Item 1.

Financial Statements

 

 

		July 31,				January 31,
		2015				2015
		(Unaudited)				(Audited)
ASSETS
Current Assets
Cash		$	44,293			$	255,455
Marketable securities - available for sale			210,000				28,950
Accounts receivable			6,033				10,862
Due from Net D			1,276				-
Deposit - Cipherloc			1,125,000				1,125,000
Total Current Assets			1,386,602				1,420,267
Web equipment, net of depreciation of $44,244 and $14,748			132,731				162,227
Intangible assets and proprietary technology, net of amortization $152,028 and $36,749			790,337				404,238
Goodwill			4,865,530				1,310,908
TOTAL ASSETS		$	7,175,200			$	3,297,640
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued liabilities		$	505,590			$	330,384
Note payable			360,000				10,000
Convertible note payable net of discount $29,850 and $208,950			1,795,150				1,591,050
Investor payable - common shares			2,504,000				1,154,000
Preferred shares payable			2,017,500				1,000,000
Due to related parties			228,854				188,854
Total Current Liabilities			7,411,094				4,274,288
TOTAL LIABILITIES			7,411,094				4,274,288
Stockholders' Equity (Deficit)
A Preferred stock, $0.001 par value, 1,000 shares authorized; 1,000 issued and outstanding			1				1
B Preferred stock, $0.001 par value, 50,000,000 shares authorized; none  issued and outstanding			-				-
C Preferred stock, $0.001 par value, 100 shares authorized; 8 and none  issued and outstanding			0				-
Common stock, $0.001 par value, 650,000,000 shares authorized; 180,079,156  and 161,732,000 issued and outstanding			180,079				161,732
Additional paid in capital			7,480,335				6,176,599
Accumulated other comprehensive income (loss)			-				(442	)
Accumulated deficit			(7,896,309	)			(7,314,538	)
Total Stockholders' Equity (Deficit)			(235,894	)			(976,648	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)		$	7,175,200			$	3,297,640

 

 

 

 

		For the Three Months Ended July 31,								For the Six Months Ended July 31,
		2015				2014				2015				2014
Revenues		$	558,079			$	-			$	616,661			$	-
Cost of revenues			392,629				-				392,629				-
Gross profit			165,450				-				224,032				-
Operating Expenses
General and administration			265,999				1,076,887				570,275				1,275,931
Research and development			2,500				53,407				2,500				532,142
Related party payments			-				16,000				-				401,035
Depreciation and amortization			93,278				-				144,775				-
Total operating expenses			361,777				1,146,294				717,550				2,209,108
Net loss from operations			(196,327	)			(1,146,294	)			(493,518	)			(2,209,108	)
Other income (expense)
Interest income			-				-				3				-
Interest expense			(135,156	)			-				(269,306	)			-
Unrealized gain on marketable securities			75,000				-				181,050				-
Total other income (expense)			(60,156	)			-				(88,253	)			-
Net loss before taxes			(256,483	)			(1,146,294	)			(581,771	)			(2,209,108	)
Net loss		$	(256,483	)		$	(1,146,294	)		$	(581,771	)		$	(2,209,108	)
Other comprehensive income (loss)			442				-				442				-
Comprehensive Loss		$	(256,041	)		$	(1,146,294	)		$	(581,329	)		$	(2,209,108	)
Basic and dilutive loss per share		$	(0.00	)		$	(0.01	)		$	(0.00	)		$	(0.01	)
Weighted average number of
shares outstanding			179,496,982				152,000,000				176,083,946				180,176,796

GAWK INCORPORATED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2015

NOTE 1 - DESCRIPTION OF BUSINESS

We were incorporated in the state of Nevada on January 6, 2011 and our principal business address is 5300 Melrose Avenue, Suite 42, Los Angeles, CA  90038 telephone number 888-754-6190.  We have a January 31 fiscal year end.  Gawk is focused on becoming our business customers' single source for leveraging the increasing power of the cloud, providing essential services that form the foundation for successful migration to, and efficient use of, the cloud. Our cloud computing and Infrastructure as a Service ("IaaS") solutions are designed to provide our customers with a platform on which additional cloud services can be layered.  Complemented by Software as a Service ("SaaS") solutions such as storage, security and business continuity, our advanced cloud offerings allow our customers to experience the increased efficiencies and agility delivered by the cloud. Gawk's cloud-based services are flexible, scalable and rapidly deployed, reducing our customers' cost of ownership while increasing their productivity.

