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EYE ON MEDIA NETWORK, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations(Edgar Glimpses Via Acquire Media NewsEdge) Note Regarding Forward Looking Statements. This quarterly report on Form 10-Q of Eye On Media Network, Inc. for the period ended February 28, 2014 contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that such statements are not recitations of historical fact, such statements constitute forward-looking statements which, by definition, involve risks and uncertainties. In particular, statements under the Sections: Description of Business, Management's Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements. Where, in any forward-looking statement, the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. The following are factors that could cause actual results or events to differ materially from those anticipated, and include but are not limited to: general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in tax laws; and the costs and effects of legal proceedings. You should not rely on forward-looking statements in this quarterly report. This quarterly report contains forward-looking statements that involve risks and uncertainties. We use words such as "anticipates," "believes," "plans," "expects," "future," "intends," and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this report. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by Eye On Media Network, Inc. Financial information provided in this Form 10-Q, for periods subsequent to August 31, 2013, is preliminary and remains subject to audit. As such, this information is not final or complete, and remains subject to change, possibly materially. Business (a) Business Development Eye On Media Network, Inc. ("we", "us", "our", or the "Company") was incorporated in the State of Florida on August 2, 2013. Since inception on August 2, 2013, the Company has been engaged in organizational efforts and obtaining initial financing. The Company was formed as a vehicle to pursue a business combination and had made no efforts to identify a possible business combination. The business purpose of the Company had been to seek the acquisition of or merger with, and existing company. The Company selected August 31 as its fiscal year end. We are a reporting company and file all reports required under sections 13 and 15d of the Exchange Act. (b) Implications of Being an Emerging Growth Company We qualify as an emerging growth company as that term is used in the Jumpstart Our Business Startups Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions included: (i) A requirement to have only two years of audited financial statements and only two years of related Management Discussion & Analysis disclosures; (ii) Exemption from the auditor attestation requirement in the assessment of the emerging growth company's internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002; (iii) Reduced disclosure about the emerging growth company's executive compensation arrangements; and (iv) No non-binding advisory votes on executive compensation or golden parachute arrangements. 16-------------------------------------------------------------------------------- We have already taken advantage of these reduced reporting burdens, which are also available to us as a smaller reporting company as defined under Rule 12b-2of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the "Securities Act") for complying with new or revised accounting standards. We are choosing to utilize the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. This election allows our Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) which issued more than $1 billion in non-convertible debt during the preceding three-year period. (c) Business of Issuer As of August 31, 2013, the Company, based on proposed business activities, was a "blank check" company. The U.S. Securities and Exchange Commission (the "SEC") defines those companies as "any development stage company that is issuing a penny stock, within the meaning of Section 3 (a)(51) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies." Under SEC Rule 12b-2 under the Exchange Act, the Company also qualified as a "shell company," because it had no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of "blank check" companies in their respective jurisdictions. As a former "shell company", the limitation on public resales of our issued, restricted securities by our shareholders includes a prohibition against the use of SEC Rule 144 until such time as the conditions set forth in Rule 144(i) are met. Rule 144(i) provides that if the issuer of the securities previously had been a shell company but has ceased to be a shell company and is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act; has filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and has filed current "Form 10 information" with the Commission reflecting its status as an entity that is no longer a shell company, then those securities may be sold subject to the requirements of Rule 144 after one year has elapsed from the date that the issuer filed "Form 10 information" with the Commission. On January 22, 2014, the Company entered into the Share Exchange Agreements with the Shareholders of Eye On South Florida, Inc. ("EOSF"). Pursuant to the Exchange Agreement, the Shareholders agreed to exchange each of their