on the future tax</pre><pre>consequences attributable to temporary differences between the financial</pre><pre>statement carrying amounts of existing assets and liabilities and their</pre><pre>respective tax bases, and attributable to operating loss and tax credit carry</pre><pre>forwards. Accounting standards regarding income taxes requires a reduction of</pre><pre>the carrying amounts of deferred tax assets by a valuation allowance, if based</pre><pre>on the information available it is more likely than not that such assets will</pre><pre>not be realized. Accordingly, the need to establish valuation allowances for</pre><pre>deferred tax assets is assessed at each reporting period based on a</pre><pre>more-likely-than-not realization threshold. This assessment considers, among</pre><pre>other matters, the nature, frequency and severity of current and cumulative</pre><pre>losses, forecasts of future profitability, the duration of statutory carry</pre><pre>forward periods, the Company's experience with operating loss and tax credit</pre><pre>carry forwards not expiring unused, and tax planning alternatives. As of</pre><pre>September 30, 2012 and 2011, the Company did not have any amounts recorded</pre><pre>pertaining to uncertain tax positions.</pre><pre> </pre><pre>RECENT ACCOUNTING PRONOUNCEMENTS</pre><pre> </pre><pre>In December 2011, The FASB issued Accounting Standards Update 2011-11,</pre><pre>"Disclosures about Offsetting Assets and Liabilities." This update requires</pre><pre>entities to disclose both gross information and net information about</pre><pre>instruments and transactions eligible for offset in the statement of financial</pre><pre>position and instruments and transactions subject to an agreement similar to a</pre><pre>master netting arrangement. The scope of this update includes derivatives, sale</pre><pre>and repurchase agreements and reverse sale and repurchase agreements and</pre><pre>securities borrowing and lending arrangements. The Company is required to adopt</pre><pre>this update retrospectively for periods beginning after January 1, 2013. The</pre><pre>adoption of this accounting standard update will become effective for the</pre><pre>reporting period beginning January 1, 2013. Management does not anticipate that</pre><pre>adoption will have a material impact on the Company's consolidated financial</pre><pre>position, results of operations or cash flows.</pre><pre> </pre><pre>Other recent accounting pronouncements issued by the FASB (including its</pre><pre>Emerging Issues Task Force), the American Institute of Certified Public</pre><pre>Accountants, and the SEC did not, or are not believed by management to, have a</pre><pre>material impact on the Company's present or future financial position, results</pre><pre>of operations or cash flows.</pre>
<!--egx--><pre>NOTE 3 - INTANGIBLE ASSET</pre><pre> </pre><pre>The following table presents the detail of other intangible assets for the</pre><pre>periods presented:</pre><pre> </pre><pre> Gross</pre><pre> Carrying Accumulated Net Carrying Weighted-Average</pre><pre> Amount Amortization Amount Remaining Life</pre><pre> ------ ------------ ------ --------------</pre><pre>September 30, 2012:</pre><pre> Capitalized website</pre><pre> development costs $46,750 $(5,503) $41,247 2.74 years</pre><pre> ------- ------- ------- ----------</pre><pre>Total $46,750 $(5,503) $41,247 2.74 years</pre><pre> ======= ======= ======= ==========</pre>
<!--egx--><pre>NOTE 4 - RELATED PARTY TRANSACTIONS</pre><pre> </pre><pre>During the year ended September 30, 2009, the Company entered into a verbal loan</pre><pre>agreement with an officer of the Company, whereby the Company borrowed amounts</pre><pre>from time to time which are interest-free, payable on demand. During the year</pre><pre>ended September 30, 2012, advances of $12,723 were made pursuant to this</pre><pre>agreement. According to the terms of the "Asset Purchase Agreement" with PFN</pre><pre>Holdings, all related party advances were fully repaid as of September 30, 2012,</pre><pre>leaving a balance of $0 and $0 as of September 30, 2012 and 2011, respectively.</pre><pre> </pre>