 

NOTE 2 – BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS

The Company prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.  The accompanying interim unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with the instructions to Form 10-Q/A and Article 8 of Regulation S-X. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended July 31, 2015 are not necessarily indicative of the results that may be expected for the year ending January 31, 2016. Notes to the unaudited interim consolidated financial statements that would substantially duplicate the disclosures contained in the audited consolidated financial statements for fiscal year 2015 have been omitted; this report should be read in conjunction with the audited consolidated financial statements and the footnotes thereto for the fiscal year ended January 31, 2015 included within its Form 10-K as filed with the Securities and Exchange Commission.

 

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net revenues and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.

The company pursues opportunities to realize revenues from consulting services. It is the company's policy that revenues and gains will be recognized in accordance with ASC Topic 605-10-25, "Revenue Recognition." Under ASC Topic 605-10-25, revenue earning activities are recognized when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

The Company typically is paid in cash or stock. When paid in stock the Company books the stock as Securities Available For Sale. The Company recognizes the revenue based on the current price per share of the stock received at the date the services are complete and prior to completion, interim measurements are taken at each reporting date. At the time the Company sells or otherwise disposes the shares, the company will record any realized gain or loss on the sale of the stock. After a measurement date has been reached for revenue recognition purposes, interim changes in fair value of the stock are reflected in Other Comprehensive Income (Loss) as an unrealized gain (loss).

 

The Company's financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt.  The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.  

 

The Company adopted ASC Topic 820, Fair Value Measurements ("ASC Topic 820"), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.

 

The three-level hierarchy for fair value measurements is defined as follows:

 

•		Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; liabilities in active markets;
•		Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; or directly or indirectly including inputs in markets that are not considered to be active;
•		Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement

 

The following table summarizes fair value measurements by level at July 31, 2015 and January 31, 2015 for assets measured at fair value on a recurring basis:

No accounting standards or interpretations issued recently are expected to a have a material impact on the Company's financial position, operations or cash flows.

NOTE 3 - GOING CONCERN ISSUES

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has a net loss for the six months ended July 31, 2015 of $581,329, an accumulated deficit of $7,896,309, cash flows used in operating activities of $194,104 and needs additional cash to maintain its operations.

These factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's continued existence is dependent upon management's ability to develop profitable operations, continued contributions from the Company's executive officers to finance its operations and the ability to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of the Company's products and business.

On September 4, 2014 Cloud issued 3,000,000 common shares through a consulting agreement with Gawk, Inc. valued at $105,000 at the trading price of $.035 per share and the common stock issued to Gawk for consulting has been accounted as a marketable securities valued at $105,000.  The services have been earned and completed in accordance with the agreement.

The Company fair valued the marketable security available for sale at July 31, 2015 and recorded a gain on change in fair value of the asset of $181,050. Total available security available for sale at July 31, 2015 is $210,000.

On June 11, 2014 we entered into a license and subscription agreement with Cloud Medical Doctor Software Corporation formerly National Scientific Corporation (NSCT) which changed it’s name to Cipher Loc Corporation and ticker symbol to (CLOK) ("Cloud") for $1,125,000.  The agreement grants to us a non-exclusive encryption license agreement which entitles us to utilize Cloud's encryption software solution within the Customer's business.  We purchased a 48 months encryption licensing agreement to incorporate into our existing web based software. The licensing agreement will protect members of our platform from hackers and other privacy intrusion vehicles.  CipherLoc has various features that will further protect our members and end users of our web developed platform.  As of July 31 2015 the software has not been delivered to the Company, as such the cash paid for the encryption licensing agreement has been accounted as a deposit for $1,125,000.

		May 1, 2015
Fair Value of Consideration:
Cash		$	150,000
Note payable			350,000
40,000,000 common shares			1,556,000
2 Series Preferred C shares convertible into common shares			2,000,000
Total Purchase Price		$	4,056,000
Recognized amounts of identifiable assets acquired:
Assets:
Customer lists		$	501,378
Goodwill			3,554,622
Fair value of total assets		$	4,056,000

		July 31, 2015				January, 31, 2015
Dated – August 22, 2014		$	1,800,000			$	1,800,000
Dated – June 3, 2015			25,000				-
Total notes payable		$	1,825,000			$	1,800,000
Less: Discount			(29,850	)			(208,950	)
Less: current portion of convertible notes payable			1,795,150				1,591,050
Long-term convertible notes payable		$	-			$	-

		July 31, 2015				January, 31, 2015
Dated – October 30, 2014		$	10,000			$	10,000
Dated – May 1, 2015			350,000				-
Total notes payable		$	360,000			$	10,000

General and administrative expenses decreased to $570,275 from $1,275,931 for the six months ended July 31, 2015 and 2014, respectively.  The decrease in general and administrative expenses are primarily related to the change in focus from streaming media and the associated marketing and promotion expenses.

Research and development costs decreased to $2,500 from $532,142 for the six months ended July 31, 2015 and 2014, respectively.  Our research and development decrease is related to the expanded focus beyond streaming media to also include the business of cloud communications, cloud connectivity, cloud computing, and managed cloud-based applications solutions to small, medium and large businesses.

