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TPNI > SEC Filings for TPNI > Form 10-K/A on 13-Jan-2014All Recent SEC Filings

Show all filings for PULSE NETWORK, INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-K/A for PULSE NETWORK, INC.


13-Jan-2014

Annual Report


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition for the fiscal year ended March 31, 2013, and March 31, 2012, should be read in conjunction with our financial statements, and the notes to those financial statements that are included elsewhere in this Annual Report on Form 10-K. References in this section to "we," "us," "our" or "The Pulse Network" are to the consolidated business of The Pulse Network. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Form 10-K. We use words such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could," and similar expressions to identify forward-looking statements.

Overview of The Pulse Network

Through our wholly owned subsidiary, The Pulse Network was incorporated on December 24, 2008, in Massachusetts. The business of The Pulse Network was originally developed at Exgenex, Inc., a New York corporation ("Exgenex"), formed in April 2002. Exgenex changed its name to "CrossTech Group, Inc." ("CrossTech New York") in February 2008. On December 24, 2008, The Pulse Network was formed in Massachusetts under the name of "CrossTech Group, Inc.", merged (as the surviving corporation) with CrossTech New York on December 31, 2009, and changed its name to "The Pulse Network Inc." on June 2, 2011. The business of The Pulse Network is now the principal business of the Company.

The Pulse Network provides a service to businesses to create a platform for delivering content, primarily video but also written and curated content, integrated with digital, social media and offline event strategies. The Pulse Network's platform helps digital and event marketers create better engagement and drive leads with the power of content marketing. The Pulse Network's solutions help brands accelerate their social strategy and create engaging content, help event organizers drive audience and engagement, and help public relations companies and professionals reach targeted audiences with The Pulse Network's original content. All The Pulse Network's content is deliverable and consumable online and via popular social and mobile channels, designed to enable brands to engage with prospective consumers.

Critical Accounting Policies and Estimates

The Company's financial statements have been prepared in accordance with U.S. GAAP. In connection with the preparation of the financial statements, the company is required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. It based assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time the consolidated financial statements are prepared. On a regular basis, management reviews accounting policies, assumptions, estimates and judgments to ensure that the financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from assumptions and estimates, and such differences could be material.

Results of operations for 2013 compared to 2012.

Revenues and Cost of Revenues

During 2013 and 2012 the Company generated revenues from 3 primary business segments, being:

Revenues earned from usage of the Pulse Network Platform for management and support of client events or conferences.

Revenues paid by sponsors and attendees for conferences hosted by the Company.

Revenues earned by providing ongoing development and support for client content and digital marketing programs.

In 2011, the Company was also providing social media marketing agency services, which were discontinued during 2012.


Total revenues for The Pulse Network in 2013 resulted in a decrease of 9.6% to $3,757,471, from $4,157,757 in 2012. The decrease is mainly attributed to $399,997 in revenue lost due to canceled programs.

Cost of revenues for 2013 increased by 13.3% to $1,396,421 from $1,231,897 in 2012. The increase for 2013 is mainly attributable to increased cost incurred for venues, accomodations and food in 2013 compared to 2012.

During 2013 the Company had sales to one customer that accounted for approximately 13% of total revenue during 2013. Accounts receivable from three customers accounted for approximately 45% of total accounts receivable at March 31, 2013. Should this single customer decrease its orders or cease to use our services, our revenues and results of operations will be negatively affected.

Selling and Marketing

Selling and Marketing expenses for 2013 decreased by 30.4% to $456,115, this was down from $655,851 for 2012. The decrease in selling and marketing expenses is attributable to a decrease in Company production of online content and programs.

General and Administrative

General and administrative expenses for 2013 increased by 37.5% to $3,127,651, up from the amount $2,274,193 for 2012. The increase in general and administrative expenses is primarily attributable to an increase in marketing and officers payroll which increased $744,000. General and administrative expenses include $127,337 of legal and audit fees for 2013 compared to $49,868 for 2012. The company moved to a cloud based service in 2013 for its servers which added an additional $57,860 in expenses for 2013 General and administrative expenses also have $89,169 of property, plant and equipment depreciation for 2013 compared to $80,381 for 2012.

Net Loss Attributable to the Company

The net loss attributable to the Company for 2013 was $1,280,422 compared to $37,343 for 2012. The net loss was mainly attributable to the transitioning of the business from social media agency services to software based online video development and related corporate marketing along with the cancelation of programs.

