☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934   For the quarterly period ended October 31, 2015

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT   For the transition period from N/A to N/A

Nevada		33-1220317
( State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

Large accelerated filer	☐	Accelerated filer	☐
Non–Accelerated filer	☐	Smaller reporting company	☒

Class		Outstanding at December 4, 2015
Common stock, $0.001 par value		216,388,063

 

 

 

				PAGE
PART I - FINANCIAL INFORMATION
Item 1.		Condensed Consolidated Financial Statements (Unaudited)		3
		Condensed Consolidated Balance Sheets		3
		Condensed Consolidated Statements of Operations		4
		Condensed Consolidated Statements of Cash Flows		5
		Notes to Condensed Consolidated Financial Statements		6
Item 2.		Management Discussion & Analysis of Financial Condition and Results of Operations		17
Item 3		Quantitative and Qualitative Disclosures About Market Risk		22
Item 4.		Controls and Procedures		22
PART II - OTHER INFORMATION
Item 1.		Legal Proceedings		23
Item 1A.		Risk Factors		23
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		23
Item 3.		Defaults Upon Senior Securities		24
Item 4.		Mining Safety Disclosures		24
Item 5		Other information		24
Item 6.		Exhibits		24
CERTIFICATIONS

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

 

Item 1.

Financial Statements

 

GAWK INCORPORATED

CONSOLIDATED BALANCE SHEETS

 

		October 31,				January 31,
		2015				2015
		(Unaudited)				(Audited)
ASSETS
Current Assets
Cash		$	36,804			$	255,455
Marketable securities - available for sale			157,500				28,950
Accounts receivable			17,977				10,862
Due from Net D			34,542				-
Deposit - Cipherloc			1,125,000				1,125,000
Deferred financing cost assets			15,917				-
Total Current Assets			1,387,740				1,420,267
Web equipment, net of depreciation of $58,992 and $14,748			117,983				162,227
Intangible assets and proprietary technology, net of amortization $230,559 and $36,749			711,807				404,238
Goodwill			4,865,530				1,310,908
TOTAL ASSETS		$	7,083,060			$	3,297,640
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued liabilities		$	474,974			$	330,384
Note payable			385,000				10,000
Current portion of convertible note payable, net of discount $73,897 and $208,950			1,861,603				1,591,050
Investor payable - common shares			2,504,000				1,154,000
Preferred shares payable			17,500				1,000,000
Due to related parties			262,016				188,854
Derivative liabilities			666,430				-
Total Current Liabilities			6,171,523				4,274,288
Convertible note payable, net of discount $29,166 and $0			4,167				-
TOTAL LIABILITIES			6,175,690				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; 10 and 7  issued and outstanding			-				-
Common stock, $0.001 par value, 650,000,000 shares authorized; 215,638,063  and 161,732,000 issued and outstanding			215,638				161,732
Additional paid in capital			9,354,144				6,176,599
Accumulated other comprehensive income (loss)			-				(442	)
Accumulated deficit			(8,662,413	)			(7,314,538	)
Total Stockholders' Equity (Deficit)			907,370				(976,648	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)		$	7,083,060			$	3,297,640

 

 

 

 

 

 

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 nine months ended October 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).

 

 

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 nine months ended October 31, 2015 of $1,347,875, an accumulated deficit of $8,662,413, cash flows used in operating activities of $319,343 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.

 

NOTE 4 – MARKETABLE SECURIITES

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 October 31, 2015 and recorded a gain on change in fair value of the asset of $128,550. Total available security available for sale at October 31, 2015 is $157,500.

NOTE 5 – LICENSING AGREEMENT / DEPOSIT

 

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 October 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.

NOTE 6 – STOCK PAYABLE

Investor payable - common shares

On May 1, 2015, the Company recorded $1,556,000 as an investor payable which shall be converted to 40,000,000 common shares for acquisition of assets (Note 7).

Preferred Stock Payable

 

On October 30, 2014, the Company recorded $1,000,000 as preferred share payable which shall be converted to 1 Preferred Series C share for acquisition of assets. On April 9, 2015, the Company issued 1 Preferred Series C share (Note 7).

On May 1, 2015, the Company recorded $2,000,000 as preferred share payable which shall be converted to 2 Preferred Series C shares for acquisition of assets. On October 26, 2015, the Company issued 2 Preferred Series C shares (Note 7).

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 at a fair market value of $54,000 on February 17, 2015 in accordance with the settlement agreement.

On February 13, 2015 the Company issued 4,587,156 shares for legal services rendered for $20,183.

 

On March 20, 2015 the Company issued 9,000,000 shares with 3,000,000 shares going to each board member as compensation for serving on the board for a total of $36,900.

