UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2013
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission file number: 333-176820
| EYES ON THE GO, INC. |
| (Exact name of registrant as specified in its charter) |
| | Delaware | | 26-2712208 | |
| | (State or other jurisdiction of incorporation or organization) | | (IRS Employee Identification No.) | |
| | 40 Fulton Street, 24th Floor, New York, NY 100389 | |
| | (Address of principal executive offices) (Zip Code) | |
Registrant's telephone number, including area code: (908) 229-4933
Securities Registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Name of each exchange on which registered |
| None | None |
Securities Registered pursuant to Section 12(g) of the Exchange Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o |
| Non-accelerated filer | o | Smaller reporting company | þ |
| (Do not check if a smaller reporting company) | | | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
As of June 28, 2013, the last business day of our most recently completed 2nd fiscal quarter, the aggregate market value of our Common Stock (our only voting or non-voting equity) held by non-affiliates, computed by reference to the price at which our Common Stock was last sold during such quarter, was $382,475. There were approximately 478,094,041 shares of our Common Stock held by non-affiliates on that date. This valuation is based upon the last sale price of our Common Stock on June 28, 2013 (the last day on which our Common Stock was traded during such quarter), as quoted by OTC Markets Inc., on that date ($.0008).
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. The number of shares outstanding of the registrant's sole class of common stock as of April 4, 2014 was 2,517,366,758 (see Accountants’ Notes to Consolidated Financial Statements, Item 8 Subsequent Events)
(DOCUMENTS INCORPORATED BY REFERENCE)
None
EYES ON THE GO, INC.
FORM 10-K
TABLE OF CONTENTS
| | | Page |
| | PART I | |
| ITEM 1. | BUSINESS | 4 |
| ITEM 1A. | RISK FACTORS | 12 |
| ITEM 1B. | UNRESOLVED STAFF COMMENTS | 12 |
| ITEM 2. | PROPERTIES | 12 |
| ITEM 3. | LEGAL PROCEEDINGS | 12 |
| ITEM 4. | MINE SAFETY DISCLOSURES | 12 |
| | | |
| | PART II | |
| | | |
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 13 |
| ITEM 6. | SELECTED FINANCIAL DATA | 15 |
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONA ND RESULTS OF OPERATIONS | 15 |
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 21 |
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 21 |
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 22 |
| ITEM 9A. | CONTROLS AND PROCEDURES | 22 |
| ITEM 9B. | OTHER INFORMATION | 23 |
| | | |
| | PART III | |
| | | |
| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE | 23 |
| ITEM 11. | EXECUTIVE COMPENSATION | 24 |
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 25 |
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 26 |
| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES | 28 |
| | | |
| | PART IV | |
| | | |
| ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES | 28 |
| SIGNATURES | 29 |
PART I
This annual report on Form 10-K contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about the Company, us, our future performance, our beliefs and our Management's assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict or assess. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the filing of this Form 10-K, whether as a result of new information, future events, changes in assumptions or otherwise.
Unless the context otherwise requires, throughout this Annual Report on Form 10-K the words “Company,” “we,” “us” and “our” refer to Eyes on the Go, Inc. “EOTG” refers to the corporation that conducted our business prior to the Merger and became our wholly owned subsidiary by virtue of the Merger.
Overview
In January 2012, we introduced a service to provide online streaming video and audio images from bars, performances spaces, restaurants and clubs to consumers via a website called “Gander.tv.” We have developed a proprietary software program that runs on computer platforms at customers’ facilities that streams video images and sound from multiple cameras and microphones or client soundboards and makes them available to consumers on the Gander.tv website. The Company has entered into a hosting agreement for the consolidation and storage of these video and audio images and their presentation to consumers via the Gander.tv website. We began selling this service in January 2012 in anticipation of the completion of the Gander.tv website, and by the end of March 2012 we had installed our first beta site in New York City. Since that time and by December 31, 2013, we had installed a total of 40 venues in the New York Metropolitan area. We launched the Gander.tv web site in beta mode in mid-March 2012 and released from beta mode in the end of November 2012. We began generating revenue in November of 2012. The Company enhanced the software applications during the beta period including offering all eCommerce functions for billing certain services to the public.
The Company started curating content in June of 2013 and began placing video clips on third party web sites. The Company launched a number of web sites to display curated video clips, integrated advertising into its platform and started generating advertising related revenue in August 2013. The Company also began an effort in November 2013 of offering the live streams and curated content to its venue customers where they are embedding the video player and showing the content on their web sites, Facebook pages and third party affiliates.
The company has developed a suite of applications that provide the following functionality to the entertainment venue owner, the performing artists, the promoter and to the consumer.
| ● | Performances are streamed live and while transmitting, also recorded and stored on the hosted servers at Amazon. |
| ● | Recorded segments are stored and are curated by the company’s Program Managers and are available in a library where they can be selected for streaming during off hours, or during times when the venue owner does not want to stream live performances. |
| ● | Broadcasts events are streamed live and recorded as directed by the venue owners on their scheduled times. These events are streamed live and recorded and available for the consumer anytime on the future. |
| ● | A dedicated web page is provided to each venue where the Company highlights the venue name, logo, address, map, description and provides a video player window. All recorded events are also made available as a thumbnail listing under the video window. |
| ● | Broadcast events are made available as pay-per-view, meaning that the Company, the venue and the performer agree on a ticket price, which Gander.tv then makes available to the consumer during the live performance and later as a stored recorded event. The Company performs all of the eCommerce functions and accepts credit cards and PayPal for payment. The Company shares the proceeds on negotiated terms with the venue and the performer. These events can also be offered as Private Events, where the Company provides an access code to the venue and performer for their distribution to select parties for viewing. |
| ● | The artist and venue can choose to add a “tip jar” button to the events page allowing consumers to provide a gratuity to the performer. For not-for-profit venues or specific events, the Company has a “donate now” function where consumers can donate to the specific organization. |
| ● | Live and recorded broadcasts can be shared through certain social media web sites including Facebook. The Company also allows for embedded video on other third party web sites, including those of the venue and the performer. The Company has programmed a “chat” function through Facebook to its web pages featuring these events, where consumers can make comments. |
| ● | The Company offers social media marketing services where it provides graphics, creates special web sites for events, and performs postings, Tweets and other forms of communication to expand the reach to consumers by informing them of upcoming or recorded events. |
We market directly with our own sales force through direct marketing efforts using leads that are generated internally and support the design and manage the implementation, customization and maintenance of our services with our back office customer support staff. We rely on third parties for equipment necessary to render our services including the on-site Controller, cameras and microphones and for installation and on-site maintenance services. The Company has developed certain proprietary software applications as well as modified licensed software. We market primarily to business owners and managers in the entertainment and hospitality industries, as well as to performers and promoters. The address of the Company is 40 Fulton Street, 24th Floor, New York, NY 10038; its telephone number is (888) 666-3597.
Our History
Prior to the Merger
We were incorporated in Delaware on March 5, 2008, for the purpose of acquiring Mutual Exchange International, Inc., a Florida corporation (“Mutual”).
Mutual was incorporated on July 16, 1990, in the State of Florida as All-Pro Marketing, Inc. On March 10, 1998, it changed its name to All-Pro Sports Marketing, Inc. and on June 12, 1998, it again changed its name to Mutual Exchange International, Inc.
On January 2, 2007, the Circuit Court of the Eleventh Circuit in and for Dade County, Florida, appointed a receiver over the business of Mutual (Case No. 06-25824 CA 23) and on January 2, 2007, that court issued an order approving the issuance of 100 million shares of the voting preferred stock of Mutual (the “Voting Preferred Stock”) to Mark Rentschler to compensate him for services theretofore rendered to Mutual. Shortly thereafter, he was elected as Mutual’s president, secretary and sole director.
In 2007 Mark E. Astrom became the controlling stockholder of Mutual through his indirect ownership of the Voting Preferred Stock, which a corporation of which he was the sole stockholder acquired from Mr. Rentschler. Upon the acquisition of the Voting Preferred Stock, Mr. Astrom became Mutual’s President and sole director and remained as such until Mutual was merged with and into the Company in 2008. In 2008, Mr. Astrom acquired 320 million shares of Mutual’s common stock for $36,000.
On March 13, 2008, Mutual merged with and into the Company. In connection with the merger, one share of the common stock of the Company was issued for each 10 shares of Mutual’s common stock and the Voting Preferred Stock was exchanged for 5 million shares of the Company’s Series C Preferred Stock (the “Series C Preferred Stock”). Upon the consummation of this merger, Mr. Astrom became our sole director and president. He remained our president, sole director and controlling stockholder, until, contemporaneously with the merger described below, two additional directors were added to our board of directors, Mr. Astrom ceased to be our president and he reduced his holdings in the Company to 5,000 shares of Common Stock. In November 2009, the Company and Mr. Astrom entered into an employment agreement (the “Employment Agreement”), which terminated effective November 30, 2010, under which 500 million shares of Common Stock paid as compensation for his services were issued at his direction to a corporation of which he was the sole stockholder. For a description of this employment agreement and transactions involving these shares, see “Directors, Executive Officers and Control Persons – Related Party Transactions – Employment Agreement.”
Effective November 4, 2009, we implemented a 1-for-20 reverse split of our common stock and on November 25, 2009, the Series C Preferred Stock was exchanged for 1 share of our Series A Preferred Stock (the “Series A Preferred Stock”), which had 75% of the voting power of the Company. This share of Series A Preferred Stock has been returned to the Company and cancelled (see “Directors, Executive Officers and Control Persons – Related Party Transactions – Exchange Transaction”). For a description of the Series A Preferred Stock and Series C Preferred Stock, see “Description of Securities – Series A Preferred Stock.”
During 2009 and 2010, we took preliminary measures towards establishing a business in the areas of DNA imaging and commercial printing. The printing line of business was to be operated both independently and as a symbiotic component of the DNA imaging business. We established a business plan and took steps towards developing both lines of business, one of which was the acquisition of a plan for the development of the printing line of business from Spaceport, a California business trust (“Spaceport”), in which Mr. Astrom held a controlling interest. In November 2010, after we concluded that we would not be able to establish either line of business, we abandoned the business plan. From that time until May 1, 2011, we conducted no business and were a “shell company,” as that term is defined in Rule 405 under the Securities Act. For further information respecting transactions between Mark E. Astrom and the Company and between Spaceport and the Company, see “Directors, Executive Officers and Control Persons – Related Party Transactions.”
Effective February 2, 2010, we implemented a 1-for-500 reverse stock split (the “Reverse Split”) of our issued and outstanding common stock (with no change to the amount of our authorized common stock or the par value). As a result of the Reverse Split, the number of our issued and outstanding shares of common stock was reduced to 1,960,210. Immediately following the Reverse Split, we issued 499 million shares of Common Stock to Mark E. Astrom, pursuant to the provisions of the Employment Agreement, which required us to protect the shares of common stock that had been issued to under that agreement from reduction by virtue of the Reverse Split. See “Directors, Executive Officers and Control Persons – Related Party Transactions – Employment Agreement.”
The Merger
As of May 1, 2011, we entered into a Plan and Agreement of Merger by and among ourselves, Eyes Enterprises, Inc., a Delaware corporation and our wholly owned subsidiary, and EOTG, under which Enterprises was merged with and into EOTG, with EOTG being the surviving corporation. As incidents of this merger, we changed our corporate name to “Eyes on the Go, Inc.” and EOTG changed its corporate name to “Eyes Enterprises, Inc.” As a result of the Merger, we are no longer considered a shell company. In connection with the Merger, we issued 360,600,000 shares of Common Stock to the holders of the common stock of EOTG and Mark E. Astrom transferred 500,008,000 shares of Common Stock owned by him to said holders, ratably in accordance with their respective interests in EOTG. As a result of the Merger, Christopher Carey and Mary Weaver Carey, his wife, who are officers and directors of the Company, Blazej Kesy, who was a director of the Company and an officer of Enterprises, and Christopher Carey, Jr., who is the son of Mr. Carey and Ms. Carey, became our controlling stockholders.
Also in connection with the Merger:
We completed a private placement with four investors (the “Private Placement”) of 92,500,000 shares of Common Stock for proceeds of $152,991 in cash and payment for services under Securities Purchase Agreements. We also entered into Registration Rights Agreements with these investors, pursuant to which we filed and pursued to effectiveness a registration statement under the Securities Act covering the shares issued in the Private Placement.
We issued 55,000,000 shares of Common Stock to Fritz-MacDonald Capital, LLC (“Fritz”), and its designee. On January 23, 2010, EOTG executed and delivered an asset purchase agreement with Fritz, whereby it acquired all of the rights to the name “Eyes on the Go”; a related website, domain and URL; all assets represented in the pilot site; and all marketing and sales materials (the “Purchased Assets”). EOTG was then contemplating the Merger and agreed with Fritz that it would obtain a covenant of the Company in the Merger Agreement to issue and deliver to Fritz and/or its designees 55 million shares of Common Stock and to agree to register these shares under the Securities Act. The Merger Agreement contained a covenant to this effect, and accordingly, after the consummation of the Merger, 50,000,000 shares of Common Stock were issued to Fritz and 5,000,000 shares of Common Stock were issue to its designee. The Company also entered into Registration Rights Agreements with Fritz and its designee, in substantially the same form as were entered into with respect to the Private Placement. In connection with the purchase, Fritz was granted a security interest in the Purchased Assets until such time as the Common Stock is so registered, after which all liens or claims on the Purchased Assets will be released.
Mark E. Astrom, who was then our president and sole director, entered into an Exchange Agreement with us, under which one share of our Series A Preferred Stock and $288,706 of our indebtedness to him was exchanged for a secured promissory note of the Company, dated May 1, 2011, payable to him in the principal amount of $473,933.65 and bearing interest at the rate of 0.55% per annum. The promissory note is due May 1, 2012, is subject to acceleration in the event of certain events of default and contains a covenant under which we are required to prevent Enterprises from granting liens upon its property, except for purchase money security interests. On August 15, 2011, the promissory note was amended to reduce its principal amount to $185,227.00, including the effect of a payment of $97,943. For further information, see “Directors, Executive Officers and Control Persons – Related Party Transactions – Exchange Agreement.”
On May 10, 2011, we filed with the Secretary of State of the State of Delaware (i) a Certificate of Merger Consummating the Merger and (ii) a Certificate of Amendment to our Certificate of Incorporation changing our name from “Avenue Exchange Corp.” to “Eyes on the Go, Inc.” As a result of the Merger, our business became that of designing, implementing and providing services for the remote real-time monitoring of, and the control of equipment and devices located at, businesses and other facilities via computers, wireless handheld devices and television equipment using the internet, through our website, www.eyesonthego.com, or internal communications and we ceased to be a “shell company,” as that term is defined in Rule 405 under the Securities Act. Since the consummation of the Merger, our business has developed so as to offer streaming video and audio images from bars, restaurants and clubs to consumers via our “Gander.tv” website. For more detailed information as to our business, see “Our Business.”
On December 6, 2013 the Company filed a Certificate of Amendment of Certificate of Incorporation of Eyes on the Go, Inc. with the State of Delaware increasing the number of authorized shares to 6,000,000,000. The Amendment was accepted and filed by the State of Delaware on December 6, 2013.
Our Common Stock is quoted on Pink Sheets under the symbol “AXCG.OTCQB.”
Our Business
In January 2012, we introduced our Gander.tv service. This service provides online streaming video and audio images from bars, restaurants, performance spaces and clubs to consumers via a website called “Gander.tv.” We have developed a proprietary software program that runs on computer platforms at customers’ facilities that streams video images and sound from multiple cameras and microphones or soundboards and makes them available to consumers on the Gander.tv website. The Company has entered into a hosting agreement for the consolidation of these video and audio images and their presentation to consumers via the Gander.tv website. We will rely on third parties for the implementation services and for onsite maintenance. We have installed 40 sites in the New York Metropolitan area. At the end of 2013, the Company had agreements with another 4 venues to be installed in the first quarter 2014. We have developed website applications for Gander.tv that enable our customers to schedule live broadcasts, or to post previously recorded segments which would be shown during slow or down times. In addition, we have a pay-per-view application that enable our customers to schedule and broadcast shows and performances for a fee determined by the Company, our customers and the performers for each show and performance in the form of an online ticket paid by major credit card or PayPal®. The purchase of an on-line ticket entitles the purchaser to watch the live performance and have future unlimited access to the recording. The service is targeted to the performance of music, spoken word, plays and musicals, comedy, karaoke, and other performances determined by the customer. The Company will collect these fees and will remit an agreed portion of the fees to the venue customer. The customer will be responsible for contracts with performers, including the terms for broadcasting and releases.
The Gander.tv website was released in beta mode in mid-March 2012. We launched to the general public by the end of March 2012. Each venue has a dedicated web page that allows for personalization including logos, description of venue, hours of operation, address and a map showing the location of the venue and a video player window. In addition, all previous broadcast events are listed in thumbnail form on the venue page. Except for pay-per-view or private event performances, access to the Gander.tv website is free to consumers. The Company provides for enhanced functions to consumers who sign up for free membership including personalized web pages with highlighted favorites.
Our sources of revenue for Gander.tv services and online streaming video and audio website include installation fees to cover basic installation services. The Company retains ownership of all hardware and software including the on-site controller, cameras and microphones. We also receive monthly recurring revenue for providing these services; including all video and audio image storage and access to consumers, which is in the range of $150.00 to $300.00 per month depending upon the number of components installed. In addition, the Company receives a portion of the pay-per-view fees charged to the consumer as a revenue sharing arrangement with the venues. We are generating fees for providing social media marketing services including graphics, creating web pages and landing pages, and posting and other communications to the consumers. The Company also generates revenue through video and banner ad placement, through promotional programs and venue placement fees. In the future it will offer select consumer product sponsorships.
We market directly with our own sales force, using leads that are generated internally and by other third parties. We support the sales once closed with Program Managers who engage with the client and coordinate Company efforts including the scheduling of the installation, design and customized venue pages, coordinating streaming live schedules and the schedule and program for broadcast events, develop and execute social media marketing programs for venue and performers, and provide maintenance of systems components. We rely on third parties for the equipment necessary including the controller, cameras and microphones to render our services and for on-site installation and maintenance services. We are increasing our sales efforts.
We are marketing our Gander.tv services primarily to business owners and managers in the entertainment and hospitality industries, which comprises restaurants, bars, nightclubs, and performance spaces. Our video streaming services are adaptable to other businesses and industry segments and, at some time in the future, we may seek to promote our services in these areas.
We commenced operations in August 2010 as a development-stage company; as of the first quarter of 2011, we no longer met the criteria for a development stage company.
The Company believes that it has taken advantage of new technologies at lower costs to provide a competitive proprietary platform for streaming live and recorded video to its web site. This lower cost is enabling the Company to provide a very competitive alternative to venues and performers to market themselves via the Internet. The Company has also developed robust and innovative application to leverage the video streams for marketing purposes and for revenue. Other factors enhancing the interest in its services include the wide spread and growing use of social media by consumers to view events, learn about venues they would like to visit and performers that they are interested in, or as fans to experience performances by favorite groups while not being able to attend in person. The availability of faster bandwidth, the expanding market and capabilities of mobile devices are all creating greater demand for the company’s services, where approximately 40% of viewing is done on mobile devices.
The Company intends to continue to sell and add locations to its Gander.tv business through direct marketing to bars, restaurants, nightclubs, performance spaces, and other prospects while it adds functionality for enhanced operations to its website. The Company will continue to execute its sales plan. See “Marketing and Sales – Sales Plan.”
For more information about our businesses, see “Gander.tv Online Streaming Video and Audio Service.” For information respecting our corporate history, see “Business – Our History.”
Marketing and Sales
Sales Plan
Our principal market is the entertainment and hospitality industries. Our Gander.tv streaming live and recorded video services provide benefits to owners and managers of facilities in this industry, including:
| ● | Streaming live and recorded performance events which create a positive and compelling image to consumers who may want to attend shows or visit these venues. |
| ●�� | Utilizing these live and recorded images via social media to broaden their reach to consumers to learn about and connect with these venues in a positive manner. |
| ● | Providing a service to performers to expand their reach and communicate to their fans who can’t attend the live performance. |
| ● | Allowing the performers and their promoters to leverage social media marketing and the services of the Company to expand their reach and fan base. |
| ● | Providing additional revenue and profit by broadcasting events as a pay-per-view, or through charging for private video access to events. |
| ● | Enhancing the relationship between the venue and their contract customers by providing streaming video during events. |
| ● | Providing additional revenue and profit through sharing advertising and sponsorship fees attributable to the venue events and traffic. |
We are concentrating our initial marketing efforts on the following potential customers within the entertainment and hospitality industries:
● | 86,000 full service restaurants |
● | 148,000 limited service restaurants |
● | 42,000 drinking establishments |
● | 489,000 accommodation and food service facilities |
Our sales and marketing efforts are conducted by in-house employees, using leads that are generated internally, to introduce our services and generate sales with potential customers. The Company believes that leads through its internal selling efforts will be sufficient for the level of marketing that the Company will be able to conduct in light of its present and future staffing. Using the leads that are generated internally, our sales personnel will make initial contact with, and make an initial presentation to, a prospect and if the prospect is interested in our services, perform a site survey and consultation to determine the configuration of components that best meets the prospect’s requirements. For example, we would determine where cameras and microphones should be situated and what additional components are needed including monitors, remote controllers and interfaces to existing soundboards for higher quality audio. These personnel will then confer with our engineers and develop a proposed agreement covering the equipment to be installed, the installation fee, the customized features to be provided, the monthly monitoring fee and social media marketing services and present it to the prospect. There is no minimum contract period. Upon the signing of the agreement, the sales person takes an impression of a credit card in order to charge the initial and monthly fees.
The Company maintains back office customer support personnel called Program Managers (PM’s) who coordinate with our sales personnel and the customers to confirm the equipment to be installed and the specific customization of the venue page, an overview of the content and streaming schedule and upcoming broadcast events and potential social media marketing services. The Operations Department coordinates ordering and delivery of all equipment, and schedules the onsite installation through a third-party contractor, who receives a portion of our installation fee. Once equipment is installed, the Company holds a strategic planning session with the customer and plans are developed for streaming schedules, potential broadcast events and supporting social media marketing plans. After the system is installed the customer is charged for installation fees. After the system is operating for two weeks, and is fully tested, the customer is charged for the first monthly fee. The Company provides 30 days of social media marketing services to acquire traffic and views and then determines the level of ongoing marketing desired by the customer and charges accordingly.
We intend to minimize the use of outside sales representatives and, consequently, we expect to pay limited sales commissions to third parties. Sales efforts will be organized by territory, with the Company focusing on a rollout of sales personnel across several major market areas in the United States, which commenced in January 2012 in the New York Metropolitan area. This includes the five boroughs of New York City and Northern New Jersey. The Company has continued to focus on the New York Metropolitan area to penetrate the top clubs and performance spaces and secure distinctive and appealing content for viewers. During the next 24- to 48-month period, depending on our financial resources, we are planning to expand our sales and marketing staff to enter more cities in the US and, potentially, select foreign markets. We intend to add sales and marketing staff as required. No assurance can be given that the Company will be able to meet this goal, because the Company will require substantial capital in order to develop its business. See “Liquidity and Capital Resources.”
The sales team for each key market will include a Business Development Manager and a number of Program Managers, depending upon the number of signed accounts and venue locations. New installations are coordinated by the Operations Department that relies on third parties for installation and maintenance services. All web site customization and social media marketing services are centrally located in our headquarters in New York City. The Program Managers work with the social media department to customize the Gander.tv venue pages and web site, and to produce graphics, web and landing pages and to conduct social media postings and other communications. The sales team will be headed nationally by a Vice President of Sales, with regional sales managers being added as sales staff is hired and markets are developed. The Vice President of Sales and the regional managers will also be responsible for identifying and making sales presentations to corporate accounts with multiple locations.
iCare Agreement
On April 1, 2011, we entered into an agreement with iCare Marketing, Inc. (“iCare”), a wholly owned subsidiary of Sysco Corporation (“Sysco”). Sysco sells markets and distributes food products to restaurants, healthcare and educational facilities, lodging establishments and others. Of Sysco’s 400,000 customers, approximately 150,000 are in our target market. According to Sysco, iCare provides non-competitive services and products to Sysco’s customers as a way for Sysco to differentiate itself with its customers and provide additional value in their relationships. iCare markets, among others, products and services designed to help its customers increase sales, hire and retain employees and streamline and protect business operations.
While we initially believed that the services provided to us by iCare would enable us to expand more quickly than we could using our internal resources alone, the support services provided by Sysco were less than expected or promised. We are in the process of evaluating this relationship and to determine if it is in the best interests of the Company to continue under the agreement.
Gander.tv Online Streaming Live and Recorded Video Service
Software and Hardware
The Company has developed proprietary software that runs on computer platforms installed at customers’ locations that consolidates video images for communication over the Internet to our leased server space. This platform is an off-the-shelf industrial computer that we acquire from two manufacturers. The Company makes minor alterations in these computers in order for them to work with its system. We install off-the-shelf cameras and microphones, choosing from a number of manufacturers. The Company introduced a new application in late 2013 which enables its technicians to remotely control the cameras to pan, tilt and zoom on the performance. In some cases, the Company has extended these functions to the venue for the use by their sound and lighting technicians.
We have developed additional proprietary software that resides on leased server space and retrieves the video and audio images from the platforms at customers’ locations and records and stores these images for future access by the Gander.tv website for viewing by consumers. We have utilized existing software tools at the website for video and audio playing, web page administration, and eCommerce transaction processing. We believe that there is sufficient supply of components in the market to satisfy our implementation requirements. We also believe that we can lease server space at reasonable prices to meet foreseeable demand. The Company intends to pursue components and alternatives that will improve performance and reduce costs.
Ongoing Services to Customers
Once the equipment installation is complete, we provide customization services to each customer to set up its web page to reflect the specifics of its location, including a unique description, logo, and hours of operation, address and map and video player window. All recorded broadcast events are listed as thumbnail images on the venue page and the consumer can click on the image and be linked to the recorded event. We strategize with clients on the use of the system, the plan for looping content from a library of recorded events, the schedule of broadcast events, the potential of leveraging social media marketing services to increase viewership and the potential of broadcasting events as pay-per-view or private view. The Company then releases the venue for viewing by consumers and provides ongoing support for problem determination and administrative functions. Our Program Managers assist customers in selecting performances for broadcasting and the potential as pay-per-view and selecting the price that will maximize return on each event.
Maintenance
Our monthly fee includes reprograming software and system maintenance, which we perform. We also provide on-site system maintenance through the third-party contractor that performed the initial installation. Monthly service fees cover the replacement of any failed component, except when the failure is externally caused.
Competition
There are a number of web-based competitors providing streaming online video and audio services. The most significant of these are YouTube®, Ustream® and LiveStream®. In all cases, these companies rely on the customers to provide the systems and components to stream video and audio to their websites. These companies are not focused on any specific industry and their websites are filled with many individual video and audio links including many at home performances. None of these competitors provides a pay-per-view option to its customers or a prerecorded segment for play during down times. They operate as utilities, providing the capability of streaming video, and do not provide support services including social media marketing.
There are a number of small web providers including BarSceneLive,com and Peepsout that have installed video cameras in bars. We do not believe that any of them has the capacity to become a competitive threat and none of them provides the functionality of our systems installation, website, pay-per-view, prerecorded segment play, or are focused on capturing performances.
There are a few websites that provide a utility for performers to post their own generated videos for a pay-per-view fee. Sites such as Stageit.com are providing this utility and rely on the performer to create the content for posting to the site. This site is focused on the performer and not the venue. This approach to the market is very different from ours and we do not believe that it is a competitive threat.
We are seeking to establish a market niche in providing innovative services involving the streaming of video and audio to owners of entertainment and hospitality facilities that will both enhance their presence on the internet while providing alternate sources of income through the pay-per-view application and advertising and sponsorship fees. Our approach is to offer a low-cost alternative to a potential customer’s establishing these services for themselves or through any competitors. We believe that our focus on connecting to social media sites and leveraging social networking will greatly increase internet traffic and eventually consumers at customers’ facilities and will distinguish us from competitors.
However, the nature of the internet and the proliferation of web based services may create or enhance ease of entry for competitors in the future. Some of these competitors may be better financed and have more resources than we will. There may also be sudden and unexpected new technologies or improvements in existing technologies that may make our approach and proprietary systems obsolete.
Research and Development
The Company has a small number of development staff to create and maintain our proprietary software for Gander.tv. We will continue to add resources as additional capital and cash flow permit. The Company’s efforts in this area will focus on increasing the functionality and features of its services, improving its software and the equipment that is furnished to its customers and developing additional uses for video images.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item.
The Company is currently leasing office space from GSM Systems, Inc. at their offices at 40 Fulton Street, New York, NY. All space costs are included in an agreement with GSM Systems, Inc. whereby they agreed to a payment of restricted common shares equal to 5 million for the first 6 months of space use, and then a monthly rental fee of $2,100 beginning on November 1, 2013 and through December 31, 2013 and $2,400 from January 1, 2014 through December 31, 2014. The Company expects that this space is adequate for its needs in 2014.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings nor is any of our property the subject of any pending legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Common Stock is quoted on Pink Sheets under the symbol “AXCG.OTCQB.” The following table sets forth the quarterly high and low sale closing bids for our Common Stock quoted on Pink Sheets for the fiscal years ended December 31, 2013 and 2012, and the subsequent interim periods, as reported by OTC Markets, Group, Inc. The prices set forth below represent interdealer quotations, without retail markup, markdown or commission and may not be reflective of actual transactions. Our Common Stock is very thinly traded and has been extremely limited, sporadic and highly volatile; thus, pricing of our Common Stock on Pink Sheets does not necessarily represent its fair market value and the fact that there has been sporadic trading in our Common Stock does not necessarily indicate the establishment of a public market for our Common Stock. We do not believe that such information is a good indicator of the prices at which our Common Stock may trade in the future.
| Quarter Ended | | Bid High | | | Bid Low | |
| | | | | | | |
| Fiscal Year 2013 | | | | | | |
| March 31 | | $ | .001 | | | $ | .001 | |
| June 30 | | $ | .0008 | | | $ | .0006 | |
| September 30 | | $ | .002 | | | $ | .0011 | |
| December 31 | | $ | .0009 | | | $ | .0007 | |
| | | | | | | | | |
| Fiscal Year 2012 | | | | | | | | |
| March 31 | | $ | .11 | | | $ | .02 | |
| June 30 | | $ | .12 | | | $ | .0032 | |
| September 30 | | $ | .006 | | | $ | .0021 | |
| December 31 | | $ | .004 | | | $ | .0008 | |
As of December 31, 2013, there were 2,084,675,792 shares of Common Stock issued and outstanding and there were approximately 93 holders of record of our Common Stock. There are also an indeterminate number of stockholders holding stock in street name.
We have never declared or paid cash or other dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.
There are (i) no shares of Common Stock that are subject to outstanding options or warrants to purchase, (ii) no shares of Common Stock that may be sold pursuant to Rule 144, (iii) up to 1,357,698 shares of Common Stock to be received by the former holders of the Series B Preferred Stock by virtue of its conversion into Common Stock that the Company is agreeing to register in the future on a piggyback basis under the Securities Act for sale by said former holders and (iv) no shares of Common Stock that are being or have been publicly proposed to be, publicly offered by the Company, the offering of which could have a material effect on the market price of the Common Stock.
Recent Sales of Unregistered Securities
The shares of Common Stock issued or to be issued in the above transactions were exempt from registration under Section 4(2) of the Securities Act as sales by an issuer not involving a public offering and under Regulation D promulgated pursuant to the Securities Act. These shares of Common Stock were not registered under the Securities Act, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act and corresponding provisions of state securities laws, which exempts transactions by an issuer not involving any public offering. Such securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates representing such shares contain a legend to that effect.
During the year ended December 31, 2012, neither we nor any affiliated purchasers made any purchases of our equity securities.
On February 25, 2013, Eyes on the Go, Inc. entered into a Securities Purchase Agreement with two accredited investors to sell, in one or more tranches, up to $500,000 in Original Issue Discount Senior Secured Convertible Debentures of the Company, which are due and payable 270 days after the date of issuance. The Debentures have a ten percent (10%) original issue discount and are convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to the lesser of $.0015 or 85% of the average volume weighted average price on the five (5) trading days immediately prior to the conversion date. The Debentures are secured by all of the assets of the Company. In connection with the sale of the Debentures, Chardan Capital Markets, LLC acted as placement agent. On February 25, 2013, the Investors purchased Debentures from the Company in the aggregate amount of $60,000, which had a principal amount of $66,000, and the Company received net proceeds of approximately $44,000, following the payment of fees and expenses. Pursuant to the Stock Purchase Agreement, in connection with the offering of the Debentures, the Company reimbursed the lead Purchaser in the amount of $10,000 for legal fees incurred in connection with the transaction.
On November 5, 2013, the Purchasers purchased Debentures from the Company in the aggregate amount of $33,480, which had a principal amount of $37,200, and the Company received net proceeds of approximately $30,132, following the payment of fees and expenses.
On November 19, 2013, the Purchasers purchased Debentures from the Company in the aggregate amount of $27,900, which had a principal amount of $31,000, and the Company received net proceeds of approximately $25,110, following the payment of fees and expenses.
On December 2, 2013, the Purchasers purchased Debentures from the Company in the aggregate amount of $33,336, which had a principal amount of $37,040, and the Company received net proceeds of approximately $30,002, following the payment of fees and expenses.
On December 16, 2013, the Purchasers purchased Debentures from the Company in the aggregate amount of $33,336, which had a principal amount of $37,040, and the Company received net proceeds of approximately $30,002, following the payment of fees and expenses.
On November 27, 2013, and under similar terms as the Convertible Debentures outlined above, another third party investor purchased Debentures from the Company in the principle amount of $11,100, and the Company received net proceeds of $9,990.
On December 12, 2013, and under similar terms as the Convertible Debentures outlined above, another third party investor purchased Debentures from the Company in the principle amount of $11,100, and the Company received net proceeds of $9,990.
On August 29, 2013, the Company converted $10,000 of previously purchased Convertible Debentures into 50,000,000 shares of common stock.
On September 5, 2013, the Company converted $31,430 of previously purchased Convertible Debentures into 140,456,864 shares of common stock.
On October 7, 2013, the Company converted $24,570 of previously purchased Convertible Debentures into 109,799,486 shares of common stock.
On October 15, 2013, the Company converted $20,000 of previously purchased Convertible Debentures into 100,000,000 shares of common stock.
On November 25, 2013, the Company converted $34,750 of previously purchased Convertible Debentures into 155,293,003 shares of common stock.
On December 7, 2013, the Company converted $30,000 of previously purchased Convertible Debentures into 140,456,864 shares of common stock.
On January 16, 2013, the Company entered into a letter agreement with the Chardan Capital Markets, LLC as its Placement Agent, pursuant to which the Placement Agent agreed to serve as the Company’s exclusive investment banker in connection with proposed offerings by the Company. Pursuant to the letter agreement the Company agreed (1) to issue the Placement Agent three percent (3%) of the Company’s outstanding common stock as an advisory fee, and (2) to pay the Placement Agent a ten percent (10%) sales commission and provide the Placement Agent ten percent (10%) warrant coverage for any securities sold through the Placement Agent. In connection with the Debentures sold on February 25, 2013, the Placement Agent received a sales commission of $6,000 and a warrant to purchase up to 4,400,000 shares of the Company’s common stock at an exercise price of $0.0012 per share.
We can give no assurance that sufficient funding will be available on acceptable terms, or at all, and, if it is not, we may have to significantly reduce, or discontinue, our operations. To the extent that we raise additional funds by issuing equity securities or securities that are convertible into our debt securities, our stockholders may experience significant dilution.
The Company believes that it will require capital in the form of equity or borrowed money of approximately $600,000 during the next 12 months. The Company’s current liquidity presents a material risk to investors because the Company does not currently have sufficient funds to pay its outstanding obligation of $185,227 to Mark Astrom if a settlement cannot be reached, or to expand its business as planned. Although the Company has entered into a financing arrangement in the form of Convertible Debt, it has received no commitment of the level of funding or whether the funding will continue and no assurance can be given that any such commitment will be forthcoming or, if so, in what amount.
ITEM 6. SELECTED FINANCIAL DATA
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The financial data discussed below are derived from the audited financial statements of the Company as of December 31, 2013 and 2012, included elsewhere in this report, which were prepared and presented in accordance with generally accepted United States accounting principles. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim consolidated financial statements be read in conjunction with these audited consolidated financial statements and notes thereto. We do not believe that the results set forth in these financial statements are necessarily indicative of our future performance. Factors that could affect our future performance include those discussed below and elsewhere in this report, particularly in “Risk Factors.”
Overview
In 2013, the Company began is efforts to monetize their video broadcast content, first by providing clips of segments of a performance (a song, a comedy skit, a poetry reading, etc.) to third party web sites where the partner monetized through their ad placements. While the actual revenue was a small portion of the ad revenue received by the partner, it confirmed the approach of utilizing ad and sponsorship revenues as a way to leverage the video content. In August of 2013, Company began entering into agreements with a number of ad providers and began placing video and display ads on its own web sites. The Company expanded with a number of named web sites where targeted video content is being placed along with display and video ads. The performances are being segmented by genre of music or type of entertainment.
During 2013, the Company continued to introduce new applications as well as solidifying and stabilizing their web site software to handle the increased traffic. In the fourth quarter of 2013, the Company added resources and applications to ease the production of video clips for use on all of these sites. In addition, they added a number of partnership web sites where the live streaming broadcasts are being embedded. The partners are embedding the Company’s player and showing the video content to their viewers, bringing additional traffic and ad revenue to the Company. In many of these sites, the Company has an obligation to share in the revenue produced from ad placements after their direct costs of operations.
The Company has continually qualified its installed base and determined that a number of venues did not fit their criteria for interesting and valuable content, and these locations were de-installed. All components were removed and reused on new locations or for maintenance purposes. The Company has better qualified the criteria for targeted venues and continues to add locations.
The Company generated revenue from installation fees for new installations and upgrades, monthly monitoring fees to venues, social media fees to venues and artists and digital advertising of $46,681 compared to $2,724 in 2012. The Company had costs of goods sold for 2013 of $7,352, producing a gross profit of $39,329 or 84% of revenue. With $796,094 of selling, general and administrative expenses, the Company produced a net operating loss of $$756,765. Increased overhead costs compared to prior periods resulted from additional personnel in video production who are tasked with curating and placing content, as well as increased advertising and promotion expenses to increase awareness and viewers to the web sites. The Company had other expenses based on fully accounting for the long term potential effect of the Convertible Debentures of a total of $1,496,460 which created a net loss for the year of $2,253,225.
This compares to the yearend results for 2012 with cost of goods sold of $22,786 and a gross loss of $20,062 which after selling, general and administrative costs of $662,536 left an operating loss of $682,598.
We had total current assets at December 31, 2013 of $64,106 versus current liabilities of $2,688,215 which is made up primarily of debts due to related parties and the treatment of the Convertible Debentures.
Background and Reverse Merger
Effective the first quarter of 2011, the Company no longer met the criteria of a development stage entity.
Under our agreement with iCare, we are obligated to provide our services to customers produced by iCare at prices 20% lower than the prices charged to customers who purchase our services directly from us, to make financing available to customers produced by iCare who elect to enter into two- or three-year contracts with us and to accept credit cards or “normal credit terms of net 15 days” on billing. We are also obligated to make the following payments to iCare under this agreement: 5% of the gross revenues received from any Sysco customer; an integration fee of $100,000, of which $50,000 was paid in cash and balance of which was discharged by the company’s issuance 15,861,372 shares of its common stock to iCare, which have been valued in our financial statements at $22,205; $250 per trade show event that we attend; and an amount to be determined for additional promotions and marketing programs. We believe that the payment of 5% of the gross revenues will reduce the cash flow from each contract on which it is paid by 5% and that the payment of $250 per trade show and other amounts will have an insubstantial effect on cash flow. As of December 31, 2013, the Company did not have any venues referred by Sysco and, therefore, the Company has no financial obligations. The Company is assessing the value of the agreement and whether they will continue.
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our independent auditors have included in the report on our financial statements a statement that raises substantial concern about our ability to continue as a going concern.
Results of Operations
The following table summarizes the operating results of the Company for the fiscal year ending December 31, 2012, and the results for the fiscal year ended December 31, 2013:
Fiscal Year 2012 | | | |
| | | | |
| Net Sales | | $ | 2,724 | |
| Cost of Revenue | | $ | 22,786 | |
| Gross Loss | | $ | ( 20,062 | ) |
| Operating Expenses: | | | | |
| General and Administrative | | $ | 662,536 | |
| | | | | |
| NET LOSS | | $ | ( 682,598 | ) |
| | | | | |
| Fiscal Year 2013 | | | | |
| | | | | |
| Net Sales | | $ | 46,681 | |
| Cost of Revenue | | $ | 7,352 | |
| Gross Loss | | $ | 39,329 | |
| Operating Expenses: | | | | |
| General and Administrative | | $ | 796,094 | |
| Operating Income | | $ | ( 756,765 | ) |
| Other: | | | | |
| Interest Expense | | $ | 873,027 | |
| Loss on change in fair market value of derivative liability | | $ | 385,000 | |
| Loss on extinguishment of debt | | $ | 238,433 | |
| | | | | |
| NET LOSS | | $ | (2,253,225 | ) |
Year Ended December 31, 2012
Sales: The Company began selling its streaming and recorded video network in January 2012, and launched its first beat site in March 2012. The sales people focused on selling new customers on the new video network and broadcasting through the Gander.tv web site. All venue locations sold in 2012 were offered free installation and service until the conclusion of the beta test period which ended in November 2012. Beginning in November, the sales group began a process of meeting with clients to transition to paid services and generated $2,724 in revenue. All new sales initiated in December 2012 include fees for monthly service, social media marketing support and pay-per-view revenue share.
Cost of Sales and Gross Loss: Costs of sales for the period were $22,786 representing costs to install these sites plus additional maintenance and replacement parts. Many of the costs were expensed as product development costs and were included in General and Administrative Expenses. This led to a gross loss of $20,062.
Selling, General and Administrative Expenses: Selling, General and administrative expenses incurred during this period were $662,536 and were predominantly attributable to personnel costs, selling costs, the continued development of the streaming live and recorded video network and support services, equipment used in providing them, and other operating costs including web site hosting fees.
Loss from Operations and Net Loss: During this period, our loss from operations and our net loss was $682,598.