Liquidity and Capital Resources

As of March 31, 2013, the Company's total current assets were $356,548 and our total current liabilities were $2,237,539. On March 31, 2013, we had an accumulated deficit of $3,060,522.

For the fiscal year ended March 31, 2013 the Company financed its operations with bank debt totaling $480,000, advances from stockholders of $464,647 and delayed payments to certain vendors as evidenced by the increase in accrued liabilities at March 31, 2013 compared to 2012 of $301,346.

As a result, the Company had negative working capital of $1,880,991 on March 31, 2013 compared with negative working capital of $995,361 on March 31, 2012.

Cash and cash equivalents on March 31, 2013 were $31,670, an increase of $20,943 from March 31, 2012.

Operating activities used cash of $942,784 in the fiscal year ended March 31, 2013 compared to a net increase in cash of $136,467 for the fiscal year ended March 31, 2012.

The company's sole investing activity for March 31, 2013 consisted of purchases of capital equipment of $37,154 which were financed through capital lease arrangements.

The sole investing activity in the comparable period ended March 31, 2012 was the purchase of $53,446 of equipment.


Financing activities provided cash of $963,727 in the period ended 31, 2013, compared to a use of cash totaling $137,517 in the period ended March 31, 2012.

2013 financing activities include $464,647 of primary shareholder advances, a $150,000 secured bank line and $350,000 bank loan.

The shareholder advances are unsecured, bear no interest and are to be repaid out of Company cash flow.

The bank line is secured by a first charge over the Company's assets and guaranteed by the Company's shareholders, bears interest at 4.5% and matures within 12 months from the date of the advance.

The bank loan is secured by a first charge over the Company's assets and guaranteed by the Company's shareholders, bears interest at 5% and matures within 36 months from the date of the advance.

The Company currently operates on a month-to-month cash management basis. Based on current contracts and expected revenues from re-occurring commitments management expects to be able to maintain a reasonable staffing level to sustain the business. If the company were unable to either a) maintain its current client contracts or b) achieve the expected re-occurring revenue, the company would not have sufficient capital to maintain operation beyond 6 months.

We require approximately $1,000,000 in funding to conduct our operations for one year, and we currently have no plan as to who we will raise those funds. Our ability to generate future operating revenues depends in part on whether we can obtain the financing necessary to implement our business plan. We will likely require additional financing through the issuance of debt and/or equity in order to establish profitable operations, and such financing may not be forthcoming. We may not be able to acquire additional financing through credit markets or equity markets. Even if additional financing is available, it may not be available on terms favorable to us. At this time, we have not identified or secured sources of additional financing. Our failure to secure additional financing when it becomes required will have an adverse effect on our ability to remain in business.

Off-Balance Sheet Arrangements

As of March 31, 2013, the Company had no off balance sheet arrangements that have had or that would be expected to be reasonably likely to have a future material effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Outlook

The Company believes that its future success will depend upon its ability to enhance and grow its business. The Company's current anticipated levels of revenues and cash flow are subject to many uncertainties and cannot be assured. In order to have sufficient cash to meet anticipated requirements for the next twelve months, the Company requires additional financing. The inability to generate sufficient cash from operations or to obtain required additional funds could require the Company to curtail its operations. There can be no assurance that acceptable financing to fund ongoing operations can be obtained on suitable terms, if at all. If the Company is unable to obtain the financing necessary to support its operations, it may be unable to continue as a going concern. In that event, the Company may be forced to cease operations.

Prior to our reverse acquisition of The Pulse Network, Inc., a Massachusetts corporation, on March 29, 2013, we were a "shell company" within the meaning of Rule 405, promulgated pursuant to Securities Act, because we had nominal assets and nominal operations. Accordingly, until March 29, 2014, which is one year after the date of the reverse acquisition, the holders of securities purchased in private offerings of our securities we make to investors will not be able to rely on the safe harbor from being deemed an underwriter under SEC Rule 144 in order to resell their securities (assuming (i) we have not been a shell company at any time in the prior 12 months on March 29, 2014, (ii) we have filed all Exchange Act reports required for at least 12 consecutive months, and (iii) one year has elapsed from the time that we file current Form 10-type of information on Form 8-K or other report changing our status from a shell company to an entity that is not a shell company). This will likely make it more difficult for us to attract additional capital through subsequent unregistered offerings because purchasers of securities in such unregistered offerings will not be able to resell their securities in reliance on Rule 144, a safe harbor on which holders of restricted securities usually rely to resell securities.

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