shares of EOSF common stock for one (1) share of restricted common stock of the Company. The Shareholders collectively held a total of 24,725,000 Target Shares. The Shareholders are all friends, business associates or family members of our sole officer and director, Jack Namer. Each Shareholder is a sophisticated investor and was a founding member or vendor of EOSF. A representative sample of the Exchange Agreement is attached hereto as an exhibit. As of the consummation of the Exchange Agreements, EOSF became a wholly-owned subsidiary of the Company. Our principal business activities are now occurring through our operation of EOSF. Consideration for the Exchange Agreement consisted of one share of restricted common stock of the Company for each Target Share tendered by the Shareholders in the exchange. A total of 24,725,000 shares of restricted Company common stock were issued to forty-three (43) Shareholders for the Target Shares. The receipt of the Target Shares by the Company was determined by the Company Board of Directors to constitute adequate consideration for issuance of the Company common stock as a result of the value of the assets of EOSF. Prior to the execution of the Exchange Agreement there were three million (3,000,000) shares or our common stock issued and outstanding. Upon completion of the transaction involving the Exchange Agreement, there were 27,725,000 shares of our common stock issued and outstanding. The acquisition was accounted for by the Company as a reverse merger wherein an operating, private company (Eye on South Florida, Inc.) was acquired by the Registrant, which was previously a "blank check company" 17 -------------------------------------------------------------------------------- At the time of execution of the Exchange Agreement, our sole officer and director, Jack Namer also served as an officer and director for EOSF. Mr. Namer also was one of two majority shareholders who each held ten million (10,000,000) shares of the EOSF common stock prior to consummation of the Exchange Agreement. The other shareholder who also held ten million (10,000,000) shares of the EOSF common stock prior to consummation of the Exchange Agreement was Ms. Amy Nalewaik. Mr. Namer determined on January 17, 2014 that it was in the best interest of the Company to acquire EOSF. Mr. Namer is the sole officer and director for both EOSF and the Company. Under such circumstances, Mr. Namer may be viewed as having a conflict of interest in connection with the transaction involving the Company's acquisition of EOSF. Notwithstanding the foregoing, Mr. Namer believes that the transaction was and remains fair to the shareholders of both companies. Before consummation of the Exchange Agreement Mr. Namer and Ms. Nalewaik each held ten million (10,000,000) shares of EOSF common stock. After consummation of the Exchange Agreement, Mr. Namer and Ms. Nalewaik each held zero (-0-) shares of EOSF common stock. After consummation of the Exchange Agreement Mr. Namer held eleven million (11,000,000) shares of our common stock and Ms. Nalewaik held ten million (10,000,000) shares. Prior to consummation of the Exchange Agreement, Mr. Namer and Ms. Nalewaik held one million (1,000,000) and zero (-0-) shares of our common stock, respectively. Description of Business, Principal Products, Services Our wholly-owned subsidiary, Eye On South Florida, Inc. was incorporated in the State of Florida on January 18, 2013. EOSF is actively engaged in the acquisition, development, production and distribution of television and multi-media programming content that is for the people and by the people, thus giving a voice back to communities with good news and entertainment that is conducive to society. Once EOSF "green lights" a production, the business aggressively produces, distributes, and markets the content to the general public in each target area, utilizing proprietary technology, to deliver content to tens of millions of viewers through all communication mediums from our multi-tiered platforms, located in South Florida. EOMN will distribute its content thru the available delivery companies listed below: These statistics are available on Wikipedia and Nielsen ratings. a. COMCAST: the largest cable television company in the United States with over 22 million subscribers. b. DIRECT TV, LLC: As of December 2012, DirecTV had 35.56 million subscribers. c. DISH TV: As of October 2012, Dish TV had 13 million subscribers. d. Roku network on March 5 2013, announced 5 million subscribers. These distribution delivery companies do not include the international markets of China, South America and Africa, which we intend to target for additional distribution of our content. EOSF is generating revenue from banner advertisements on our website (www.eyeonsouthflorida.com), commercial productions, event planners, corporate videos, infomercials, public announcements, pay-per-view live broadcasted transmissions and advertisers, desiring to promote their productions, events and brands alongside the various distribution mediums, whereby content is being aired and/or shared via any and all mediums that the network controls. In addition, the Company is generating revenue from other production companies and/or television networks that request on-site filming and/or our original feeds with the use of our proprietary communication technology and equipment. Among these types of programming is "feel good" programming and transmission that we produce and other stations want, due to the type of news and entertainment in the community that we promote. Eye On South Florida has been assisting and providing valuable airtime pro-bono to non-profit organizations with sponsored ads, in order to promote their fund raising events for important causes in the community. Some of our clients currently include Hard Rock Hotel & Casino, AutoNation, Florida Metro Rail, Fort Lauderdale Chamber of Commerce, Shino Bay Dermatology, DelVecchio Pizza and Universal Insurance. 