On May 23, 2015, the Company issued 2,060,000 shares in converting warrant purchaser shares for a total consideration of $206,000 previously paid as investor payable.

During nine months ended October 31, 2015, an aggregate of 30,558,907 common shares were issued for the conversion of debt, accrued interest and associated fees of $64,030.

NOTE 8 – BUSINESS COMBINATION

April 24, 2015, the Company entered into an asset purchase and sale agreement with Net D Consulting Inc. (Net D) which closed on May 1, 2015.

The fair value of the consideration and the assets acquired is based on the aggregate value of the common stock issued in exchange for the software as shown below:

The acquisition consisted of the purchase of a customer list and all of its business, which are considered to meet the definition of a business in accordance with FASB codification Topic 805, "Business Combinations", As such, the Company accounted for the acquisition as a business combination.

Management determined that the Company was the acquirer in the business combination in accordance with  FASB codification Topic 805, "Business Combinations", based on the following factors: (i) there was a change in control of Net D; (ii) the Company was the entity in the transaction that issued its equity instruments, and in a business combination, the acquirer usually is the entity that issues its equity interests; (iii) the Company's pre-transaction directors retained the largest relative voting rights of the Company post-transaction; (iv) the composition of the Company's current board of directors and management was the result of the appointment by the Company's pre-transaction directors.

The purchase price paid for the Acquisition was $4,056,000 which included $150,000 in cash $350,000 note payable, 2 Preferred Series C shares convertible into $2,000,000 of common stock and 40,000,000 common shares valued at $1,556,000. The following table summarizes the fair value of the consideration paid by the Company and the fair value amounts assigned to the assets acquired on the acquisition date:

 

Revenues of $912,811 and net income of $41,542 since the acquisition date are included in the consolidated statements of operations and comprehensive income (loss) for the nine months ended October 31, 2015.

As of October 31, 2015, cash of $138,250 was paid, note payable of $350,000 was issued, 2 Preferred Series C Shares were issued with fair value of $2,000,000 and 40,000,000 common shares were not issued and still in stock payable of $1,556,000.

NOTE 9 – CONVERTIBLE NOTES PAYABLE

 

The Company had the following convertible notes payable outstanding as of October 31, 2015 and January 31, 2015:

 

		October 31, 2015				January, 31, 2015
Dated – August 22, 2014			1,750,000				1,800,000
Dated – July 31, 2015			65,000				-
Dated - August 12, 2015			33,333				-
Dated - August 18, 2015			38,000				-
Dated - September 29, 2015			27,500				-
Dated - October 7, 2015			26,500				-
Dated - October 26, 2015			28,500				-
Total notes payable		$	1,968,833			$	1,800,000
Less: Discount			(103,063	)			(208,950	)
Total			1,865,770				1,591,050
Less: current portion of convertible notes payable			(1,861,603	)			(1,591,050	)
Long-term convertible notes payable		$	4,167			$	-

The Company transferred $750,000 to Mr. Knudson on the day of settlement, executed a $1.8 million Convertible Promissory Note with a conversion price of $0.10 per share, a Settlement Agreement and amended Mr. Knudson’s Series C Preferred Stock Purchase Agreement to provide that Mr. Knudson can convert his seven (7) Series C Preferred shares into common stock at any time after the date of this Settlement Agreement. The Company has also amended the Certificate of Designation for the Series C Preferred shares to reflect that the shares are convertible on any date after the date of this Settlement Agreement as reflected in the Amendment to the Certificate of Designation. The total value of the legal settlement was $2,550,000.

Mr. Knudson has filed a Stipulation to Dismiss the Lawsuit with prejudice.

 

The Back-End Note may not be prepaid, except that if the Back-End Note is redeemed by the Company within six months of its issuance, all obligations of the Company and the lender under the Back-End Note and the promissory note will be deemed satisfied and such notes shall automatically be deemed cancelled and of no further force or effect. In the event of default, the amount of principal and accrued interest will bear default interest at a rate of 24% per annum, or the highest rate of interest permitted by law, and the note shall become immediately due and payable.

Effective October 7, 2015, the Company evaluated the terms of the conversion features of the convertible debenture in accordance with ASC Topic No. 815 - 40, Derivatives and Hedging - Contracts in Entity's Own Stock and determined it is indexed to the Company's common stock and that the conversion features meet the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability.

The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

Fair Value Assumptions Used in Accounting for Derivative Liabilities.

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.

The aggregate gain on derivatives during the nine months ended October 31, 2015 was $36,268.