<!--egx--><pre>NOTE 5 - STOCKHOLDERS' EQUITY</pre><pre> </pre><pre>As summarized in Note 1, on January 27, 2012, our board of directors approved to</pre><pre>effect a name change from Web Wizard, Inc. to Psychic Friends Network Inc. In</pre><pre>addition to the name change, our board of directors approved a ten (10) new for</pre><pre>one (1) old forward stock split of our authorized and issued and outstanding</pre><pre>shares of common stock. Upon effect of the forward stock split, our authorized</pre><pre>capital was increased from 75,000,000 to 750,000,000 shares of common stock and</pre><pre>correspondingly, our issued and outstanding shares of common stock was increased</pre><pre>from 8,225,000 to 82,250,000 shares of common stock as of September 30, 2011,</pre><pre>all with a par value of $0.001.</pre><pre> </pre><pre>COMMON STOCK ISSUED</pre><pre> </pre><pre>In June 2007, the Company issued 74,000,000 post-split shares of common stock at</pre><pre>a price of $0.001 per share, for total proceeds of $7,400.</pre><pre> </pre><pre>In July 2007, the Company issued 8,250,000 post-split shares of common stock at</pre><pre>a price of $0.001 per share, for total proceeds of $16,500.</pre><pre> </pre><pre>In February 2012, the Company issued 40,000 post-split shares of common stock at</pre><pre>a price of $0.75 per share, for total proceeds of $30,000.</pre><pre> </pre><pre>In January 2012, the Company authorized the issuance of 6,667 post-split shares</pre><pre>of common stock at a price of $0.75 per share, for total proceeds of $5,000.</pre><pre> </pre><pre>In January 2012, the Company authorized the issuance of 326,667 post-split</pre><pre>shares of common stock at a price of $0.75 per share, for total proceeds of</pre><pre>$245,000.</pre><pre> </pre><pre>In January 2012, the Company issued common post-split shares previously payable</pre><pre>of 600,000 at a price of $0.09667 per share as described in detail below.</pre><pre> </pre><pre>In April 2012, the Company authorized the issuance of 100,000 post-split shares</pre><pre>of common stock at a price of $0.75 per share, for consulting services valued at</pre><pre>$75,000.</pre><pre> </pre><pre>In April 2012, the Company authorized the issuance of 333,333 post-split shares</pre><pre>of common stock at a price of $0.75 per share, for total proceeds of $250,000.</pre><pre> </pre><pre>In July 2012, the Company authorized the issuance of 25,000 post-split shares of</pre><pre>common stock at a price of $0.75 per share, for consulting services valued at</pre><pre>$18,750.</pre><pre> </pre><pre>In July 2012, the Company received cash of $251,000 for 334,667 post-split</pre><pre>common shares issued at a price of $0.75 per share pursuant to a financing</pre><pre>agreement.</pre><pre> </pre><pre>ASSET PURCHASE AGREEMENT</pre><pre> </pre><pre>Pursuant to the "Asset Purchase Agreement" (Note 1), on January 27, 2012 the</pre><pre>Company issued 50,600,000 post-split shares of common stock for the purchase of</pre><pre>intangible assets with a fair value of $-0- from PFN Holdings. In connection</pre><pre>with the issuance of stock, the majority shareholder of the Company agreed to</pre><pre>forgive $58,403 in related party advances and cancel 50,000,000 post-split</pre><pre>shares of common stock held by the shareholder. The value of the liabilities</pre><pre>assumed was reduced to $58,003 through the assumption of $400 of liabilities of</pre><pre>PFN Holdings by the Company. The Company has presented the common stock issued</pre><pre>in this transaction on a net basis on the statement of stockholders' deficit.</pre><pre> </pre><pre>As the assets purchased had a fair value of $-0- on the date of the transaction,</pre><pre>the value of the shares issued was based on the net value of the liabilities</pre><pre>extinguished of $58,003, which was recorded as additional paid-in capital due to</pre><pre>the fact that the liabilities were owed to a related party.</pre><pre> </pre><pre>OPTIONS AND WARRANTS</pre><pre> </pre><pre>During July 2012, the Company's shareholders approved its 2012 Stock Option Plan</pre><pre>("the Plan"). Under the Plan, the Company may issue up to 8,250,000 shares at</pre><pre>its discretion. On September 17, 2012, the Company granted 200,000 stock options</pre><pre>to a director of the Company which shall vest on September 17, 2013. The options</pre><pre>expire ten (10) years following the vesting date and carry a strike price of</pre><pre>$0.35</pre><pre> </pre><pre>These options were valued using the Black-Scholes model and the following</pre><pre>inputs: 1 year vesting term, 10 year life, volatility of 139.6%, interest rate</pre><pre>of 1.85%, and 0% forfeiture rate. The resulting value was $0.34 per option for a</pre><pre>total value of $68,259. Accordingly, during the years ended September 30, 2012</pre><pre>and 2011, the Company recognized expense of $2,429 and $0, respectively, for</pre><pre>options granted during the years pursuant to ASC Topic 718. Unrecognized stock</pre><pre>option compensation expense of $65,830 at September 30, 2012 will be recognized</pre><pre>during the year ended September 30, 2013.