18 -------------------------------------------------------------------------------- The EOSF Network is producing and distributing original news as it unfolds, along with live and live on tape entertainment programming specials and content that delivers what main stream does not, to include informative educational programming for people of all ages in the community, by way of all its vertically integrated communication mediums. Other sources of revenue such as proprietary branded merchandising and/or licensing fees derived from sharing original programming content with other affiliate TV and Satellite stations are being considered. EOSF distribution platforms include conventional network television, over the air digital, cable television, as well as satellite, presently covering 98% of the populated world. Our technology of simulcasting, delivers content to all mediums, e.g.: web, mobile phones, tablets and any smart device with 4G or wireless connectivity, thus providing a wide array of original content programming, news, marketing merchandising, advertising and distribution. Each EOSF medium has its own advertising rates and revenue models, depending on the production clients' and advertisers' preferred demographics and target markets. In addition, EOSF will seek to receive licensure fees from the use of any proprietary technology that is sub-contracted under a co-production agreement, coupled with ongoing royalties from original programming and merchandising that the network negotiates and sells via any and all mediums that the network controls. Pay-Per-View, live streaming productions are another source of revenue for EOSF and each transmission, utilizing all of our proprietary tools and solutions that will be marketed and promoted for optimum results. The EOSF television and multi-media content development and production slate will be financed by the revenues derived from its own media content, commercial production services, advertiser's revenues, licensing fees and distribution capabilities. Additional revenue will be derived through selling programming and developing quality productions whether originally produced, or co-produced with other producers and clients interested in producing their own content for distribution in any of the EOSF Television & Multi-Media mediums that the Network controls. The business is developing programming which we believe will provide all of the necessary capital for the development of our projects. Upon receiving the necessary capital, the business will be able to operate at the current demand level as well as continue to produce programming, according to comprehensive budgets and be able to solicit advertisers to participate in versatile mediums in return for multiple revenue streams. Each production, whether consisting of commercials or programming of any kind, is subject to a separate financial budget. Each production will leverage this business value and generate more capital for ongoing operations of the Company. EOSF management wants to ensure that it develops the proper content for the proper advertisers and distribution channels, before it heavily engages in the production of original programming for this business. In the meantime, the EOSF Network is currently airing content 24/7 in all of the channels that the Network currently controls including, but not limited to, archiving community news and entertainment within its www.eyeonsouthflorida.com Internet portal, hence generating unprecedented viewers from the world wide web, while promoting the brand and the advertisers whom have already entrusted us to promote their brands alongside the EOSF Network. Distribution Methods Of The Products and Services We are currently distributing our products and services via television in high profile DMA's that are already allocated to reach 22.5 million households, as well as internet and various other delivery mechanisms and portals. "DMA" means "Designated Market Areas" as per the Nielsen ratings. As of January 1, 2014 and used throughout the 2013-2014 television season below are the rankings. 