NOTE 11 –NOTES PAYABLE

 

		October 31, 2015				January, 31, 2015
Dated – October 30, 2014		$	10,000			$	10,000
Dated – May 1, 2015			350,000				-
Dated – June 3, 2015			25,000				-
Total notes payable		$	385,000			$	10,000

On May 1, 2015, the Company closed an asset purchase and sale agreement with Net D and agreed to pay $500,000 of which $150,000 will be paid in cash and $350,000 with a note payable. The note bears no interest.

 

On June 3, 2015, the Company entered into a Note Agreement in the principal amount of $25,000 with Mr. Knudson. The note bears interest at 15% per annum and is convertible into 287,500 shares of the Company's common stock.

NOTE 12 – RELATED PARTY TRANSACTIONS

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Management’s Discussion and Analysis contains various “forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to, reliance on key customers and competition in its markets, market demand, delayed payments of accounts receivables, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended January 31, 2015, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements.

 

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.  In connection with the Stock Purchase, the company has changed its focus to engage in the business of online distribution of all digital content including but not limited to full length feature films, television series, sports, documentaries, live events via our proprietary content distribution network (CDN).  On October 30, 2014 the Company acquired a company called Webrunner, LLC.  As of October 30, 2014 Webrunner, LLC is a wholly owned subsidiary of the Company. On May 1, 2015 the Company entered into an asset purchase agreement with Net D Consulting, Inc.

 

Gawk is pursuing a three-tiered growth strategy: developing specialized solutions for key vertical markets, targeting cloud services companies for acquisition, and accelerating organic growth. Our continuing effort to deliver advanced cloud solutions to companies with more complex requirements is supported by our cloud solutions platform that allows us to rapidly respond to our customers and potential customers’ needs for customized or enhanced solutions. We also intend to continue to develop vertically oriented solutions to expand our revenue opportunities and further differentiate our service suite. We intend to acquire additional cloud services companies that can further expand our customer base, allow us to introduce additional cloud products and services, and gain scale. Our strategy to organically grow our Business Services revenue includes securing large strategic distribution partners, increasing our direct as well as indirect channel sales efforts, upselling solutions to our existing base and leveraging our management, Board of Directors and shareholder relationship network.

Three Months Ended October 31, 2015, Compared to Three Months Ended October 31, 2014

 

RESULTS OF OPERATIONS

Revenue increased to $526,761 from $105,000 for the three months ended October 31, 2015 and 2014, respectively. We changed management and expanded the 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.

General and administrative expenses increased to $616,247 from $498,716 for the three months ended October 31, 2015 and 2014, respectively.  The increase in general and administrative expense are primarily related to the consulting expenses incurred during the quarter.

Research and development costs decreased to $0 from $79,838 for the three months ended October 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.

Depreciation expense increased to $93,278 from $0 for three months ended October 31, 2015 and 2014, respectively. Our depreciation expenses increased due to our acquisition of Webrunners and the associated equipment thereof.

Nine months Ended October 31, 2015, Compared to Nine months Ended October 31, 2014

RESULTS OF OPERATIONS

Revenue increased to $1,143,422 from $105,000 for the nine months ended October 31, 2015 and 2014, respectively. We changed management and expanded the 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.

 

Research and development costs decreased to $2,500 from $611,980 for the nine months ended October 31, 2014 and 2013, 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 nine months ended October 31, 2015 and 2014, respectively.

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 October 31, 2015 of $8,662,413 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 provided by operating activities were $319,343 and $3,426,144 for the nine months ended October 31, 2015 and 2014, respectively.  The decrease in cash flows provided by operations was primarily attributable to the acquisition of one cloud services business during the past year.

Cash flows from investing activities. Cash used in investing activities were $138,250 and $1,125,000 for the nine months ended October 31, 2015 and 2014, respectively. On May 1, 2015, we closed an asset purchase and sale agreement with Net D Consulting Inc. (Net D). The purchase price paid for the Acquisition was $4,056,000 which included $150,000 in cash $350,000 note payable, 2 Preferred Series C shares convertible into $2,000,000 of common stock and 40,000,000 common shares valued at $1,556,000 and as of October 31, 2015, we paid $138,250 of a part of $150,000 in cash. On June 11, 2014 we entered into a license and subscription agreement with Cloud Medical Doctor Software Corporation (NSCT) ("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 October 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.

Cash flows from financing activities. Cash provided by financing activities were $238,500 and $3,902,554 for the nine months ended October 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 nine months ended October 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 October 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 October 31,2015

 

 

(1)	Filed as an Exhibit on Form S-1 with the SEC on April 6, 2012.
(2)	10-SB/12g filed on February 13, 2008

 

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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