Related party transactions decreased to $0 from $401,035 for the six months ended July 31, 2015 and 2014, respectively. Our related party transactions decreased because of the change in management that occurred on May 12, 2014.

Depreciation expense increased to $144,775 from $0 for the six months ended July 31, 2015 and 2014, respectively. Our depreciation expenses increased due to our acquisition of Webrunners and the associated equipment thereof.

Liquidity and Capital Resources

We expect to incur substantial expenses and generate significant operating losses as we continue to grow our operations, as well as incur expenses related to operating as a public company and compliance with regulatory requirements.

The independent auditor's report on our financial statements contains explanatory language that substantial doubt exists about our ability to continue as a going concern. We have an accumulated deficit at July 31, 2015 of $7,896,309 and need additional cash flows to maintain our operations. We depend on the continued need to raise financing to finance our operations and need to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of our products and business.  We expect our cash needs for the next 12 months to be $750,000 to fund our operations.  The ability of the Company to continue its operations is dependent on the successful execution of management's plans, which include expectations of raiding debt or equity based capital until such time that funds from operations are sufficient to fund working capital requirements.  The Company may need to incur additional liabilities with related parties to sustain the Company's existence. There is no assurance that such funding, if required will be available to us or, if available, will be available upon terms favorable to us.

Cash flows from operations. Our cash used in operating activities were $194,104 and $2,192,343 for the six months ended July 31, 2015 and 2014, respectively.  The decrease in cash flows used in operating activities was primarily attributable to the acquisitions of one cloud services business and one voice over IP business during the past year.

 

 

Cash flows from financing activities. Cash provided by financing activities were $47,500 and $3,849,200 for the six months ended July 31, 2015 and 2014, respectively.

 

These factors raise doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's continued existence is dependent upon management's ability to develop profitable operations, continued contributions from the Company's executive officers to finance its operations and the ability to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of the Company's products and business.

Critical Accounting Policies

 

Substantially all of the Company's accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in its existing accounts receivable. The Company will maintain allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for services. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped in categories by the number of days the balance is past due, and the estimated loss is calculated as a percentage of the total category based upon past history. Account balances are charged against the allowance when it is probable the receivable will not be recovered.

The Company  reviews its fixed assets and certain  identifiable  intangibles for impairment  whenever  events  or  changes  in  circumstances  indicate  that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset.  If such assets are  considered  to be  impaired,  the  impairment  to be recognized  is measured by the amount by which the carrying  amount of the asset exceeds  the fair value of the asset.  Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

We have no off-balance sheet arrangements including arrangements that would affect the liquidity, capital resources, market risk support and credit risk support or other benefits.

WHERE YOU CAN FIND MORE INFORMATION

 

You are advised to read this Quarterly Report on Form 10-Q in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q, Annual Report on Form 10-K, and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC's Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.

ITEM 3.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our business is currently conducted principally in the United States. As a result, our financial results are not affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets. We do not engage in hedging transactions to reduce our exposure to changes in currency exchange rates, although if the geographical scope of our business broadens, we may do so in the future.

We do not hold any derivative instruments and do not engage in any hedging activities.

ITEM 4.          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 Exchange Act reports 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 Chief Executive Officer and Principal Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives. As required by SEC Rule 13a-15(b), our Chief Executive Officer and Principal Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective.

Our Chief Executive Officer and Principal Financial Officer are responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management has used the framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal control over financial reporting. Based on this assessment, our Chief Executive Officer and Principal Financial Officer have concluded that our internal control over financial reporting were not effective as of October 31, 2014. There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

The Company's material weaknesses in financial reporting were:

 

 

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On November 4, 2014 a verified complaint was filed in Clark County, Nevada being case number A-14-709328-C against the Company by an investor known as James McCrink on behalf of the James E. McCrink Trust. The company and James E McCrink Trust reached a settlement on January 19, 2015 and issued 2,700,000 shares of common stock on February 17, 2015 in accordance with the settlement agreement.

ITEM 1A - RISK FACTORS

 

There were no material changes from the risk factors previously disclosed in Part II, Item 1A, "Risk Factors" in our  Annual Report on Form 10-K for the year ended January 31, 2015 during our six months ended July 31, 2015.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS SECURITIES

No activity during this period.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

  

There were no defaults upon senior securities during the period ended July 31, 2015.

N/A

  

ITEM 5.  OTHER INFORMATION

 

There is no information with respect to which information is not otherwise called for by this form.

 

ITEM 6.  EXHIBITS

Exhibits filed herein for July 31, 2015.

 

 

(1)	Filed as an Exhibit on Form S-1 with the SEC on April 6, 2012.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

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