</pre><pre> </pre><pre>A summary of the status of the options granted at September 30, 2012 and 2011and</pre><pre>changes during the years then ended is presented below:</pre><pre> </pre><pre> </pre><pre> 2012 2011</pre><pre> ------------------ -----------------</pre><pre> Weighted Weighted</pre><pre> Average Average</pre><pre> Exercise Exercise</pre><pre> Shares Price Shares Price</pre><pre> ------ ----- ------ -----</pre><pre> </pre><pre>Outstanding at beginning of period -- $ -- -- $ --</pre><pre> Granted 200,000 0.35 --</pre><pre> Exercised -- -- --</pre><pre> Expired or canceled -- -- --</pre><pre> </pre><pre>Outstanding at end of period 200,000 $0.35 -- $ --</pre><pre> ------- ----- ------ ------</pre><pre> </pre><pre>Exercisable -- $ -- -- $ --</pre><pre> ======= ===== ====== ======</pre><pre> </pre><pre>The options outstanding at September 30, 2012 and 2011 have a weighted average</pre><pre>exercise price of $0.35 per share and have a remaining useful life of 9.97</pre><pre>years.</pre>
<!--egx--><pre>NOTE 6 - INCOME TAXES</pre><pre> </pre><pre>The Company provides for income taxes under FASB ASC 740, Accounting for Income</pre><pre>Taxes. FASB ASC 740 requires the use of an asset and liability approach in</pre><pre>accounting for income taxes. Deferred tax assets and liabilities are recorded</pre><pre>based on the differences between the financial statement and tax bases of assets</pre><pre>and liabilities.</pre><pre> </pre><pre>FASB ASC 740 requires the reduction of deferred tax assets by a valuation</pre><pre>allowance, if, based on the weight of available evidence, it is more likely than</pre><pre>not that some or all of the deferred tax assets will not be realized. In the</pre><pre>Company's opinion, it is uncertain whether they will generate sufficient taxable</pre><pre>income in the future to fully utilize the net deferred tax asset. Accordingly, a</pre><pre>valuation allowance equal to the deferred tax asset has been recorded. The total</pre><pre>deferred tax asset is $90,946 which is calculated by multiplying a 34% estimated</pre><pre>tax rate by the cumulative net operating loss (NOL) adjusted for the following</pre><pre>items:</pre><pre> </pre><pre>For the period ended September 30, 2012 2011</pre><pre>---------------------------------- ---------- ----------</pre><pre>Book loss for the year $ (379,562) $ (20,452)</pre><pre>Adjustments:</pre><pre> Meals and entertainment 1,496 --</pre><pre> Stock based compensation 93,750 --</pre><pre> Unpaid payroll taxes 16,829 --</pre><pre> ---------- ----------</pre><pre>Tax loss for the year (265,058) (20,452)</pre><pre>Estimated effective tax rate 34% 34%</pre><pre> ---------- ----------</pre><pre>Deferred tax asset $ (90,946) $ (6,954)</pre><pre> ========== ==========</pre><pre> </pre><pre>The total valuation allowance is $90,946. Details for the last two periods are</pre><pre>as follows:</pre><pre> </pre><pre>For the period ended September 30, 2012 2011</pre><pre>---------------------------------- ---------- ----------</pre><pre> </pre><pre>Deferred tax asset $ 90,946 $ 6,954</pre><pre>Valuation allowance (90,946) (6,954)</pre><pre> ---------- ----------</pre><pre>Net deferred tax asset -- --</pre><pre> ---------- ----------</pre><pre>Income tax expense $ -- $ --</pre><pre> ========== ==========</pre><pre> </pre><pre>Below is a chart showing the estimated corporate federal cumulative net</pre><pre>operating loss (NOL) carry forward of $342,559 and the years in which it will</pre><pre>expire.</pre><pre> </pre><pre> Year Amount Expiration</pre><pre> ---- ------ ----------</pre><pre> </pre><pre>2012 $ 267,487 2032</pre><pre>2011 $ 20,452 2031</pre><pre>Prior to 2011 $ 54,620 Prior to 2031</pre><pre> </pre>
<!--egx--><pre>NOTE 7 - SUBSEQUENT EVENTS</pre><pre> </pre><pre>The Company has evaluated events subsequent to the balance sheet date through</pre><pre>the issuance date of these financial statements in accordance with FASB ASC 855</pre><pre>and has determined there are no such events that would require adjustment to, or</pre><pre>disclosure in, the financial statements</pre>