Year Ended December 31, 2013
Sales: The Company continued generating revenue from installation fees, monthly monitoring fees to venues, social media fess to venues and artists, pay-per-view fees, tip jar and donate now buttons, and advertising revenue with the placement of digital display and video ads for a total of $46,681. The Company ended the year with relationships with 8 ad networks which are providing the digital ads.
Cost of Sales and Gross Profit: Costs of sales for the period were $7,352 representing costs to install new venues plus maintenance and replacement parts. This led to a gross profit of $39,329 or 84% of revenue.
Selling, General and Administrative Expenses: Selling, General and Administrative expenses incurred during this period were $796,094 and were predominantly attributable to personnel costs, selling costs, the continued development of the streaming live and recorded video network and support services, and other operating costs including web site hosting fees.
Other Expenses: The Company has accounted for the future exposure of the Convertible Debentures with interest expense of $873,027, the loss on change in fair market value of derivative liability of $385,000 and the loss on extinguishment of debt of $238,433.
Loss from Operations and Net Loss: During this period, our loss from operations was $756,765 and our net loss was $2,253,225.
Liquidity and Capital Resources
As of December 31, 2012, and December 31, 2013, we had cash and cash equivalents of $327 and $37,215, respectively. We financed our operations for the year ended December 31, 2012, from stock sales and capital contributions totaling $126,000 and from loans from Christopher Carey, President of the Company, in the aggregate principal amount of $179,305. For the year ended December 31, 2013, we financed operations through the sale of stock and capital contributions of $7,500 from loans from Christopher Carey, President of the Company of $45,948, and the proceeds from the issuance of convertible debentures of $499,733.
The following table provides a summary of our balance sheet and net cash flows from operating, investing, and financing activities for the years ended December 31, 2013 and 2012.
| Statement of Cash Flows | | | | | | |
| | | December 31, 2013 | | | December 31, 2012 | |
| | | | | | | | | |
| OPERATING ACTIVITIES: | | | | | | | | |
| | | | | | | | | |
| Net Loss | | $ | (2,253,225) | | | $ | (682,598) | |
| Adjustments to reconcile net loss to net cash | | | | | | | | |
| used in operating activities: | | | | | | | | |
| Accrued expenses to related party | | $ | 216,000 | | | $ | 216,000 | |
| Stock based payment | | $ | 35,777 | | | $ | 59,808 | |
| Amortization | | $ | | | | $ | 17,059 | |
| Loss on change in fair market value of derivative liability | | $ | 385,000 | | | $ | 59,808 | |
| Loss on extinguishment of debt | | $ | 238,433 | | | $ | 17,059 | |
| Non cash interest expense | | $ | 872,551 | | | $ | 59,808 | |
| | | | | | | | | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | $ | (1,948) | | | $ | | |
| Inventory | | $ | 1,613 | | | | | |
| Accounts payable | | $ | (27,554) | | | $ | 32,452 | |
| NET CASH USED IN OPERATING ACTIVITIES | | $ | (516,293) | | | $ | (357,279) | |
| | | | | | | | | |
| FINANCING ACTIVITIES: | | | | | | | | |
| Capital contributions | | | | | | | | |
| Proceeds from issuance of common stock and capital contributions | | $ | 7,500 | | | $ | 126,000 | |
| Loan from related party | | $ | 45,948 | | | $ | 179,305 | |
| Proceeds from issuance of convertible debt | | $ | 499,733 | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| NET CASH PROVIDED BY FINANCING ACTIVITIES | | $ | 553,181 | | | $ | 305,305 | |
| | | | | | | | | |
| INCREASE (DECREASE) IN CASH | | $ | 38,888 | | | $ | (51,974) | |
| CASH – BEGINNING OF YEAR | | $ | 327 | | | $ | 52,301 | |
| CASH – END OF YEAR | | $ | 37,215 | | | $ | 327 | |
| | | | | | | | | |
From its inception (August 26, 2010) to the date hereof, the Company has obtained funding through loans from related parties, private placements and the sale of debentures. The Company plans to fund its activities during fiscal 2014 and beyond through cash from operations and through the sale of debt or equity securities and/or bank financing. We can give no assurance that sufficient funding will be available on acceptable terms, or at all, and, if it is not, we may have to significantly reduce, or discontinue, our operations. To the extent that we raise additional funds by issuing equity securities or additional securities that are convertible into our debt securities, our stockholders may experience significant dilution.
The Company believes that it will require capital in the form of equity or borrowed money of approximately $600,000 during the next 12 months. The Company’s current liquidity presents a material risk to investors because the Company does not currently have sufficient funds to expand its business as planned. The Company estimates that if it will require additional capital to get to cash flow breakeven. The Company and its Placement Agent will continue to seek additional capital, it has received no commitment for further financing from investors or banks and no assurance can be given that any such commitment will be forthcoming or, if so, in what amount.
Contractual Obligations
The following table sets forth information with respect to our known contractual obligations as of the December 31, 2012, aggregated by type of contractual obligation.
| Contractual obligations | | Payments due by period | |
| | | Total | | | Less than 1 year | | | 1-3 years | | | 3-5 years | | | More than 5 years | |
| Long-Term Debt Obligations | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
| Capital Lease Obligations | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
| Operating Lease Obligations | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
| Purchase Obligations | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
| Other Long-Term Liabilities Reflected on Our Balance Sheet under GAAP | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
| Total | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
Off-Balance Sheet Arrangements
None.
Controls and Procedures
Pursuant to Section 404 of Sarbanes-Oxley, management is required to report on the effectiveness of internal controls over financial reporting in each annual report, The JOBS Act (Jumpstart Our Business Startups) stipulates that smaller companies (for which we qualify) are exempt from the requirements of the Sarbanes-Oxley act of 2002, and Section 404(b); the personal certification and guarantee of financial controls by the chief executive officer and attestation by a licensed auditor.
Risks and Uncertainties
The Company operates in an industry that is subject to rapid and sometimes unpredictable change and the Company’s technology could become obsolete within a short period. The Company’s operations will be subject to significant risk and uncertainties, including financial, operational, technological and other risks, including the risk of business failure. Further, as noted in this Report, in order to develop its business, the Company will require substantial capital resources. For a full statement of the risks and uncertainties to which the Company is subject, see “Risk Factors.”
Critical Accounting Policies and Estimates
Use of Estimates.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.
Revenue Recognition
The Company follows the guidance of the SEC’s Staff Accounting Bulletin No. 104 for revenue recognition. The Company records revenue when all of the following have occurred; (1) persuasive evidence of an arrangement exists, (2) product delivery has occurred, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured.
The Company derives its revenues as follows:
| · | Fees generated from the installation of video equipment are recognized at the end of the pilot period when testing is completed. |
| · | Monthly monitoring fees are recognized ratably over the period to which it applies. |
| · | Advertising revenues are recognized when the related advertisement is run. |
| · | Pay per view revenues are recognized, net of the amount due to the venue and artist, when the performance is aired. |
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
| | PAGE(S) |
| | |
| Report of Independent Registered Public Accounting Firm | F-1 |
| | |
| Balance Sheets as of December 31, 2013 and 2012 | F-2 |
| | |
| Statements of Operations for the Years Ended December 31, 2013 and 2012 | F-3 |
| | |
| Statement of Changes in Stockholders’ (Deficit) For the Years Ended December 31, 2013 and 2012 | F-4 |
| | |
| Statements of Cash Flows for the Years Ended December 31, 2013 and 2012 | F-5 |
| | |
| Notes to Financial Statements | F-6 - F-12 |
| | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Eyes on the Go, Inc.
We have audited the accompanying consolidated balance sheets of Eyes on the Go, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of operations, changes in stockholders’ deficiency and cash flows for the years in the ended December 31, 2013 and 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred net losses and negative cash flows from operating activities for the years ended December 31, 2013 and 2012 and has a stockholders’ deficiency of $2,602,788 as of December 31, 2013. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Eyes on the Go, Inc. as of December 31, 2013 and 2012 and the results of its operations and its cash flows for the years ended December 31, 2013 and 2012 in conformity with accounting principles generally accepted in the United States of America.
/s/ Paritz & Co., P.A.
Hackensack, N.J.
April 8, 2014
EYES ON THE GO, INC.