19 -------------------------------------------------------------------------------- Below is the Rank Designated Market Area ("DMA") TV Homes (100% of U.S.) representing the top 18 DMA's. Household's % of US 1 New York 7,461,030 6.442 2 Los Angeles 5,665,780 4.892 3 Chicago 3,534,080 3.052 4 Philadelphia 2,963,500 2.559 5 Dallas-Ft. Worth 2,655,290 2.293 6 San Francisco-Oak-San Jose 2,518,900 2.175 7 Boston (Manchester) 2,433,040 2.101 8 Washington, DC (Hagrstwn) 2,412,250 2.083 9 Atlanta 2,375,050 2.051 10 Houston 2,289,360 1.977 11 Detroit 1,856,400 1.603 12 Phoenix (Prescott) 1,855,310 1.602 13 Seattle-Tacoma 1,847,780 1.596 14 Tampa-St. Pete (Sarasota) 1,827,510 1.578 15 Minneapolis-St. Paul 1,748,070 1.509 16 Miami-Ft. Lauderdale 1,663,290 1.436 17 Denver 1,574,610 1.360 18 Orlando-Daytona Bch-Melb 1,490,380 1.287 Competitive Business Conditions And The Smaller Reporting Company's Competitive Position In The Industry And Methods Of Competition We believe that our competitors usually give people in the communities programming which is of negative impact and which does not engage them. Few channels cover the positive things that the community is doing to help the less fortunate, or even to help themselves. Cable Networks specialize in specific genres and usually have great overheads and liabilities to contend with, in order to fulfill their programming agendas, while meeting the demands of advertisers. Additionally, most of the current news media networks show bias for one side or the other, whether it is the liberal point of view or the conservative point of view. Our goal is to serve all sides of the equation with equal opportunity news and entertainment programming for all opinions and voices in each community that we reach. EOSF covers and promotes up-lifting and empowering content, as well as promotion of proactive safety matters and public announcements. In each market, there are different needs in the community and the people and their issues have a right to be heard! The essence of EOSF Network is to bring people together that is by them and for them. 20-------------------------------------------------------------------------------- The use of proprietary software technology provides EOSF many solutions when it comes to attracting viewers to watch our TV stations, live streaming programming, smart device promotions and/or to engage in its website portals that promote their EYE On Network content. For example www.eyeonsouthflorida.com delivers simultaneous live streaming in between live events and makes it possible for vast amounts of traffic to be generated, long after the events are archived on the websites. EOSF is currently positioned in South Florida as a leader in its genre, as we continue to be the voice of the people, giving them back what they want and need in their communities. The EYE On brand will continue to offer non-profit organizations and their sponsored advertisers a medium from which to promote their production events. Sponsored brands can broaden their audience, especially during live streaming events, which are open to hundreds of millions of viewers from the World Wide Web. News like this does not get around to mainstream media, but at EOSF it does matter and it will always matter because it is what we do! We have no direct competition with the type of alternative programming we produce, benefiting the community and non-profit organizations. As a matter of fact, other main stream media networks have solicited us to re-broadcast our content on their networks, because they now started to see the importance of what we are doing and more important how the community has reacted! Our strategy is to be a resource for other media networks to continue to approach our organization, as a source of content for their programming. We will accomplish this by making sure that we are on the cutting edge of communication, community news and entertainment and new technology. Our platform is designed to give the advertisers multiple ways and methods to broadcast their commercial messages and promote their brands to a wide audience with ease and efficiency, which translates into a time saving and more cost efficient method of producing and distributing commercial advertising and content to all the targeted people, places and even things, which will equate to a better ROI. Note: Millions of dollars are spent each year serving the multi-cultured and diverse South Florida market, as illustrated by data at the following websites: http://www.floridajobs.org/office-directory/division-of-strategic-business-development/florida-strategic-plan-for-economic-development; http://www.minorityprofessionalnetwork.com/miami.asp;and http://www.floridajobs.org/about%20awi/open government/2013 VISITFloridaAnnualReport.pdf. Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements Or Labor Contracts, Including Duration As EOSF develops its programming property portfolio, management fully intends to license and develop strategic relationships with affiliate networks and or satellite cable networks that desire to participate in licensing EOSF's slate of original programming. If our marketing campaigns are successful, we will be able to offer licensing of our trademarked and copyright protected proprietary works, to include new and innovative communication platforms designed to distribute content by way of versatile and vertically integrated mediums as described herein as a part of this business plan to other Networks and communication and technology service providers worldwide. Said proprietary works will be made available to other businesses and as such the fees and licensing percentages will greatly increase our profitability. Number Of Total Employees And Number Of Full-Time Employees At this time, the Company has five part-time contracted employees. Critical Accounting Policies We prepare our condensed financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the condensed financial statements are prepared. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation of our condensed financial statements. 