<!--egx--><pre>BASIS OF PRESENTATION</pre><pre> </pre><pre>The Company is considered to be a development stage company and has not</pre><pre>generated significant revenues from operations. There is no bankruptcy,</pre><pre>receivership, or similar proceedings against our company.</pre><pre> </pre><pre>The accompanying audited financial statements have been prepared in accordance</pre><pre>with accounting principles generally accepted in the United States of America</pre><pre>and the rules and regulations of the United States Securities and Exchange</pre><pre>Commission for annual financial information.</pre>
<!--egx--><pre>GOING CONCERN</pre><pre> </pre><pre>The accompanying financial statements have been prepared assuming the Company</pre><pre>will continue as a going concern. Its ability to continue as a going concern is</pre><pre>dependent upon the ability of the Company to obtain the necessary financing to</pre><pre>meet its obligations and pay its liabilities arising from normal business</pre><pre>operations when they come due. Furthermore, as of September 30, 2012, the</pre><pre>Company has accumulated losses from inception (May 9, 2007) of $454,634.</pre><pre>Likewise, net cash of $316,255 has been used in operations during the same</pre><pre>period. The outcome of these matters cannot be predicted with any certainty at</pre><pre>this time and raise substantial doubt that the Company will be able to continue</pre><pre>as a going concern. These financial statements do not include any adjustments to</pre><pre>the amounts and classification of assets and liabilities which may be necessary</pre><pre>should the Company be unable to continue as a going concern. Management believes</pre><pre>that the Company will need to obtain additional funding by borrowing funds from</pre><pre>its directors and officers, or a private placement of common stock through</pre><pre>various sales and public offerings.</pre>
<!--egx--><pre>DEVELOPMENT STAGE COMPANY</pre><pre> </pre><pre>The Company is considered to be in the development stage, as defined under</pre><pre>Accounting Codification Standard, (ASC 915) "Development Stage Entities". Since</pre><pre>its formation, the Company has not yet realized significant revenues from its</pre><pre>planned operations.</pre>
<!--egx--><pre>RECLASSIFICATIONS</pre><pre> </pre><pre>The Company reclassified $780 and $14,377 in "Transfer and filing fees"; $-0-</pre><pre>and $1,500 in "Travel and entertainment", to "General and administrative"</pre><pre>expenses for the year ended September 30, 2011 and for the period from inception</pre><pre>(May 9, 2007) through September 30, 2011, respectively to conform to the current</pre><pre>presentation. The reclassifications had no effect on the Company's financial</pre>
<!--egx--><pre>CASH AND CASH EQUIVALENTS</pre><pre> </pre><pre>The Company considers highly liquid financial instruments purchased with a</pre><pre>maturity of three months or less to be cash equivalents.</pre>
<!--egx--><pre>USE OF ESTIMATES</pre><pre> </pre><pre>The preparation of financial statements in conformity with generally accepted</pre><pre>accounting principles requires management to make estimates and assumptions that</pre><pre>affect the reported amounts of assets and liabilities and disclosure of</pre><pre>contingent assets and liabilities at the date of the financial statements and</pre><pre>the reported amounts of revenues and expenses during the reporting period.</pre><pre>Actual results could differ from those estimates.</pre>
<!--egx--><pre>FAIR VALUE OF FINANCIAL INSTRUMENTS</pre><pre> </pre><pre>The fair value of the Company's financial instruments, consisting of cash and</pre><pre>accounts payable and accrued liabilities, is equal to fair value due to their</pre><pre>short-term to maturity. Unless otherwise noted, it is management's opinion that</pre><pre>the Company is not exposed to significant interest, currency or credit risks</pre><pre>arising from these financial instruments.</pre>
<!--egx--><pre>REVENUE RECOGNITION</pre><pre> </pre><pre>The Company recognizes revenue on an accrual basis. Revenue is generally</pre><pre>realized or realizable and earned when all of the following criteria are met: 1)</pre><pre>persuasive evidence of an arrangement exists between the Company and our</pre><pre>customer(s); 2) services have been rendered; 3) our price to our customer is</pre><pre>fixed or determinable; and 4) collectability is reasonably assured. For the</pre><pre>years ended September 30, 2012 and 2011, the Company recognized no revenues.</pre>
<!--egx--><pre>PER SHARE DATA</pre><pre> </pre><pre>In accordance with "ASC 260 - Earnings per Share", the basic loss per common</pre><pre>share is computed by dividing net loss available to common stockholders by the</pre><pre>weighted average number of common shares outstanding. Diluted loss per common</pre><pre>share is computed similar to basic loss per common share except that the</pre><pre>denominator is increased to include the number of additional common shares that</pre><pre>would have been outstanding if the potential common shares had been issued and</pre><pre>if the additional common shares were dilutive. At September 30, 2012 and 2011,</pre><pre>the Company had no stock equivalents that were anti-dilutive and excluded in the</pre><pre>loss per share computation.</pre>
<!--egx--><pre>STOCK-BASED COMPENSATION</pre><pre> </pre><pre>The Company records stock based compensation in accordance with the guidance in</pre><pre>ASC Topic 718 which requires the Company to recognize expenses related to the</pre><pre>fair value of its employee stock option awards. This eliminates accounting for</pre><pre>share-based compensation transactions using the intrinsic value and requires</pre><pre>instead that such transactions be accounted for using a fair-value-based method.</pre><pre>Accordingly, the Company recognized expenses of $2,429 and $0 during the years</pre><pre>ended September 30, 2012 and 2011, respectively (see Note 5).</pre>
<!--egx--><pre>WEBSITE DEVELOPMENT COSTS</pre><pre> </pre><pre>The Company capitalizes its costs to develop its website and when preliminary</pre><pre>development efforts are successfully completed, management has authorized and</pre><pre>committed project funding, and it is probable that the project will be completed</pre><pre>and the website will be used as intended. Such costs are amortized on a</pre><pre>straight-line basis over the estimated useful life of the related asset, which</pre><pre>approximates three years. Costs incurred prior to meeting these criteria,</pre><pre>together with costs incurred for training and maintenance, are expensed as</pre><pre>incurred. Costs incurred for enhancements that are expected to result in</pre><pre>additional material functionality are capitalized and expensed over the</pre><pre>estimated useful life of the upgrades.</pre><pre> </pre><pre>The Company capitalized website costs of $46,750 during the year ended September</pre><pre>30, 2012. The Company's capitalized website amortization is included in</pre><pre>depreciation and amortization in the Company's consolidated statements of</pre><pre>operations, and totaled $5,503 for the period.</pre>
<!--egx--><pre>ADVERTISING COSTS</pre><pre> </pre><pre>Advertising costs are to be expensed as incurred in accordance to Company</pre><pre>policy; for the year ended September 30, 2012, Advertising expenses totaled</pre><pre>$23,778.</pre>
<!--egx--><pre>INCOME TAXES</pre><pre> </pre><pre>The Company records income taxes under the asset and liability method, whereby</pre><pre>deferred tax assets and liabilities are recognized based on the future tax</pre><pre>consequences attributable to temporary differences between the financial</pre><pre>statement carrying amounts of existing assets and liabilities and their</pre><pre>respective tax bases, and attributable to operating loss and tax credit carry</pre><pre>forwards. Accounting standards regarding income taxes requires a reduction of</pre><pre>the carrying amounts of deferred tax assets by a valuation allowance, if based</pre><pre>on the information available it is more likely than not that such assets will</pre><pre>not be realized. Accordingly, the need to establish valuation allowances for</pre><pre>deferred tax assets is assessed at each reporting period based on a</pre><pre>more-likely-than-not realization threshold. This assessment considers, among</pre><pre>other matters, the nature, frequency and severity of current and cumulative</pre><pre>losses, forecasts of future profitability, the duration of statutory carry</pre><pre>forward periods, the Company's experience with operating loss and tax credit</pre><pre>carry forwards not expiring unused, and tax planning alternatives. As of</pre><pre>September 30, 2012 and 2011, the Company did not have any amounts recorded</pre><pre>pertaining to uncertain tax positions.</pre>
