EQUITY

6 Months Ended

Jul. 31, 2016

EQUITY

NOTE 8 - EQUITY

Preferred Stock

Series A Preferred Stock

There were no issuances of the Series A Preferred Stock during the six months ended July 31, 2016

Series B Convertible Preferred Stock

During the six months ended July 31, 2016, the Company issued Series B Preferred shares, as follows:

On December 21, 2015, the Company recorded preferred stock payable of $13,438 for 13,437,500 Series B Preferred shares related to the acquisition of the assets of Net D. During the six months ended July 31, 2016 the Company issued 13,437,500 Series B Preferred shares to settle this payable.

On February 3, 2016, 4,750,000 shares were sold for cash of $20,000. On issuance, value of the underlining common stock represented a beneficial conversion feature of $23,344. The beneficial conversion feature will be recognized when the preferred stock becomes convertible on August 3, 2016 as a deemed dividend.

Series C Convertible Preferred Stock

There were no issuances of the Series C Preferred Stock during the six months ended July 31, 2016.

Series D Convertible Preferred Stock

On June 23, 2016, pursuant to its Articles of Incorporation and Bylaws, the Board of Directors of the Company, unanimously approved the designation of a new series of preferred stock, "Series D Convertible Preferred Stock.

Each share of the Series D Preferred Stock shall be convertible, at the option of the holder thereof and subject to notice requirements at any time following 12 months from the issuance of such shares, into such number of fully paid and non-assessable common shares worth $100,000.

During six months ended July 31, 2016, the Company issued 1 share of Series D Preferred Stock with a fair value of $100,000 in connection with the acquisition of XTELUS (see Note 4).

As of July 31, 2016 and January 31, 2016, 1 and 0 shares of Series D Preferred Stock were issued and outstanding, respectively.

Common stock

During the six months ended July 31, 2016, the Company issued common shares, as follows:

	·	155,147,275 common shares were issued for the conversion of debt and accrued interest of $336,007.
	·	24,000,000 common shares in exchange for the exercise of options for no consideration

Warrants and Options

Options

During six months ended July 31, 2016, the Company entered into three separate agreements with consultants to provide the Company with consulting services in exchange for options of 17,000,000, 5,000,000 and 17,000,000 with an exercise price of $0, respectively. The options can be exercised by the holder any time prior to June 30, August 31, and September 30, 2016. These options were tainted as a result of the convertible notes with variable conversion rates (see Note 7) and were accounted for as derivative instruments at the time of issuance. The fair value of the options amounting to $177,000 was recorded as stock compensation expense during the six months ended July 31, 2016, with a corresponding credit to derivative liability (see Note 7).

A summary of activity during the period ended July 31, 2016 follows:

	Options Outstanding
				Weighted Average
	Shares			Exercise Price

Outstanding, January 31, 2016		36,100,000		$	0.03
Granted		39,000,000			-
Exercised		(24,000,000	)		(0.0015	)
Forfeited/canceled		-			-
Outstanding, July 31, 2016		51,100,000		$	0.02

The following table summarizes information relating to outstanding and exercisable stock options as of July 31, 2016:

Options Outstanding					Options Exercisable
Number of Shares	Weighted Average Remaining Contractual life (in years)		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
9,100,000		3.25	$	0.10		9,100,000	$	0.10
20,000,000		0.34	$	0.005		27,000,000	$	0.005
5,000,000		0.08	$	-		5,000,000	$	-
17,000,000		0.17	$	-		17,000,000	$	-
51,100,000		0.77	$	0.02		51,100,000	$	0.02

The options have an intrinsic value at July 31, 2016 and January 31, 2016 of $63,800 and $59,400, respectively.

Employee Incentive Bonus Plan

On June 27, 2016, the Company entered into employee agreement with two employees that contain preferred share issuance incentive bonuses based on various sales targets for XTELUS, for the 12 month period ending June 27, 2017. The first award contains cash compensation of $10,000 per month and the ability to earn 500,000 shares of Series B preferred stock if XTELUS revenue of $1,000,000 is generated within 12 months. The second award contains cash compensation of $20,000 per month, 5 shares of Series D preferred stock earned on June 27, 2017 (with 1 share earned immediately upon revenue of $100,000 being generated within first six months) and the ability to earn up to 6,500,000 shares of Series B preferred stock based upon XTELUS revenue targets up to $1,000,000 over 12 months and up to an additional 3,000,000 shares of Series B preferred stock based upon XTELUS revenue targets up between $1,000,000 and greater than $7,000,000 over 12 months. The Company assessed the probability that the revenue targets will be met and determined that the target revenue will most likely meet $1,000,000 and based on the stock awards, estimated the fair value of 6,500,000 shares of Preferred B stock at $32,500, 5 shares of Preferred D stock at $500,000 and 500,000 shares of Preferred B stock at $2,500, respectively. For the period ended July 31, 2016, the Company recognized stock based compensation of $61,157 under these awards, with a corresponding credit to additional paid in capital.

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

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+ Details

Gawk Inc. 10-Q