CONSOLIDATED BALANCE SHEETS
| | | December 31, 2013 | | | December 31, 2012 | |
| | | | | | | |
| ASSETS | | | | | | |
| CURRENT ASSETS: | | | | | | |
| Cash | | $ | 37,215 | | | $ | 327 | |
| Inventories | | | - | | | | 1,613 | |
| Deferred finance expense | | | 24,943 | | | | | |
| | | | | | | | | |
| TOTAL CURRENT ASSETS | | $ | 64,106 | | | $ | 1,940 | |
| | | | | | | | | |
| | | | | | | | | |
| Intangible asset, net of accumulated amortization of $50,884 and $33,824, | | | 21,321 | | | | 38,381 | |
| respectively | | | | | | | | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 85,427 | | | $ | 40,321 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDER’S DEFICIENCY | | | | | | | | |
| | | | | | | | | |
| CURRENT LIABILITIES: | | | | | | | | |
| Accounts Payable | | $ | 33,362 | | | $ | 60,916 | |
| Due to related parties | | | 1,052,114 | | | | 906,466 | |
| Convertible debt | | | 222,957 | | | | - | |
| Derivative liability | | | 1,379,782 | | | | - | |
| TOTAL CURRENT LIABILITIES | | $ | 2,688,215 | | | $ | 967,382 | |
| | | | | | | | | |
| | | | | | | | | |
| STOCKHOLDERS’ DEFICIENCY: | | | | | | | | |
| Series A Preferred stock, $0.000001 par value, | | | | | | | | |
| 5,000,000 shares authorized, 0 shares issued and outstanding | | | | | | | | |
| at December 31, 2013 and 2012 | | | - | | | | - | |
| Series B Preferred stock, $0.000001 par value, | | | | | | | | |
| 5,000,000 shares authorized, no shares issued | | | | | | | | |
| and outstanding at December 31, 2013 and 2012, respectively | | | - | | | | - | |
| Series C Preferred stock, $0.000001 par value, | | | | | | | | |
| 5,000,000 shares authorized, no shares issued and outstanding | | | | | | | | |
| at December 31, 2013 and 2012 | | | - | | | | - | |
| Common stock, $0.000001 par value, | | | | | | | | |
| 6,000,000,000 shares authorized, 2,084,675,792 and 1,214,217,824 | | | | | | | | |
| shares issued and outstanding at December 31, 2013 | | | | | | | | |
| and December 31, 2012, respectively | | | 2,085 | | | | 1,215 | |
| Additional paid-in capital | | | 1,126,048 | | | | 549,420 | |
| Stock Subscription receivable | | | - | | | | - | |
| Accumulated deficit | | | (3,730,921) | | | | (1,477,696) | |
| TOTAL STOCKHOLDERS’ DEFICIENCY | | | (2,602,788) | | | | (927,061) | |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | | $ | 85,427 | | | $ | 40,321 | |
See notes to financial statements
EYES ON THE GO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | |
| | | Year Ended | | | Year Ended | |
| | | December 31, 2013 | | | December 31, 2012 | |
| | | | | | | |
| REVENUES | | $ | 46,681 | | | $ | 2,724 | |
| | | | | | | | | |
| COST OF REVENUE | | | 7,352 | | | | 22,786 | |
| | | | | | | | | |
| GROSS INCOME (LOSS) | | | 39,329 | | | | (20,062) | |
| | | | | | | | | |
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | | | 796,094 | | | | 662,536 | |
| | | | | | | | | |
| OPERATING LOSS | | | (756,765) | | | | (682,598) | |
| | | | | | | | | |
| OTHER: | | | | | | | | |
| Interest expense | | | 873,027 | | | | | |
| Loss on change in fair market value of derivative liability | | | 385,000 | | | | | |
| Loss on extinguishment of debt | | | 238,433 | | | | | |
| | | | 1,496,460 | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| NET LOSS | | | (2,253,225) | | | | (682,598) | |
| | | | | | | | | |
| Loss per common share | | | (0.001) | | | | (0.001) | |
| | | | | | | | | |
| Weighted average common shares outstanding | | | 1,403,922,478 | | | | 1,183,769,653 | |
See notes to financial statements
EYES ON THE GO, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY
| | | | | | | | | Additional | | | | | | | | | | |
| | | COMMON STOCK | | | Paid-In | | | Subscription | | | Accumulated | | | | |
| | | Shares | | | Amount | | | Capital | | | Receivable | | | Deficit | | | Total | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| BALANCE – December 31, 2011 | | | 1,168,606,568 | | | $ | 1,169 | | | $ | 373,658 | | | $ | (10,000) | | | $ | (795,098) | | | $ | (430,271) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock Subscription Received | | | | | | | | | | | | | | | 10,000 | | | | | | | | 10,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Sales of Common Stock | | | 32,941,256 | | | | 33 | | | | 115,967 | | | | | | | | | | | | 116,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock issued for services | | | 12,670,000 | | | | 13 | | | | 59,795 | | | | | | | | | | | | 59,808 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock issued in connection with Sysco ICare agreement | | | 15,861,372 | | | | 16 | | | | 22,189 | | | | | | | | | | | | 22,205 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net loss for the year | | | | | | | | | | | | | | | | | | | (682,598) | | | | (682,598) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| BALANCE – December 31, 2012 | | | 1,214,217,824 | | | $ | 1,215 | | | $ | 549,420 | | | $ | | | | $ | (1,477,696) | | | $ | (927,061) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Sales of Common Stock | | | 5,181,971 | | | | 5 | | | | 7,495 | | | | | | | | | | | | 7,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock issued for services | | | 27,126,644 | | | | 27 | | | | 35,750 | | | | | | | | | | | | 35,777 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock issued for conversion of convertible notes | | | 705,549,353 | | | | 706 | | | | 467,216 | | | | | | | | | | | | 467,922 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock issued for conversion of debt | | | 132,600,000 | | | | 133 | | | | 66,167 | | | | | | | | | | | | 66,300 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net loss for the year | | | | | | | | | | | | | | | | | | | (2,253,225) | | | | (2,253,225) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| BALANCE – December 31, 2013 | | | 2,084,675,792 | | | $ | 2,086 | | | $ | 1,126,048 | | | $ | - | | | $ | (3,730,921) | | | $ | (2,602,787) | |
See notes to financial statements
EYES ON THE GO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | Year Ended December 31, | |
| | | 2013 | | | 2012 | |
| | | | | | | |
| OPERATING ACTIVITIES: | | | | | | |
| Net loss | | $ | (2,253,225) | | | $ | (682,598) | |
| Adjustments to reconcile net loss to net cash | | | | | | | | |
| used in operating activities: | | | | | | | | |
| Accrued expenses to related parties | | | 216,000 | | | | 216,000 | |
| Stock based payment | | | 35,777 | | | | 59,808 | |
| Amortization | | | 17,060 | | | | 17,059 | |
| Loss on change in fair value of derivative liability | | | 385,000 | | | | - | |
| Loss on extinguishment of debt | | | 238,433 | | | | - | |
| Non cash interest expense | | | 872,551 | | | | - | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | (1,948) | | | | - | |
| Inventories | | | 1,613 | | | | - | |
| Accounts payable | | | (27,554) | | | | 32,452 | |
| NET CASH USED IN OPERATING ACTIVITIES | | | (516,293) | | | | (357,279) | |
| | | | | | | | | |
| FINANCING ACTIVITIES: | | | | | | | | |
| Proceeds from issuance of common stock and capital contributions | | | 7,500 | | | | 126,000 | |
| Proceeds of loan from related party | | | 45,948 | | | | 179,305 | |
| Proceeds from issuance of convertible debt | | | 499,733 | | | | | - |
| NET CASH PROVIDED BY FINANCING ACTIVITIES | | | 553,181 | | | | 305,305 | |
| | | | | | | | | |
| | | | | | | | | |
| INCREASE (DECREASE) IN CASH | | | 36,888 | | | | (51,974) | |
| | | | | | | | | |
| CASH – BEGINNING OF YEAR | | | 327 | | | | 52,301 | |
| | | | | | | | | |
| CASH – END OF YEAR | | $ | 37,215 | | | $ | 327 | |
| | | | | | | | | |
| Non-cash investing and financing activities: | | | | | | | | |
| Derivative liability recognized as debt discount | | $ | 505,840 | | | $ | - | |
| Original issue discount on convertible debt | | $ | 60,741 | | | $ | - | |
| Conversion of convertible debt to common stock | | $ | 150,750 | | | $ | - | |
| Conversion of related party payable to common stock | | $ | 66,300 | | | $ | - | |
See notes to financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013
(Unaudited)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Eyes on the Go, Inc. (the “Company”) was incorporated under the laws of the state of Delaware on August 26, 2010. The Company designs, implements, and provides services relating to the remote monitoring of businesses and other facilities.
On May 11, 2011 the Company completed a Plan and Agreement of Merger with Mutual Exchange Corp. (“Mutual”), whereby Mutual issued 360,600,000 shares of its common stock to the Company and Mutual’s majority shareholder transferred 500,008,000 shares to the shareholders of the Company. The Company was considered to be the accounting acquirer, and the merger was accounted for as a reverse merger, whereby the Company being the accounting survivor. Accordingly, the historical financial statements presented herein are those of Eyes on the Go, Inc. and do not include the historical financial results of Mutual. The stockholders’ equity section of Mutual has been retroactively restated for all periods presented to reflect the accounting effect of the reverse merger transaction.
Use of Estimates
The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include share based payment arrangements, determining the fair value of the Company’s common stock, and deferred taxes and related valuation allowances. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.
Cash and cash equivalents
We consider all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.
Revenue Recognition
The Company follows the guidance of the SEC’s Staff Accounting Bulletin No. 104 for revenue recognition. The Company records revenue when all of the following have occurred; (1) persuasive evidence of an arrangement exists, (2) product delivery has occurred, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured.
The Company derives its revenues as follows:
| ● | Fees generated from the installation of video equipment are recognized at the end of the pilot period when testing is completed. |
| ● | Monthly monitoring fees are recognized ratably over the period to which it applies. |
| ● | Advertising revenues are recognized when the related advertisement is run. |
| ● | Pay per view revenues are recognized, net of the amount due to the venue and artist, when the performance is aired. |
Intangible asset
Intangible asset represents the integration fee made in connection with the ICARE agreement referred to in Note 6. The fee is being amortized over the four year life of the agreement
Fair Value Measurements
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
The derivative liability in connection with the conversion feature of the convertible debt, classified as a level 3 liability, is the only financial liability measured at fair value on a recurring basis.
Convertible Instruments
The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities. During the year ending December 31, 2013, the Company recognized a loss on extinguishment of $238,433 from the conversion of convertible debt with a bifurcated conversion option.
Stock-Based Compensation
The Company recognizes compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.
Income Taxes
The Company use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.
2 GOING CONCERN
As shown in the accompanying financial statements, the Company has incurred net losses and negative cash flows from operating activities for the years ended December 31, 2013 and 2012, and has a stockholder’s deficiency of $2,602,788 as of December 31, 2013. The Company has relied upon the cash from its Chief Executive Officer and outside investors to fund its ongoing operations to date as it has yet to generate sufficient cash from its operating activities. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern until it completes its financing activities. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
3 RELATED PARTY TRANSACTIONS
Amounts due to related parties consist of:
| | | June 30, 2013 | | | December 31, 2012 | |
| | | | | | | |
| Promissory note to stockholder bearing interest at .55% per annum and due May 1, 2012 | | $ | 185,227 | | | $ | 185,227 | |
| | | | | | | | | |
| Due to stockholder, non-interest bearing and due on demand. | | | 866,887 | | | | 721,239 | |
| | | $ | 1,052,114 | | | $ | 906,466 | |
During the years ended December 31, 2013 and 2012 the Company incurred consulting expenses totaling $216,000 for the services of three members of executive management provided by an entity owned by the CEO. That amount is included in due to related parties.
During the year ended December 31, 2013, the stockholder referred to above exchanged $50,000 of debt owed to him for cash (see Note 4).
4 CONVERTIBLE DEBT
On February 25, 2013, Eyes on the Go, Inc. (the “Company”) entered into a Securities Purchase Agreement with two accredited investors (the “Purchasers”) to sell, in one or more tranches, up to $500,000 in Original Issue Discount Senior Secured Convertible Debentures of the Company, which are due and payable 270 days after the date of issuance (the “Debentures”). The Debentures have a ten percent (10%) original issue discount and are convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to the lesser of $.0015 (adjusted to $.0002238) or 85% of the average volume weighted average price on the five (5) trading days immediately prior to the conversion date. The Debentures are secured by all of the assets of the Company. The Company has determined that the conversion feature embedded in the notes constitutes a derivative and have been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded to the associated debt, on the accompany balance sheet, and revalued to fair market value at each reporting period. The Company has issued an aggregate of $591,212 of convertible notes under this agreement.
The Company has issued $22,200 in convertible notes under a separate Securities Purchase Agreement. The notes have a ten percent (10%) original issue discount and are convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to the lesser of $.0002238 or 85% of the average volume weighted average price on the five (5) trading days immediately prior to the conversion date. The Debentures are secured by all of the assets of the Company. The Company has determined that the conversion feature embedded in the notes constitutes a derivative and have been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded to the associated debt, on the accompany balance sheet, and revalued to fair market value at each reporting period.