21 -------------------------------------------------------------------------------- While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material. Our Plan of Operation for the next twelve months is to raise capital to implement our strategy. We do not have the necessary cash and revenue to satisfy our cash requirements for the next twelve months. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then we may not be able to expand our operations. If adequate funds are not available, our sole officer and director has verbally agreed to fund our operations. We do not know whether we will issue stock for the loans or whether we will merely prepare and sign promissory notes. If we are forced to seek funds from our officers or directors, we will negotiate the specific terms and conditions of such loan when made, if ever. Financial Condition Results of Operations for three months ended February 28, 2014 Revenues Total Revenue. Total revenues for the three months ended February 28, 2014 and 2013 were 5,000 and $8,355, respectively. Expenses Total Expenses. Total expenses for the three months ended February 28, 2014 and 2013 were $216,317 and $66,032. Total expenses consisted of professional fees of $28,393 and $9,004, general and administrative expenses of $41,188 and $15,436 and depreciation of $146,736 and 41,592. Total expenses were the result of operations. Results of Operations for six months ended February 28, 2014 Revenues Total Revenue. Total revenues for the six months ended February 28, 2014 and 2013 were $21,150 and 8,355, respectively. Expenses Total Expenses. Total expenses for the six months ended February 28, 2014 and 2013 were $303,302 and $66,032. Total expenses consisted of professional fees of $39,444 and $9,004, general and administrative expenses of $63,809 and $15,436 and depreciation of $200,049 and $41,592. Total expenses were the result of operations. Financial Condition Total Assets. Total assets at February 28, 2014 were $1,815,820. Total assets consist of cash of $32,403, other current assets of $42,667 and property and equipment, net of depreciation in the amount of $1,740,750. The property and equipment was acquired through the issuance of stock.. Total Liabilities. Total liabilities at February 28, 2014 were $11,864. Total liabilities consist of related party loans of $6,000 and accrued expenses of $5,864. Liquidity and Capital Resources The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. 22 -------------------------------------------------------------------------------- The Company sustained a loss for the six months ended February 28, 2014 of $282,152. The Company has an accumulated loss of $456,930. Because of the absence of positive cash flows from operations, the Company will require additional funding for continuing the development and marketing of products. These factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. We are presently able to meet our obligations as they come due. At February 28, 2014 we had working capital of $63,206. Our working capital deficit is expected to be used in operations. Net cash used in operating activities for the six months ended February 28, 2014 was ($52,492). Net cash used in operating activities includes our net loss, less depreciation, accounts payable, prepaid expense, accrued salaries. Net cash provided by investing activities for the six months ended February 28, 2014 was $2,450. The cash provided by investing activities was cash acquired in the reverse merger for stock. Net cash provided by financing activities for the six months ended February 28, 2014 was $33,000. Net cash provided by financing activities are proceeds from the issuance of common stock for $33,000. We anticipate that our future liquidity requirements will arise from the need to fund our growth from operations, pay current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated from operations and raising additional funds from the private sources and/or debt financing. However, we can provide no assurances that we will be able to generate sufficient cash flow from operations and/or obtain additional financing on terms satisfactory to us, if at all, to remain a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. Our Plan of Operation for the next twelve months is to raise capital to continue to expand our operations. Although we are not presently engaged in any capital raising activities, we anticipate that we may engage in one or more private offering of our company's securities. We would most likely rely upon the transaction exemptions from registration provided by Regulation D, Rule 506 or conduct another private offering under Section 4(2) of the Securities Act of 1933. See "Note 2 - Going Concern" in our financial statements for additional information as to the possibility that we may not be able to continue as a "going concern." We have no known demands or commitments and are not aware of any events or uncertainties that will result in or that are reasonably likely to materially increase or decrease our current liquidity. We are not aware of any trends or known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in material increases or decreases in liquidity. Capital Resources. We had no material commitments for capital expenditures as of February 28, 2014. Off-Balance Sheet Arrangements We have made no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. |