<!--egx--><pre>RECENT ACCOUNTING PRONOUNCEMENTS</pre><pre> </pre><pre>In December 2011, The FASB issued Accounting Standards Update 2011-11,</pre><pre>"Disclosures about Offsetting Assets and Liabilities." This update requires</pre><pre>entities to disclose both gross information and net information about</pre><pre>instruments and transactions eligible for offset in the statement of financial</pre><pre>position and instruments and transactions subject to an agreement similar to a</pre><pre>master netting arrangement. The scope of this update includes derivatives, sale</pre><pre>and repurchase agreements and reverse sale and repurchase agreements and</pre><pre>securities borrowing and lending arrangements. The Company is required to adopt</pre><pre>this update retrospectively for periods beginning after January 1, 2013. The</pre><pre>adoption of this accounting standard update will become effective for the</pre><pre>reporting period beginning January 1, 2013. Management does not anticipate that</pre><pre>adoption will have a material impact on the Company's consolidated financial</pre><pre>position, results of operations or cash flows.</pre><pre> </pre><pre>Other recent accounting pronouncements issued by the FASB (including its</pre><pre>Emerging Issues Task Force), the American Institute of Certified Public</pre><pre>Accountants, and the SEC did not, or are not believed by management to, have a</pre><pre>material impact on the Company's present or future financial position, results</pre><pre>of operations or cash flows.</pre>
<!--egx--><pre>The following table presents the detail of other intangible assets for the</pre><pre>periods presented:</pre><pre> </pre><pre> Gross</pre><pre> Carrying Accumulated Net Carrying Weighted-Average</pre><pre> Amount Amortization Amount Remaining Life</pre><pre> ------ ------------ ------ --------------</pre><pre>September 30, 2012:</pre><pre> Capitalized website</pre><pre> development costs $46,750 $(5,503) $41,247 2.74 years</pre><pre> ------- ------- ------- ----------</pre><pre>Total $46,750 $(5,503) $41,247 2.74 years</pre><pre> ======= ======= ======= ==========</pre>
<!--egx--><pre>A summary of the status of the options granted at September 30, 2012 and 2011and</pre><pre>changes during the years then ended is presented below:</pre><pre> </pre><pre> </pre><pre> 2012 2011</pre><pre> ------------------ -----------------</pre><pre> Weighted Weighted</pre><pre> Average Average</pre><pre> Exercise Exercise</pre><pre> Shares Price Shares Price</pre><pre> ------ ----- ------ -----</pre><pre> </pre><pre>Outstanding at beginning of period -- $ -- -- $ --</pre><pre> Granted 200,000 0.35 --</pre><pre> Exercised -- -- --</pre><pre> Expired or canceled -- -- --</pre><pre> </pre><pre>Outstanding at end of period 200,000 $0.35 -- $ --</pre><pre> ------- ----- ------ ------</pre><pre> </pre><pre>Exercisable -- $ -- -- $ --</pre><pre> ======= ===== ====== ======</pre><pre> </pre>
<!--egx--><pre>For the period ended September 30, 2012 2011</pre><pre>---------------------------------- ---------- ----------</pre><pre>Book loss for the year $ (379,562) $ (20,452)</pre><pre>Adjustments:</pre><pre> Meals and entertainment 1,496 --</pre><pre> Stock based compensation 93,750 --</pre><pre> Unpaid payroll taxes 16,829 --</pre><pre> ---------- ----------</pre><pre>Tax loss for the year (265,058) (20,452)</pre><pre>Estimated effective tax rate 34% 34%</pre><pre> ---------- ----------</pre><pre>Deferred tax asset $ (90,946) $ (6,954)</pre><pre> ========== ==========</pre>
<!--egx--><pre>For the period ended September 30, 2012 2011</pre><pre>---------------------------------- ---------- ----------</pre><pre> </pre><pre>Deferred tax asset $ 90,946 $ 6,954</pre><pre>Valuation allowance (90,946) (6,954)</pre><pre> ---------- ----------</pre><pre>Net deferred tax asset -- --</pre><pre> ---------- ----------</pre><pre>Income tax expense $ -- $ --</pre><pre> ========== ==========</pre>
<!--egx--><pre> Year Amount Expiration</pre><pre> ---- ------ ----------</pre><pre> </pre><pre>2012 $ 267,487 2032</pre><pre>2011 $ 20,452 2031</pre><pre>Prior to 2011 $ 54,620 Prior to 2031</pre>
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