During the year ended December 31, 2013, the Company’s majority shareholder exchanged indebtedness to him in the amount of $50,000 to unrelated third parties for cash. Simultaneous with the exchange the Company issued these parties convertible notes. .The notes are convertible into shares of the Company’s common stock at the option of the holder at a purchase price equal to the lesser of $.0002 or 50% of the lowest closing bid price of the company’s common stock during the twenty trading days immediately prior to the conversion date.
| Convertible Debentures Issued | | $ | 663,412 | |
| Less: Discount | | | 289,705 | |
| Less: Converted to common stock | | | 150,750 | |
| Carrying Value | | $ | 222,957 | |
5 STOCKHOLDERS’ DEFICIENCY
On December 6, 2013, the Company amended its Certificate of Incorporation to raise its authorized common stock to 6 billion shares with a par value of .00001 per share.
In a March 2013, the Company issued 5,181,971 shares of common stock to investors for proceeds of $7,500.
In a March 2013, the Company issued 23,376,644 shares of common stock for consulting services which was valued at $33,227
In September 2013, the Company converted $66,300 of loans into 132,600,000 shares of the Company’s common stock.
In a March 2013, the Company issued 3,750,000 shares of common stock for consulting services which was valued at $2,550
During the year ended December 31, 2013, holders of the convertible notes converted their notes aggregating $150,750 into 705,549,353 shares of the Company’s common stock.
6 INCOME TAXES
Deferred tax asset
| Net operating loss | | $ | 690,000 | |
| Valuation allowance | | | (690,000 | ) |
| | | $ | - | |
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, the Company has established a full valuation allowance against all of the deferred tax assets for every period because it is more likely than not that all of the deferred tax assets will not be realized.
The NOLs may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under regulations.
7 ICARE AGREEMENT
On April 1, 2011, the Company entered into an agreement with iCare Marketing, Inc. (“iCare), a wholly owned subsidiary of Sysco Corporation (“Sysco”), whereby iCare will promote the Company’s product to Sysco’s customers. Under the agreement, the Company is committed to pay 5% of the gross revenues received from any Sysco customer, an integration fee, $250 per trade show event attended by the Company and an amount to be determined for additional promotions and marketing programs. The Company paid $50,000 of the integration fee in cash and the balance by issuing 15,861,372 shares of common stock which were valued at $22,205. The integration fee has been recorded at $72,205 and is being amortized over the four-year life of the agreement. $17,060 has been recorded for amortization of the agreement during the years ended December 31, 2013 and 2012.
8 Subsequent events
Management has evaluated events occurring after the date of these financial statements through the date these financial statements were issued, other than disclosed below. There were no material subsequent events as of that date.
The total shares of the Company issued and outstanding as of December 31, 2013 were 2,084,675,792. For the period ending April 4, 2014, the Company converted a number of debt obligations which resulted in the issuance of 432,690,966 shares which brought the total issued and outstanding shares to 2,517,366,758.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act as of December 31, 2013. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were not effective as of such date, at a reasonable level of assurance, in ensuring that the information required to be disclosed by our company in the reports we file or submit under the Exchange Act is: (i) accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, management has concluded that our internal control over financial reporting was not effective as of December 31, 2013. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting pursuant to temporary rules of the Securities and Exchange Commission.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection with our assessment of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act of 2002, we identified the following material weaknesses in our internal control over financial reporting as of December 31, 2012:
| ● | We have difficulty in accounting for complex accounting transactions particularly as it relates to complex equity transactions. |
● | Documented processes do not exist for several key processes |
Because of the material weaknesses noted above, we have concluded that we did not maintain effective internal control over financial reporting as of December 31, 2013, based on Internal Control over Financial Reporting – Guidance for Smaller Public Companies issued by COSO.
Changes in Internal Control over Financial Reporting
No changes have been made in internal control over financial reporting during the year ended December 31, 2013.
ITEM 9B. OTHER INFORMATION
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following sets forth information about our directors and executive officers as of the date of this report:
| Name | | Age | | Position |
| | | | | |
| Christopher Carey | | 61 | | Director; President; Acting Chief Financial Officer |
| Mary Weaver Carey | | 61 | | Director; Chief Operating Officer; Secretary |
The directors named above will serve until the next annual meeting of the Company’s stockholders or until their respective successors have been appointed and duly qualified. Thereafter, directors will be elected for one-year terms at the annual stockholders’ meeting. Officers hold their positions at the pleasure of the board of directors, absent any employment agreement. There is no present arrangement or understanding between any of the directors or officers of the Company and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and, to our knowledge, there is no arrangement, agreement, plan or understanding (a) as to whether non-management stockholders will exercise their voting rights to continue to elect the current directors to the Company’s board and or (b) between non-management stockholders and management under which non-management stockholders may directly or indirectly participate in or influence the management of the Company’s affairs.
None of the directors is receiving compensation for his services as such.
Christopher Carey is the Founder of Enterprises; he also serves as its Chief Executive Officer and Chairman of its Board of Directors. On May 10, 2011, he was elected as our President and our Acting Chief Financial Officer and on August 30, 2011, he was elected as a director of the Company. He is President of Chris Carey Advisors, LLC, a boutique management consulting company specializing in turning around distressed businesses by leveraging IT systems, implementing proprietary sales and marketing techniques, and improving productivity, which he formed in March 2009. In 1976, he founded and until 2000 served as president and director of Datatec Systems, Inc. (“Datatec”), which became North America’s largest deployment services company and which was listed on NASDAQ, and in 2002, he founded and until 2005 served as chief executive officer of Stronghold Technologies, Inc., which was also listed on NASDAQ. Since he left Datatec, in addition to founding Enterprises, he has provided turnaround and workout services to a number of private and family-owned businesses. Mr. Carey is a member of the World Presidents’ Organization, and past chapter chairman of the Young Presidents’ Organization. He was named Entrepreneur of the Year by New Jersey magazine in 1998 and Small Business Philanthropist of the Year by the Community Foundation of New Jersey in 1996. Mr. Carey graduated from Princeton University in 1975. He serves as a director for GSM Systems, a New York based reseller and services provider for broadband equipment. He is an active speaker and contributing columnist for the Huffington Post.
Mr. Carey’s experience in launching and developing technology-based start-up companies, his experience as a chief executive officer and director of two public companies and contacts in the business community led to the conclusion that he should serve as a director of the Company.
Mary Weaver Carey was appointed Vice President Operations of Enterprises on August 26, 2010. On May 10, 2011, she was elected to be our Vice President – Operations and on August 30, 2011, she was elected as a director of the Company. In October 2013, she was promoted to Chief Operating Officer. Ms. Carey founded Datatec with her husband, Mr. Christopher Carey, in 1976 and served as its Vice President of Operations. After leaving that position in 2000 and until 2009, Ms. Carey worked as a private consultant advising several companies, helping them achieve profit and sales growth. She joined Chris Carey Advisors in 2009, at which she continues to be employed. Ms. Carey graduated from Ramapo College in 1974.
Ms. Carey’s many years of experiences as a senior manager of operations for technology-based companies and her work in developing them led to the conclusion that she should serve as a director of the Company.
Our Board of Directors has not adopted a Code of Ethics because the attention of its members, who are also officers responsible for the day-to-day operation of the Company, has been directed to the development of the Company’s business.
The Company has no nominating committee whereby nominees for directors are proposed and has adopted no procedures whereby the stockholders may make suggestions as to such nominees.
The Company has no audit committee and no compensation committee.
ITEM 11. EXECUTIVE COMPENSATION
The following table provides certain information for the fiscal years ended December 31, 2013 and 2012 concerning compensation earned for services rendered in all capacities by our named executive officers.
| SUMMARY COMPENSATION TABLE |
| Name | Year | Salary | Bonus | Stock Awards | Options Awards | Non-Equity Incentive Compensation | Nonqualified Deferred Compensation Earnings | All Other Compensation | Total |
Christopher J Carey-¹ ² Chief Executive Officer | 2013 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| | 2012 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| | | | | | | | | | |
Mary W Carey-¹ Vice President Operations | 2013 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| | 2012 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| | 1 | Although Mr. Carey and, Ms. Carey received no direct compensation from the Company, Carey Advisors received consideration for services that Mr. Carey and Ms. Carey rendered to Enterprises in 2013 and 2012 in the following amounts: Christopher Carey, $72,000 in 2012 and $72,000 in 2013; Mary W. Carey, $72,000 in 2012 and $72,000 in 2012. In addition, Mr. Carey and Ms. Carey were reimbursed for business expenses that they incurred in 2013 and 2012 in the following amounts: Christopher Carey, $0 in 2012, $0 in 2013; Mary W. Carey, $0 in 2012 and 2013. |
| | 2 | President since May 10, 2011. |
Employment Agreements
We do not have an employment agreement with any executive officer.
Equity Awards, Grant Based Awards, Stock Options, Pension Benefits and Deferred Compensation
We have granted no equity or grant based awards, stock options or pension benefits since our inception and have not entered into any deferred compensation plan or arrangement.
Compensation Committee Report
We are presently paying no compensation to our officers and directors; however, we are paying Carey Advisers $18,000 per month to provide the services of the persons comprising Enterprises’ management. See “Directors, Executive Officers and Control Persons – Related Party Transactions – Agreement with Carey Advisers.” We believe that the compensation that these persons are receiving indirectly through Carey Advisers is inadequate in light of the compensation that each of them might be able to obtain from other employers. We recognize that we need to develop compensation programs that will provide adequate cash and short- and long-term incentive compensation in order to attract and retain qualified officers and key employees, but we have not yet determined what the compensation program is designed to reward; the various elements of compensation; why we choose to pay each element; how we will determine the amount to be paid for each element (or the formula for such payment); and how our decisions regarding that element fit into our overall compensation objectives and affect decisions regarding other elements.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information as February 15, 2013, with respect to the holdings of: (1) each person known to us to be the beneficial owner of more than 5% of the Common Stock; (2) each of our directors, nominees for director and named executive officers; and (3) all directors and executive officers as a group. This information is as of the above date, except as otherwise indicated. To the best of our knowledge, each of the persons named in the table below as beneficially owning the shares set forth therein has sole voting power and sole investment power with respect to such shares. The address of each of the persons set forth below is in care of the Company, 40 Fulton Street, 24th Floor, New York, NY 10038.
| Name of Beneficial Owner | | Nature and Amount of Beneficial Ownership of Common Stock | | Percentage of Ownership1 |
| | | | | |
| Christopher Carey | | 143,327,787 | | 6.87% |
Christopher Carey, Jr. ³ | | 160,527,1213 | | 7.70% |
Mary Weaver Carey 4 | | 315,321,1314 | | 15.12% |
| Blazej Kesy | | 143,327,787 | | 6.87% |
All directors and executive officers as a group (2 persons) ¹ | | 458,648,919 | | 22.00% |
| | 1 | Based on 2,084,675,792 shares of Common Stock, comprising 2,084,675,792 shares of Common Stock outstanding as of December 31, 2013 None of the persons named in this table owns any shares of Class B Preferred Stock. |
| | | |
| | 2 | Prior to the Merger, Mark E. Astrom, who served as president of the Company until May 1, 2011, and as a director of the Company until August 29, 2011, owned 1 share of Series A Preferred Stock, which had 75% of the voting power of the Company and 500,085,000 shares of Common Stock. In connection with the Merger, Mr. Astrom transferred 500,080,000 shares of Common Stock to the holders of the Common Stock of EOTG immediately prior to the Merger pro rata in accordance with the number of share of the Common Stock of EOTG owned by them. (See “Business – The Merger”) In addition, Mr. Astrom exchanged the share of Series A preferred stock indirectly held by him and $185,307 of indebtedness of the Company to him (comprising $100,125 of unpaid salary and $85,182 for unreimbursed expenses) that was carried on our books for a secured promissory note in the amount of $473,933.65. For further information about this promissory note and its amendment to reduce its principal amount to $183,229, see “Directors, Executive Officers and Control Persons – Related Party Transactions – Exchange Transaction”). |
| | | |
| | 3 | Mr. Carey owns 17,199,334 shares of Common Stock in his own name and 143,327,787 shares of Common Stock through Tall Oaks Ct., LLC, a limited liability company of which he is the sole member. |
| | | |
| | 4 | Owned through Off the Charts, LLC, a limited liability company of which Ms. Carey is the sole member. |
The Company has no equity compensation plans under which its officers, directors or employees may receive compensation in the form of the Company’s equity securities.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Christopher Carey and Mary Weaver Carey are married to one another. The Company has employed Amie Sepaniak, Christopher Carey’s daughter, as its Business Development Manager to represent the Company in New York City; such employment is at will. Her salary commissions were and will be the same as those payable to unrelated parties.
Related Party Transactions
The following describes transactions for the two fiscal years ended December 31, 2013, or any currently proposed transactions, in which we were or are to be a participant and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”).
Agreement with Carey Advisors
On August 26, 2010, Enterprises entered into an agreement with Chris Carey Advisors, LLC under which Carey Advisors provided Enterprises the services of (i) Christopher Carey as Enterprises’ Chief Executive Officer and Chairman, for which Enterprises agreed to pay $6,000 per month, (ii) Mary Weaver Carey as its Vice President Operations, for which it agreed to pay $6,000 per month, and (iii) Blazej Kesy as its Chief Technology Officer, for which it agreed to pay $6,000 per month. In addition, Enterprises has agreed to reimburse all business related expenses of these persons which are incurred in providing their services. The agreement may be terminated upon 30 days written notice. Mr. Carey is the sole member of Carey Advisers. As of the date hereof, none of Mr. Carey or Ms. Carey are parties to any agreements with the Company. Mr. Carey and Ms. Carey are being compensated through Carey Advisors because the Company is not in a position to compensate them directly. On January 1, 2012, the Company entered into a new agreement with Carey Advisors where i) Christopher Carey will continue as the Company’s Chief Executive Officer, Chief Financial Officer and Chairman of the Board and ii) Mary Carey would dedicated full time to the role of Vice President Operations and Director for a monthly fee of $18,000. As the business is able to generate revenue, the Company intends to compensate these persons directly at competitive salaries and benefits. Mr. Carey and Ms. Carey are currently devoting approximately, 60% and 100% of their work time to the Company’s business. Mr. Carey and Ms. Carey have advised the Company that they intend to devote such time as may be required to the development of the Company and its business. Carey Advisors does not have other customers that compete with the business conducted and to be conducted by the Company and has advised the Company that it does not intend to do business with such customers.
Employment Agreement
The Company and Mark E. Astrom, who served as president of the Company until May 10, 2011, and as a director of the Company until August 29, 2011, were parties to an Employment Agreement, dated as of November 17, 2009, as amended on February 1, 2010, under which he agreed to serve as the Company’s Chief Executive Officer and Director for a period of one year at a salary of $100,000 per year, payable at his election in shares, as valued by the Board of Directors, or in cash. The agreement was to be renewed automatically for successive one-year terms unless a party gave notice of termination 120 days prior to the end of a term and was so renewed on November 17, 2010. On May 1, 2011, the agreement was terminated as of November 30, 2010. On November 24, 2009, 2010, an entity of which Mr. Astrom was the sole stockholder received 500,000,000 shares of Common Stock at his direction in lieu of $5,000 of salary. These shares were reduced to 1,000,000 shares as a result of the Reverse Merger. On July 26, 2010, pursuant to provisions contained in the Employment Agreement which required the Company to protect Mr. Astrom against the effects of the Reverse Split, the Company issued 499,000,000 shares of Common Stock to this entity, such that, upon such issuance, its holdings of Common Stock received under the employment agreement were increased to 500,000,000. These shares were transferred to the holders of shares in EOTG as of the date immediately prior to the Merger ratably in accordance with their holdings of shares in EOTG. Over the term of the employment agreement, $100,125 of unpaid salary and $85,182 of unreimbursed expenses was accrued on the books of the Company and represents a like amount of the principal of the promissory note received by Mr. Astrom in his exchange of certain book entry indebtedness of the Company to him and one share of the Company’s Series A Preferred Stock for a promissory note of the Company. See “Exchange Transaction.”
Spaceport Transaction
On November 30, 2009, the Company accepted the proposal of Spaceport, a California business trust, to sell 1,200,000 shares of beneficial interest therein to the Company in exchange for 480,000,000 shares of Common Stock, of which Mark E. Astrom owned 1,000,000. Accordingly, 400,000,000 shares of Common Stock were distributed to Mr. Astrom. The holders of the other 200,000 shares of beneficial interest in Spaceport, to whom 80,000,000 shares of Common Stock were distributed, were not related parties.
As a result of the Reverse Merger, these 400,000,000 shares of Common Stock were reduced to 800,000 shares. On July 26, 2010, in the belief that the provisions contained in the Employment Agreement which required the Company to protect Mr. Astrom against the effects of the Reverse Split was applicable to these 400,000,000 shares, the Company issued 399,200,000 shares of Common Stock to Mr. Astrom, such that, upon such issuance, his holdings were restored to 400,000,000 shares of Common Stock. The Company and Mr. Astrom later determined that these provisions were not applicable to these 400,000,000 shares and accordingly, Mr. Astrom surrendered 399,200,000 shares to the Company for cancellation.
Exchange Transaction
Prior to the Merger, Mark E. Astrom owned 1 share of the Series A Preferred Stock of the Company and was owed $100,125 for accrued and unpaid salary and $85,182 for unreimbursed expenses, which indebtedness was carried as related party debt on the books of the Company. In satisfaction of a condition precedent to the Merger, Mr. Astrom and the Company entered into an Exchange Agreement, dated as of May 1, 2011, pursuant to which one share of Series A Preferred Stock and all of this indebtedness were exchanged for a promissory note of the Company payable to him in the principal amount of $473,933.65. The promissory note is due on May 1, 2012 and bears interest at the rate of 0.55% per annum. On May 6, 2011, the Company repaid $97,943 of the principal amount of this promissory note to Mr. Astrom. After such repayment, the promissory note was voluntarily amended on August 15, 2011, to reduce the principal amount due thereunder to $185,227, because the parties concluded, among other things, that the aforesaid share of Series A Preferred Stock had been overvalued and that certain covenants of the Company in the promissory note impaired the ability of the Company to raise capital. This promissory note is secured by the pledge of all of the outstanding shares of Enterprises and contains a covenant under which we are required to prevent Enterprises from granting liens upon its property, except for purchase money security interests, pursuant to a Pledge Agreement, dated as of May 1, 2011, between the Company and Mr. Astrom. The Company is uncertain as to whether it will be able to repay the note on a timely basis. As part of the merger transaction, Mark Astrom committed to retire the note based on the meeting of certain conditions, which the Company believes have been satisfied. The Company and Astrom are in discussions confirming the retirement of the note.
Exchange of Preferred Stock
On November 25, 2009, 5 million shares of Series C Preferred Stock held by an entity of which Mark E. Astrom was the sole stockholder were exchanged for 1 share of our Series A Preferred Stock.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree, or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters, if any, that were dismissed without sanction or settlement.
Director Compensation
Currently, we do not pay our directors any cash or other compensation. In the future, we may consider appropriate forms of compensation, including cash compensation and the issuance of Common Stock and stock options.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
We were billed $17500 and $12,500 for the fiscal years ended December 31, 2013, and 2012, respectively, for professional services rendered by the principal accountant for the audit of our annual financial statements in connection with our statutory and regulatory filings.
Audit Related Fees
There was $0 in audit related fees for each of the fiscal years ended December 31, 2013, and 2012. Audit related fees include fees for assurance and related services rendered by the principal accountant related to the audit or review of our financial statements, not included in the foregoing paragraph.
Tax Fees
Tax fees were $0 for each of the fiscal years ended December 31, 2013, and 2012.
All Other Fees
There were no other professional services rendered by our principal accountant during the last two fiscal years that were not included in the above paragraphs.
Preapproval Policy
Our Board of Directors reviews and approves audit and permissible non-audit services performed by its independent accountants, as well as the fees charged for such services. In its review of non-audit service fees and its appointment of Paritz & Co. LLP as the Company's independent accountants, the Board of Directors considered whether the provision of such services is compatible with maintaining independence.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
| (a) | Financial Statements and Schedules. The following financial statements and schedules for the Company as of December 31, 2013 are filed as part of this report. |
(1) Financial statements of the Company and its subsidiaries.
(2) Financial Statement Schedules:
All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(b) Exhibits.
The following Exhibits are incorporated herein by reference or are filed with this report as indicated below.
Item 16. Exhibits and Financial Statement Schedules
| Exhibit No. | | Description |
| 3.1 | | Certificate of Amendment to Registrant’s Certificate of Incorporation, dated December 10, 2013 |
| 3.2 | | Certificate of Corrections to Certificate of Amendment to Registrant’s Certificate of Incorporation, dated April 8, 2014 |
| 31.1 | | Certification of Chief Executive Officer and Chief Financial Officer – Filed herewith. |
| 32.1 | | Certification of Chief Executive Officer and Chief Financial Officer – Filed herewith. |
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.
| | EYES ON THE GO, INC. | |
| | | | |
| By: | /s/ Christopher Carey | |
| | | Christopher Carey | |
| | | Chief Executive Officer | |
| | | | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | | Title | | Date |
| | | | | |
| /s/ Christopher Carey | | Chief Executive Officer; Chief Financial | | April 14, 2014 |
| Christopher Carey | | Officer; Chairman of the Board | | |
| | | | | |
| | | | | |
| /s/ Mary Weaver Carey | | Director | | April 14, 2014 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
29
