News Column

GAWK INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

September 3, 2014

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, 2014, 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.

Overview



We were incorporated in the state of Nevada on January 6, 2011 and our principal business address 5300 Melrose Avenue, Suite 42, Las Angeles, CA 90038. 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).

The Future of Gawk



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 and 3,000,000 common shares of Cloud through a consulting agreement with Gawk, Inc. 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.

-12-



CipherLoc™ is the first truly Polymorphic Cipher Engine that can be used in commercial, security sensitive applications and is far more secure than any cipher by itself. This PKPA Engine eliminates replay attacks because the cipher morphs quickly over time. It also rejects data access and injection, false commands, and data alteration. All such methods are keys to cyber intrusion, spoofing, and electronic attacks. CipherLoc™ is one facet of a layered defense in depth protection plan for any organization. Cost effective and easy to use, the CipherLoc™ Polymorphic Cipher Engine provides an electronic gate that restricts access to vital assets, production facilities, and distribution systems that comprise the backbone of today's electronics based organizations.

A polymorphic cipher has the ability to change an encryption to another method of encryption or key on the fly and is more commonly known as a "mutating" cipher. Polymorphic ciphers are a revolutionary idea based on the information content in a message rather than the difficulty of the key. Using advanced set theory and information theory, this encryption method does not rely exclusively on large keys and complicated permutation/obscuring techniques. This makes the algorithm faster, thus, allowing cipher changes to occur VERY quickly, and requires less memory than other encryptions. Polymorphic changes take place at a rate no slower than the effective "unicity distance" (that certain amount of information needed in order to decrypt an encrypted message) of the cipher, more frequently than enough information can be collected to break the code. Most other ciphers are easily broken as hardware gets faster because it is easier to check all possible keys in the cipher key space. However, if a polymorphic cipher is implemented properly, the speed of the encryption will increase as the hardware gets faster. Thus, unlike other ciphers, this type of software becomes safer as computers get faster.

Strategic Alliances



On May 29, 2014 the Company entered into a consulting agreement with BCMG Entertainment, Inc. for $100,000 to provide services for the procurement of content from movies, television series, music videos, shorts, animated films, live sporting events, and other Company business models.

On June 9, 2014 the company entered into a consulting agreement with Kamrol Imperial Corporation for $450,000. This agreement will assist managementin developing a practical and effective strategic marketing and social media planning program, company branding, assessment of current technology and develop a technology roadmap, provide merger and acquisition assistance, and management consulting services.

On June 10, 2014 the Company entered into a consulting agreement with BCMG Entertainment, Inc. for $125,000 to provide services for the procurement of content from movies, television series, music videos, shorts, animated films, live sporting events, and other Company business models.

Three Months Ended April 30, 2014, Compared to Three Months Ended April 30, 2013

RESULTS OF OPERATIONS



Revenue decreased to $0.00 from $1,572 for the three months ended April 30, 2014 and 2013, respectively. We changed management and changed the focus to a software and content development Company.

General and administrative expenses increased to $199,074 from $35,824 for the three months ended April 30, 2014 and 2013, respectively. The increase in general and administrative expenses are primarily related to the salaries of management of $60,000, legal expenses of $23,500, consulting of $38,553, and accounting expenses of $35,035.

-13-



Research and development costs increased to $478,735 from $0.00 for the three months ended April 30, 2014 and 2013, respectively. Our research and development increase is related to updates to our software and development of our software platform.

Related party transactions increased to $385,035 from $0.00 for the three months ended April 30, 2014 and 2013, respectively. Our related party transactions increased because of funds that prior managed disbursed to themselves for legal of $102,115, consulting fees of $177,215, and $105,705 to the prior CEO and COO.

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 April 30, 2014 of $2,581,751 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 $450,000 to fund our operations and further $350,000 to development of our website platform. 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 ($1,035,631) and ($31,016) for the three months ended April 30, 2014 and 2013, respectively. The increase in cash flows provided by operations was primarily attributable to the changes in operating assets and liabilities.

Cash flows from financing activities. Cash provided by financing activities were $3,849,200 and $0.00 for the three months ended April 30, 2014 and 2013, respectively. We received cash from sales of our investment payable of common stock of $699,200 proceeds from Series C Preferred Stock of $3,300,000, and the repayment of investors of $150,000 for the three months ended April 30, 2014 and 2013, 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



Accounts Receivable and Allowance for Uncollectible Accounts

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.

-14- Long-lived Assets



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'sPublic 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.

-15-


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Edgar Glimpses


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters