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EX-32.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER, PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - CrowdGather, Inc.crwgex322.htm
EX-31.2 - CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER, REQUIRED BY RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - CrowdGather, Inc.crwgex312.htm
EXCEL - IDEA: XBRL DOCUMENT - CrowdGather, Inc.Financial_Report.xls
EX-32.1 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER, PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - CrowdGather, Inc.crwgex321.htm
EX-31.1 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER REQUIRED BY RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - CrowdGather, Inc.crwgex311.htm
EX-23.1 - CONSENT OF Q ACCOUNTANCY CORPORATION - CrowdGather, Inc.crwgex231.htm
EX-22 - SUBSIDIARIES OF THE REGISTRANT - CrowdGather, Inc.crwgex21.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
[ X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2014
 
[   ] 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: 000-52143
 
CrowdGather, Inc.
 (Exact name of registrant as specified in its charter)
Nevada
 
20-2706319
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
20300 Ventura Blvd. Suite 330, Woodland Hills, California
 
91364
(Address of principal executive offices)
(Zip Code)
 
(818) 435-2472
(Registrant’s Telephone Number, Including Area Code)
   
Securities registered under Section 12(b) of the Act:
 
 
Title of each class registered:
 
Name of each exchange on which registered:
None
None 
 
Securities registered under Section 12(g) of the Act:
 
 
Common Stock, Par Value $.001
(Title of Class)
 
 
Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   o  Yes     x No
 
Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   o  Yes     x No
 
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. x Yes  o No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x  Yes    o  No
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. x
 
Indicate by check mark whether the registrant is a large accelerated file, 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 12b-2 of the Exchange Act.
 
Large accelerated filer o
Accelerated filer o
Non-accelerated filer   o    (Do not check if a smaller reporting company)
Smaller reporting company x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  o  Yes x No
 
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 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 October 31, 2013, approximately $4,605,608.
 
As of July 7, 2014, there were 116,733,508 shares of the issuer’s $.001 par value common stock issued and outstanding.
 
Documents incorporated by reference. There are no annual reports to security holders, proxy information statements, or any prospectus filed pursuant to Rule 424 of the Securities Act of 1933 incorporated herein by reference.


 
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TABLE OF CONTENTS
 
   
PAGE
 
PART I
 
PART II
 
PART III
 
PART IV


 

 
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PART I
 
Forward-Looking Information
 
This Annual Report of CrowdGather, Inc. on Form 10-K contains forward-looking statements, particularly those identified with the words, “anticipates,” “believes,” “expects,” “plans,” “intends,” “objectives” and similar expressions. These statements reflect management’s best judgment based on factors known at the time of such statements. The reader may find discussions containing such forward-looking statements in the material set forth under “Management’s Discussion and Analysis and Plan of Operations,” generally, and specifically therein under the captions “Liquidity and Capital Resources” as well as elsewhere in this Annual Report on Form 10-K. Actual events or results may differ materially from those discussed herein. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.
 
 
Our Background.   CrowdGather, Inc. formerly WestCoast Golf Experiences, Inc., (the “Company,” “we” or “CrowdGather”) was incorporated in the State of Nevada on April 20, 2005.
 
On April 2, 2008, the Company, General Mayhem LLC (“General”) and the Company’s wholly owned subsidiary, General Mayhem Acquisition Corp. (the “Acquisition Subsidiary”), closed the agreement and plan of merger, pursuant to which General merged into the Acquisition Subsidiary, with the Acquisition Subsidiary surviving, and each share of General was converted into and became one (1) share, such that former members of General were issued 26,000,000, or approximately 64.9%, of the outstanding shares at that time. Immediately thereafter, the Acquisition Subsidiary merged with and into the Company, with the Company surviving, and the Company changed its name to CrowdGather, Inc.

Recent Developments.

Sale of PbNation. On May 19, 2014, we sold the online forum PBNation.com and related website and domain names to VerticalScope, Inc. for $1,380,000 in cash. The Purchase Agreement is attached as Exhibit 10.1 to the Current Report on Form 8-K, which was filed on May 1, 2014.

Merger with Plaor, Inc. On May 19, 2014, we closed the Agreement and Plan of Merger with Plaor, Inc., a Delaware corporation (“Plaor”) and our wholly-owned subsidiary, Plaor Acquisition Corp., pursuant to which Plaor Acquisition Corp. merged with Plaor and Plaor survived as our wholly-owned subsidiary (“Merger”). Pursuant to the Merger, the shareholders of Plaor received 55,075,800 shares of common stock of CrowdGather .

Background of Plaor. Plaor was initially organized as Plaor LLC in the State of Delaware on March 5, 2012.  On May 1, 2014, Plaor filed a Certificate of Conversion with the Secretary of State of Delaware pursuant to which Plaor was converted to a corporation.

Our Business.   We are an Internet company that specializes in monetizing a network of online forums and message boards designed to engage, provide information to and build community around users. We are in the process of building what we hope will become an important social, advertising and user generated content network by consolidating existing groups of online users who post on message boards and forums. Our goal is to create superb user experiences for forum communities and world class service offerings for forum owners. We believe that the communities built around message boards and forums are one of the most dynamic sources of information available on the web because forums are active communities built around interest and information exchange on specific topics.

 
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Our network is comprised of two types of forum communities: branded and hosted communities that are built on one of our forum hosting platforms.  The branded communities, such as Pocketables.com and Digishoptalk.com, are wholly owned by us and we monetize them through a combination of text and display ads.  The hosted communities comprise the majority of our revenues, traffic, and page views, and are built upon one of our leading forum hosting platforms - Yuku.com and Freeforums.org.  We monetize the web traffic on these sites through a combination of Internet advertising mediums at our discretion in exchange for providing free software, support and hosting.  In some instances, we may derive subscription revenues in lieu of or in addition to advertising revenue because the site administrator has decided to pay monthly fees in exchange for providing an ad-free experience and other services for their members.  Our goal is to ultimately build an advertising network that allows us to leverage the targeted demographics of the combined network in order to generate the highest advertising rates for all of our member sites.
 
As a result of the Merger with Plaor, we have subsequently devoted a significant portion of our operations to the business of Plaor and expect to continue to do so in order to expand our operations.

Plaor’s Business. Plaor specializes in developing highly scalable multi-platform games that are available on Facebook, Google Play, and the Apple App Store. Plaor’s initial social gaming platform is a simulated casino environment referred to as Mega Fame Casino wherein individual gamers are able to play online casino style games socially with other players from around the world. Unlike traditional casinos or their online counterparts, the betting on Mega Fame is virtual and no real money bets are accepted and there is no ability for a player to redeem their winnings for cash. Despite the lack of traditional cash betting, we believe that players experience the same entertainment as they experience in a casino setting. Mega Fame Casino is a gaming platform which includes multiple games, combined to emulate a casino environment. Along with the company’s initial Hollywood Poker offering, the Mega Fame Casino also includes Video Poker, multiple slot machines, and a daily celebrity challenge designed to increase engagement and retention of players.

Mega Fame Casino features celebrities from film, television, professional sports, and the music industry and offers weekly celebrity tournaments which we believe bring unique experiences to social games as players can play and interact with their favorite stars.  Plaor’s mission is to create great social game experiences that bring enjoyment and a sense of community to its players.  Plaor strives to “treat everyone like a star” with high quality products, exceptional customer service, and personal attention for all of its players.

In addition to its focus on social games, Plaor has developed a web-based technology platform to facilitate short development cycles and data collection systems.  Plaor collects and analyzes large volumes of player behavioral data continually and utilizes analysis of those data to understand its players and maximize its platform’s potential as a creative social game environment.
 
Plaor’s technologies include a mixture of native and managed frameworks deployed to both internal and hosted environments. Based on well-known web technologies, Plaor has engineered systems built to maximize operating and development efficiencies while maintaining what we believe is a high quality experience for the user.
 
Plaor also has a content tool chain that allows for real time and seamless content deployment paths on all of its currently supported distribution channels.  This technology is fundamental in our ability to rapidly expand and enhance our game experiences with minimal friction in either the distribution of content or our players’ ability to access it.

Our Community of Online Forums. Our forum community connects what we believe is a robust and vibrant network of people sharing their questions, expertise and experiences. We hope that this collection of forums will help users easily access relevant, dynamic, and compelling user-generated content, conversations and commerce.

Our primary objective is to maximize the monetization of page views and user actions across our network of forum properties, with a primary focus on U.S. and Western traffic that can earn more lucrative ad payouts. Among other considerations, defining potential monetization typically includes the review of traffic analytics. Historically, we have reported ranges of monthly page views and monthly unique visitors as of a given point in time. However, when we purchase a site, the seller may not have analytics tags installed to properly gauge traffic and occasionally we must install the analytics tags in order to define and then estimate key traffic statistics. Combined with our ongoing efforts to create premium ad inventory by removing inactive sites, and pruning other sites to remove content that violates our advertising partners’ terms of service agreements and international content that is not easily monetized, the use of such estimates can contribute to quarter over quarter variances in traffic analytics. We will from time to time continue to engage in pruning our sites to remove inactive accounts and other content where monetization is not feasible. These activities can contribute to creating an improved ad network capable of earning higher ad rates, but they can also result in reductions of page views, unique visitors, registered users, discussions and posts. Although traffic analytics such as monthly page views and monthly unique visitors can be useful indicators, a more important determinant of value from a business perspective is our ability to generate and increase the revenues we receive from higher ad rates since not all traffic can be efficiently monetized.

We seek to continually add to the number of communities our website services by acquiring additional active forums, thereby increasing traffic to our site and the number of forums we host.
 
 
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Revenues. We derive revenue principally from the sale of Internet advertising and sponsorships, as well as from subscription services on free forum hosting platforms and e-commerce. The Internet is an attractive forum for certain advertisers, depending on the number of users we have and a variety of other factors.  Internet advertising spending continues to increase on an annual basis.  We believe that significant revenues can be generated from online advertising both for our Company-owned sites as well as on a commission sales basis for our third-party network sites.
 
Plaor generates revenue from Mega Fame Casino through the sale of virtual currency to players that they may exchange to play at any of our online slot machines, video poker machines, Hold’em style poker tables, or for other features and experiences available within Mega Fame Casino. Players can pay for our virtual currency using Facebook local currency payments when playing our games through Facebook and can use other payment methods such as credit cards or PayPal on other platforms. Mega Fame Casino currently has more than 20,000 daily active users.
 
Sales, Marketing and Distribution. We intend to pursue direct sales with advertisers interested in exposing their products or services to our forum populations on a targeted basis.  We will work not only with direct advertisers, but also advertising networks as represented by intermediaries.  A key component of our strategy will be to customize advertising programs that are directly relevant to an advertiser, while not at odds with our online communities.  We will also allow for direct personalized advertising sales to the members of our respective forum communities who wish to market their products or services to their fellow members.
   
We hope to develop a widely recognized brand, which will enable us to attract, retain, and more deeply engage users, forum owners, advertisers, publishers, and developers. We believe a great brand begins with a great product, services, and content.  We focus on each step of product and services development, deployment, and management and content design to understand our offerings and how best to market them to our communities of potential and existing users. We hope to use online advertising, and leverage our online network and our distribution partnerships to market our products and services to the right people at the right time. With continued investment in brand and product marketing, we believe we can continue to attract and engage users, advertisers, publishers, and developers.
 
In order to highlight our capabilities beyond traditional Internet advertising, we undertook a social media marketing initiative wherein we partnered with a technology company in order to create and market a fragrance product called Erox.  In May 2011, we acquired the Erox.com domain name, “Erox” trademark in the United States and produced a limited amount of product. Our investment in this project has been immaterial to date.

Plaor’s users are primarily acquired through the Facebook advertising platform for both desktop and mobile users.  We have invested in the creation of an advanced advertising tool set that has been tightly integrated with our game products.  This tool set enables our marketing teams to more efficiently study, segment, and target user segments inside of and outside of our products.
 
Plaor also operates product web sites, Facebook fan pages, and other social media accounts to connect and cultivate players into a thriving community of dedicated fans.  Fans can join these online sites to interact with other players of Plaor’s games and to receive special promotions and sale items exclusively for participants in these sites and pages.
 
Plaor sponsors or hosts live and online events with specific themes or topics that Plaor believes are interesting to its community of players.  These events include sponsorship of events such as “The Night of 100 Stars” and land-based poker tournaments featuring many of the celebrities with whom players can interact within our social game products.

Competition. We operate in the Internet products, services, and content markets, which are highly competitive and characterized by rapid change, converging technologies, and increasing competition from companies offering communication, information, and entertainment services integrated into other products and media properties.
 
We compete for users, advertisers, publishers, and developers with many other providers of online services, including Web businesses where expertise in a particular market segment may provide a competitive advantage and with social media and networking competitors. Ad networks which create specialized marketing solutions for specific advertiser or publishers segments, also compete with us for a share of marketing budgets.
 
We compete with companies to attract users and developers as well as attract advertisers and publishers to our forums. The principal competitive factors relating to attracting and retaining users include the usefulness, accessibility, integration, and personalization of the forums that we offer and the overall user experience on our sites.
 
 
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Many of our current and potential competitors have longer operating histories, more industry experience, larger customer or user bases, greater brand recognition and significantly greater financial, marketing and other resources than we do. We may not be able to compete with either the large or mid-sized companies. We are also at a significant competitive disadvantage within the Internet industry because we have limited capital resources. Our ability to compete will depend on our ability to obtain users of our products without spending any significant funds to market and promote our products.

The social gaming industry in which Plaor operates is also highly competitive, and we expect to face constant competition as new titles emerge onto the marketplace due to the low development costs and negligible barriers to entry in launching social games. We face competition from a number of entities who develop games as well as many traditional and digital forms of entertainment. These competitors include established gaming companies such as King.com, Electronic Arts Inc., Zynga Inc. and numerous smaller privately-held companies as well as independent developers. We also face increased competition if large companies with significant online presences such as Facebook, Inc., Google Inc., Amazon.com, Inc., Apple, Inc., The Walt Disney Company or Yahoo! Inc., choose to enter or expand in the games space or develop competing social casino games. Many of our potential competitors have significant resources for developing or acquiring additional games, and may be able to incorporate appealing brands and assets into their games or distribution of their titles. We also face potential competition from the established casino companies who may develop their social casino own platforms in competition with ours.

Intellectual Property. Our intellectual property assets include domain names and websites; trademarks related to our brands, products and services; copyrights in software and creative content; trade secrets; and other intellectual property rights and licenses of various kinds. We also currently own the web domain www.crowdgather.com , which serves as our corporate website, and www.plaor.com, which serves as Plaor’s corporate website.  Our portfolio currently consists of over 500 domain names and over 70 web properties at various stages of development.  Our corporate website ( www.crowdgather.com ) features a current list of our developed communities and software products.
 
Under current domain name registration practices, no one else can obtain an identical domain name, but someone might obtain a similar name, or the identical name with a different suffix, such as “.org”, or with a country designation.  The regulation of domain names in the United States and in foreign countries is subject to change, and we could be unable to prevent third parties from acquiring domain names that infringe or otherwise decrease the value of our domain names.
 
We seek to protect our intellectual property assets through patent, copyright, trade secret, trademark and other laws of the United States and other countries, and through contractual provisions. We enter into confidentiality and invention assignment agreements with our employees and contractors, and non-disclosure agreements with third parties with whom we conduct business in order to secure our proprietary rights and additionally limit access to, and disclosure of, our proprietary information. We consider our trademarks to be our most valuable assets and we will seek to register these trademarks in the United States and will seek to protect them. We have licensed in the past, and expect that we may license in the future, certain of our proprietary rights, such as trademark, patent, copyright, and trade secret rights to third parties. 
 
Government Regulation. We are subject to regulations and laws directly applicable to providers of online content and services. Many laws and regulations, however, are pending and may be adopted in the United States, individual states and local jurisdictions and other countries with respect to the Internet. The federal government and some state governments have introduced or considered legislation relating to Internet usage generally, including measures relating to privacy and data security, as well as specific legislation aimed at social networking sites, such as ours.  It is not possible to predict whether or when such legislation may be adopted, and certain proposals, if adopted, could negatively affect our business. We do not know for certain how existing laws governing issues such as property ownership, copyright and other intellectual property issues, digital rights management, security, illegal or obscene content, retransmission of media, spyware, and personal privacy and data protection apply to the Internet.  We monitor pending legislation to ascertain relevance, analyze impact and develop strategic direction surrounding regulatory trends and developments within the industry.

A number of U.S. federal laws, including those referenced below, impact our business. The Digital Millennium Copyright Act (“DMCA”) is intended, in part, to limit the liability of eligible online service providers for listing or linking to third-party Websites that include materials that infringe copyrights or other rights of others. Portions of the Communications Decency Act (“CDA”) are intended to provide statutory protections to online service providers who distribute third-party content. We rely on the protections provided by both the DMCA and CDA in conducting our business. Any changes in these laws or judicial interpretations narrowing their protections will subject us to greater risk of liability and may increase our costs of compliance with these regulations or limit our ability to operate certain lines of business. The Children’s Online Privacy Protection Act of 1998 (“COPPA”) prohibits web sites from collecting personally identifiable information online from children under age 13 without prior parental consent. The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (“CAN-SPAM”) regulates the distribution of unsolicited commercial emails, or “spam.” Online services provided by us may be subject to COPPA and CAN-SPAM requirements. Congress and individual states may also consider online privacy legislation that would apply to personal information collected from teens and adults. We believe that we are in material compliance with the requirements imposed by those laws and regulations.
 
 
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Plaor’s games are based upon traditional casino games, such as poker. We have structured and operate our casino-themed games with the gambling laws in mind and believe that playing such games does not constitute gambling.
 
We are also subject to federal, state and local laws and regulations applied to businesses generally. We believe that we are in conformity with all applicable laws in all relevant jurisdictions. We do not believe that we have not been affected by any of the rules and regulations specified in this section.
 
Research and Development. We seek to continually enhance, expand, and launch products and features to meet evolving user, advertiser, and publisher needs for technological innovation and a deeper, more integrated experience for the online community of users. We intend to leverage our internal development efforts through technology acquisitions.  
 
As Plaor is a social games company, we believe that the need to anticipate social and technical trends is significant.  We believe it is necessary to invest in the development of new games, code, and tools in an effort to achieve our strategic goals and objectives.  Plaor’s research and development costs were approximately $2.5 million for the fiscal year ended April 30, 2014.

Our Subsidiaries. In May 2014, we acquired Plaor, Inc., which operates as a wholly owned subsidiary. In June 2010, we acquired Adisn, Inc., which operates as a wholly owned subsidiary.
 
Employees. As of July 7, 2014, we have five full time employees, and an additional 21 employees relating to the Plaor merger.  None of our employees are covered by a collective bargaining agreement, nor are they represented by a labor union. We have not experienced any work stoppages, and we consider relations with our employees to be good.
 
 
An investment in our securities involves a high degree of risk.  You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities.  If any of the following risks actually occurs, our business, financial condition, and/or results of operations could be harmed.  In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.  You should only purchase our securities if you can afford to suffer the loss of your entire investment.
 
Risks Related to Our Business:
 
We have a history of net losses which will continue and which may negatively impact our ability to achieve our business objectives.
 
For the year ended April 30, 2014, we had revenue of $1,537,051 and a net loss of $7,725,770 compared to revenue of $1,933,298 and a net loss of $2,782,451 for the year ended April 30, 2013. There can be no assurance that our future operations will result in net income. Our failure to increase our revenues will harm our business. We may not be able to operate profitability on a quarterly or annual basis in the future. If our revenues grow more slowly than we anticipate or our operating expenses exceed our expectations, our operating results will suffer.
 
Our auditors have questioned our ability to continue operations as a “going concern.” Investors may lose all of their investment if we are unable to continue operations.
 
We hope to obtain significant revenues from future sales.  In the absence of significant sales and profits, we will seek to raise additional funds to meet our working capital needs principally through the additional sales of our securities.  However, we cannot guarantee that we will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to us. As a result, our auditors believe that substantial doubt exists about our ability to continue operations. In the event we are not able to continue operations, our securities will become worthless.
 
 
 
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Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.
 
We have a relatively limited operating history.  Such limited operating history and the unpredictability of the success of online forums and Plaor’s social casino makes it difficult for investors to evaluate our business and future operating results. An investor in our securities must consider the risks, uncertainties, and difficulties frequently encountered by companies in our industry.  The risks and difficulties we face include challenges in accurate financial planning as a result of limited historical data and the uncertainties resulting from having had a relatively limited time period in which to implement and evaluate our business strategies as compared to older companies with longer operating histories.
 
We will need additional financing to execute our business plan.
 
The revenues from the sale of advertising and forum memberships and the projected revenues from Plaor are not currently adequate to support our expansion and product development programs. We will need additional funds to:
 
·
effectuate our business plan;
·
expand our online reach and presence;
·
develop and enhance our technological capabilities, including new social casino games;
·
file, prosecute, defend and enforce our intellectual property rights; and
·
hire and retain key employees. 
 
We will seek additional funds through public or private equity or debt financing, via strategic transactions, and/or from other sources. There are no assurances that future funding will be available on favorable terms or at all.  If additional funding is not obtained, we may need to reduce, defer or cancel development programs, planned initiatives, or overhead expenditures to the extent necessary.  The failure to fund our operating and capital requirements could have a material adverse effect on our business, financial condition and results of operations.
 
Additional capital may be costly or difficult to obtain.
 
Additional capital, whether through the offering of equity or debt securities, may not be available on reasonable terms or at all. If we are unable to obtain required additional capital, we may have to curtail our growth plans or cut back on existing business and, further, we may not be able to continue operating if we do not generate sufficient revenues from operations needed to stay in business.  We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition.  
 
A small number of games currently generate a substantial majority of Plaor’s revenue.

Plaor’s top game currently accounts for nearly 100% of our total gross revenues from Plaor. In future periods, we expect this game to represent a smaller percentage of our total gross revenues from Plaor as we diversify our game portfolio. If the gross revenues from our top game are lower than anticipated and we are unable to broaden our portfolio of games or increase gross revenues from those games, we will not be able to maintain or grow our revenue and our financial results could be adversely affected.

We must develop new games and enhance Plaor’s existing games so that our players will continue to play our games and make purchases of virtual items within our games.

Our continued growth will depend on our ability to regularly develop new games and enhance our existing games in ways that improve the gaming experience for both paying and non-paying players while encouraging the purchase of virtual items within our games. In the event our current game development model ceases to be effective in generating revenues, our operating results will suffer. It is possible that only a small number of our games, if any, will generate significant revenues through purchases of virtual items.
 
 
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Our resources may not be sufficient to manage our potential growth; failure to properly manage our potential growth would be detrimental to our business.
 
We may fail to adequately manage our potential future growth. Any growth in our operations will place a significant strain on our administrative, financial and operational resources, and increase demands on our management and on our operational and administrative systems, controls and other resources. We cannot assure you that our existing personnel, systems, procedures or controls will be adequate to support our operations in the future or that we will be able to successfully implement appropriate measures consistent with our growth strategy. As part of this growth, we may have to implement new operational and financial systems, procedures and controls to expand, train and manage our employee base, and maintain close coordination among our technical, accounting, finance, marketing and sales staff. We cannot guarantee that we will be able to do so, or that if we are able to do so, we will be able to effectively integrate them into our existing staff and systems. There may be greater strain on our systems mainly because we have acquired a business and significant number of Internet properties over the last 48 months and have had to devote significant management time and expense to the ongoing integration and alignment of management, systems, controls and marketing. To the extent we acquire other businesses, we will also need to integrate and assimilate new operations, technologies and personnel. If we are unable to manage growth effectively, such as if our sales and marketing efforts exceed our capacity to install, maintain and service our products or if new employees are unable to achieve performance levels, our business, operating results and financial condition could be materially and adversely affected.   

 Interest-group forums may not prove to be a viable business model.
 
Interest-group forums as a business model for delivering information and entertainment over the Internet is unproven, and we have only recently developed a business centered on this model. It is too early to predict whether consumers will accept, and use our products on a regular basis, in significant numbers, and participate in our online community. Our products may fail to attract significant numbers of users, or, may not be able to retain the usership that it attracts, and, in either case, we may fail to develop a viable business model for our online community. In addition, a significant portion of the content that we provide is available for free. If we are unable to successfully monetize the use of our content, either through advertising or fees for use, we may not be able to generate sufficient revenues.

If players do not find our social casino games compelling and engaging, we could lose players and our revenue could decline.

Our most successful game to date has been our Mega Fame Casino and Slots and we intend to continue to develop new games in this genre. It is possible that players could lose interest in our social casino over time due to a variety of reasons, including the emergence of new formats that players find more engaging, increased popularity of other game titles, or lack of sustained interest or loss of interest in particular games or the genre of games. If large numbers of players were to lose interest on our social casino or if we are not able to develop games in new casual sub-genres or if we cannot develop new game formats, we could lose players, and our revenue and business could be harmed.
 
Plaor has a short history offering games on mobile and social platforms on a free-to-play basis. This model and these platforms are relatively new and evolving. These factors make it difficult to evaluate our future prospects and financial results.

Prior to the Merger, we primarily generated revenue from online forums and from sales of advertising available on our forums. As a result of the Merger with Plaor, we offer Plaor’s games through Facebook and on mobile platforms through the Apple App Store and the Google Play Store. Accordingly, we have had limited experience offering games using these new distribution platforms, which makes it difficult to effectively assess their long-term prospects. In addition, mobile platforms and social networks have only recently become significant distribution platforms. As a result, we have limited experience with our model and we also have limited information operating in these markets. Thus, it is difficult for us to forecast our future revenue growth, if any, and to plan our operating expenses appropriately, which in turn makes it difficult to predict our future operating results.

If the use of mobile devices as game platforms and the proliferation of mobile devices generally do not increase, Plaor’s business could be adversely affected.

While the number of people using mobile Internet-enabled devices, such as smartphones and handheld tablets, has increased dramatically in the past few years, the mobile market, particularly the market for mobile games, is still emerging and it may not grow as we anticipate. Our future success is substantially dependent upon the continued growth of use of mobile devices for games. The proliferation of mobile devices may not continue to develop at historical rates and consumers may not continue to use mobile Internet-enabled devices as a platform for games. In addition, we do not yet offer our games on all mobile devices. Therefore, if the mobile devices on which our games are available decline in popularity, we could experience a decline or a slow in growth in revenue until we are able to develop versions of our games for other mobile devices or platforms. Any decline in the usage of mobile devices for games could harm our business.

 
9

 
Plaor’s free-to-play business model depends on the sale of virtual currency to players, and our business, financial condition and results of operations will be materially and adversely affected if we do not continue to successfully implement this model.

Plaor derives nearly all of its revenue from the sale of virtual currency in its social casino. Our games are available to players for free, and we generally generate revenue only through the sale of virtual currency to players that they may exchange to play at any of our online slot machines, video poker machines, Hold’em style poker tables, or for other features and experiences available within Mega Fame Casino. If we offer games that do not attract purchases of virtual currency, our business, financial condition and results of operations will be materially and adversely affected.

We may be unable to attract advertisers to our online forums.
 
Advertising revenue comprises a significant portion of the revenue generated by the forums that we own. Most large advertisers have fixed advertising budgets, only a small portion of which has traditionally been allocated to Internet advertising. In addition, the overall market for advertising, including Internet advertising, has been generally characterized in recent periods by softness of demand, reductions in marketing and advertising budgets, and by delays in spending of budgeted resources. Advertisers may continue to focus most of their efforts on traditional media or may decrease their advertising spending. If we fail to convince advertisers to spend a portion of their advertising budgets with us, we will be unable to generate revenues from advertising as we intend.
 
Our forum business generates revenue almost entirely from advertising and retaining other sites as paid participants in our community, and the reduction in spending by, or loss of, advertisers and members could seriously harm our ability to generate revenues.
 
Our forum business generates revenues from advertisers and other communities that pay to affiliate with our sites. If we are unable provide value to potential advertisers or other online communities, we may not be able to sell any ad space or memberships, which would negatively impact our revenues and business. In addition, we expect that advertisers will be able terminate their contracts with us at any time. We may also encounter difficulty collecting from our advertisers because we are a very small company with limited resources to collect outstanding balances.
 
If we are unable to compete effectively in the forum sector or the social gaming sector of the Internet industry, our business will fail.
 
The forum sector and social gaming sector of the Internet industry is extremely competitive. The competition comes from both companies within the same business and companies in other media which create alternative forms of entertainment. We compete with several major Internet companies which are dominant in the industry, as well as with numerous small and independent Internet companies. Many of the organizations with which we compete have significantly greater financial and other resources than we do. The major companies are typically large, diversified entertainment and media companies or subsidiaries of diversified corporations which have strong relationships with advertisers and others involved in the Internet industry. We may not be able to compete with those companies for users and advertisers.
 
We may not be able to sustain or grow our business unless we keep up with changes in technology and consumer tastes.
 
The Internet and electronic commerce industries are characterized by:
 
●   
rapidly changing technology;
●   
evolving industry standards and practices that could render our website and proprietary technology obsolete;
●   
changes in consumer tastes and user demands;
●   
challenges, such as “click fraud,” that cast doubt on otherwise legitimate activities and practices; and
●   
frequent introductions of new services or products that embody new technologies.
 
 
10

 
Our future performance will depend, in part, on our ability to develop, license or acquire leading technologies and program formats, enhance our existing services and respond to technological advances and consumer tastes and emerging industry standards and practices on a timely and cost-effective basis. Developing website and other proprietary technology involves significant technical and business risks. We also cannot assure you that we will be able to successfully use new technologies or adapt our website and proprietary technology to emerging industry standards. We may not be able to remain competitive or sustain growth if we do not adapt to changing market conditions or customer requirements.
 
We face significant competition from large-scale Internet content, product and service aggregators, principally Google, Microsoft, Yahoo and Facebook.
 
Our forum business faces significant competition from companies, principally Google, Microsoft, Yahoo and Facebook that have developed or acquired similar online sites. These services may directly compete with us for affiliate and advertiser arrangements, which is key to our business and operating results.  Some of these competitors offer services that indirectly compete with our services, including: consumer e-mail services, desktop search, local search, and instant messaging services; photos, maps, video sharing, content channels, mobile applications, and shopping services; movie, television, music, book, periodical, news, sports, and other media holdings; access to a network of cable and other broadband users and delivery technologies; advertising offerings; and have considerable resources for future growth and expansion. Some of the existing competitors and possible additional entrants may have greater operational, strategic, financial, personnel or other resources than we do, as well as greater brand recognition either overall or for certain products and services. We expect these competitors increasingly to use their financial and engineering resources to compete with us, individually and potentially in combination with each other. In certain of these cases, our competition has a direct billing relationship with a greater number of their users through Internet access and other services than we have with our users through our premium services. This relationship may permit such competitors to be more effective than us in targeting services and advertisements to the specific preferences of their users thereby giving them a competitive advantage. If our competitors are more successful than we are in developing compelling products or attracting and retaining users, advertisers, or publishers, then our revenues and growth rates could decline.
 
We face significant competition from traditional media companies which could negatively impact our future operating results.
 
Our forum business also competes with traditional media companies for advertising, both offline as well as increasingly with their online assets as media companies offer more content directly from their own websites. Most advertisers currently spend a small portion of their advertising budgets on Internet advertising. If we fail to persuade existing advertisers to retain and increase their spending with us and if we fail to persuade new advertisers to spend a portion of their budget on advertising with us, our revenues could decline and our future operating results could be adversely affected.

Plaor’s business faces significant competition from number of entities who develop games as well as low development costs and negligible barriers to entry in launching social games.

The social gaming industry in which Plaor operates is also highly competitive, and we expect to face constant competition as new titles emerge onto the marketplace due to the low development costs and negligible barriers to entry in launching social games. We face competition from a number of entities who develop games as well as many traditional and digital forms of entertainment. These competitors include established gaming companies such as King.com, Electronic Arts Inc., Zynga Inc. and numerous smaller privately-held companies as well as independent developers. We also face increased competition if large companies with significant online presences such as Facebook, Inc., Google Inc., Amazon.com, Inc., Apple, Inc., The Walt Disney Company or Yahoo! Inc., choose to enter or expand in the games space or develop competing social casino games. Many of our potential competitors have significant resources for developing or acquiring additional games, and may be able to incorporate appealing brands and assets into their games or distribution of their titles. We also face potential competition from the established casino companies who may develop their social casino own platforms in competition with ours.
 
 
11

 
We anticipate that the majority of our forum revenues will be derived from advertising to our users, and the reduction in spending by or loss of current or potential advertisers would cause our revenues and operating results to decline.
 
We anticipate that our forum business will primarily rely on our ability to generate revenues from advertising on our sites and from paid subscriptions from our members.  Our ability to develop revenue from advertising revenue depends upon:
   
·
establishing and maintaining our user base;
·
establishing and maintaining the popularity of our Internet forums;
·
broadening our relationships with advertisers to small- and medium-sized businesses;
·
attracting advertisers to our user base;
·
increasing demand for our services by advertisers, users, businesses and affiliates, including prices paid by advertisers, the number of searches performed by users, the rate at which users click-through to commercial search results and advertiser perception of the quality of leads generated by our forums;
·
the successful development and deployment of technology improvements to our advertising platform;
·
establishing and maintaining our affiliate program for our search marketing;
·
deriving better demographic and other information from our users; and
·
driving acceptance of the Web in general and of our sites in particular by advertisers as an advertising medium.
 
We anticipate that our agreements with advertisers will likely have terms of one year or less, or may be terminated at any time by the advertiser. Accordingly, it is difficult to forecast advertising revenues accurately. Any reduction in spending by or loss of existing or potential future advertisers would cause our revenues to decline. Further, we may be unable to adjust spending quickly enough to compensate for any unexpected revenue shortfall.
 
We are substantially dependent on a small number of direct advertisers and advertising networks, which account for a vast majority of our revenues for our forum business.

Our forum business currently generate revenues from approximately fifteen advertising networks.  For the year ended April 30, 2014, our top five advertisers accounted for approximately 45% of our revenues. We expect to continue to generate the vast majority of our revenues from advertising for the foreseeable future. We do not have any long-term contractual agreements with any advertiser or advertising network.  If our relationships with any of these advertisers or advertising networks were to be disrupted, our operating results will suffer.
 
Decreases or delays in advertising spending by our advertisers due to general economic conditions could harm our ability to generate advertising revenues from our forum business.
 
Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns.  Since we derive most of our revenues from advertising, any decreases in or delays in advertising spending due to general economic conditions could reduce our revenues or negatively impact our ability to grow our revenues.
 
Quarterly financial results will vary.
 
Factors that may contribute to the variability of quarterly revenue and operating results include:
 
  ●
 fluctuations in revenue due to cyclicality of our customers’ forum advertising spend;
  ●
 commencement, completion and termination of contracts during any particular quarter;
  ●
 additions and departures of key personnel; and
  ●
 strategic decisions made by us and our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments and changes in business strategy, such as our recent acquisition of Plaor, Inc.
 
 
12

 
 Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our brand image and harm our business and our operating results.
 
We hope to create, own and maintain a wide array of intellectual property assets, including copyrights, patents, trademarks, trade dress, trade secrets and rights to certain domain names, which we believe will be among our most valuable assets. We seek to protect our intellectual property assets through patent, copyright, trade secret, trademark and other laws of the United States and other countries of the world, and through contractual provisions. The efforts we have taken or will take to protect our intellectual property and proprietary rights may not be sufficient or effective at stopping unauthorized use of those rights. In addition, effective trademark, patent, copyright and trade secret protection may not be available or cost-effective in every country in which our products and media properties are distributed or made available through the Internet. There may be instances where we are not able to fully protect or utilize our intellectual property assets in a manner to maximize competitive advantages.   Protection of the distinctive elements of our site may not be available under copyright law or trademark law. If we are unable to protect our proprietary rights from unauthorized use, the value of our brand image may be reduced. Any impairment of our brand could negatively impact our business. In addition, protecting our intellectual property and other proprietary rights is expensive and time consuming. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and consequently harm our operating results.
 
We are subject to U.S. and foreign government regulation of Internet services which could subject us to claims, judgments and remedies including monetary liabilities and limitations on our business practices.
 
We are subject to regulations and laws directly applicable to providers of Internet content and services. In addition, we will also be subject to any new laws and regulations directly applicable to our domestic and international activities. We may incur substantial liabilities for expenses necessary to defend such litigation or to comply with these laws and regulations, as well as potential substantial penalties for any failure to comply. Compliance with these laws and regulations may also cause us to change or limit our business practices in a manner adverse to our business.
 
We rely on third-party providers for our principal Internet connections and technologies, databases and network services critical to our properties and services, and any errors, failures or disruption in the services provided by these third parties could significantly harm our business and operating results.
 
We rely on private third-party providers for our principal Internet connections, co-location of a significant portion of our data servers and network access. A key element of our strategy is to generate a high volume of traffic to our forums. Our ability to generate revenues will depend substantially on the number of customers who use our websites. Accordingly, the satisfactory performance, reliability and availability of our websites and network infrastructure are critical to our ability to generate revenues, as well as to our reputation. Any disruption, from natural disasters, technology malfunctions, sabotage or other factors, in the Internet or network access or co-location services provided by these third-party providers or any failure of these third-party providers to handle current or higher volumes of use could significantly harm our business, operating results and financial condition. We have little control over these third-party providers, which increases our vulnerability to disruptions or problems with their services. Any financial difficulties experienced by our providers may have negative effects on our business, the nature and extent of which we cannot predict.
 
Furthermore, we depend on hardware and software suppliers for prompt delivery, installation and service of servers and other equipment to deliver our services. Any errors, failures, interruptions or delays experienced in connection with these third-party technologies and information services could negatively impact our relationship with users and adversely affect our brand, our business, and operating results.
 
Plaor relies on third-party platforms such as the Apple App Store, the Google Play Store, and Facebook to distribute our games and collect revenue. If we are unable to maintain a good relationship with such platform providers, if their terms and conditions or pricing changed to our detriment, if we violate, or if a platform provider believes that we have violated, the terms and conditions of its platform, or if any of these platforms were unavailable for a prolonged period of time, our business will suffer.

Plaor derives a majority of its revenue from distribution of games on the Apple App Store, the Google Play Store, and Facebook, and the virtual currency we sell is purchased using the payments processing systems of these platform providers. These platforms also serve as significant online distribution platforms for our games. We are subject to their standard terms and conditions for application developers, which govern the promotion, distribution and operation of games and other applications on their platforms. In addition, if we violate, or if a platform provider believes that we have violated, its terms and conditions, the particular platform provider may discontinue or limit our access to that platform, which would harm our business. Our business would be harmed if they discontinue or limit our access to their platforms, if their platforms decline in popularity, if they modify their current discovery mechanisms, communication channels available to developers, respective terms of service or other policies, including fees, or change how the personal information of players is made available to developers or develop their own competitive offerings.
 
 
13

 
Security breaches, computer viruses and computer hacking attacks could harm our business and results of operations.

Security breaches, computer malware and computer hacking attacks have become more prevalent in our industry. Any security breach caused by hacking, including efforts to gain unauthorized access to our applications, servers or websites, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses could harm our business, financial condition and operating results. Though it is difficult to determine what harm may directly result from any specific interruption or breach, any failure to maintain performance, reliability, security and availability of our application, servers or website may result in significant expenses, loss of revenue and other adverse effects to our business.

If we are not able to retain the full-time services of senior management, there may be an adverse effect on our operations and/or our operating performance until we find suitable replacements.
 
Our business is dependent, to a large extent, upon the services of our senior management.  We do not maintain key person life insurance for any members of our senior management at this time.  The loss of services of our chief executive officer or any other key members of our senior management could adversely affect our business until suitable replacements can be found.  There may be a limited number of personnel with the requisite skills to serve in these positions, and we may be unable to locate or employ such qualified personnel on acceptable terms.
 
Our inability to diversify our operations may subject us to economic fluctuations within our industry.
 
Our limited financial resources reduce the likelihood that we will be able to diversify our operations. Our probable inability to diversify our activities into more than one business area will subject us to economic fluctuations within the Internet industry and therefore increase the risks associated with our operations.
 
If there are changes in regulations or user concerns regarding privacy and protection of user data, or we fail to comply with such laws, we may face claims brought against us under any of these regulations and it could adversely affect our business.
 
Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of data that we receive from and about our users. Any failure, or perceived failure, by us to comply with regulations of privacy and protection of user data or with any data-related consent orders, Federal Trade Commission requirements or orders, or other federal, state, or international privacy or consumer protection-related laws, regulations or industry self-regulatory principles could result in proceedings or actions against us by governmental entities or others, which could potentially have an adverse effect on our business. As a company that provides services over the Internet, we may be subject to a claim or class-action lawsuit brought under any of these or future laws governing online services. The successful assertion of these claims against us could result in potentially significant monetary damages, diversion of management resources and require us to make significant payments and incur substantial legal expenses.  Even if a claim is not successfully pursued to judgment by a claimant, we may still incur substantial legal expenses defending against such a claim.  In either situation, any claims with respect to violation of privacy or user data brought against us may adversely affect our business.
 
The costs to meet our reporting requirements as a public company subject to the Exchange Act of 1934 is substantial and may result in us having insufficient funds to operate our business.
 
We are a public reporting company in the United States and, accordingly, subject to the information and reporting requirements of the Securities Exchange Act of 1934 and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley). We will incur ongoing expenses associated with professional fees for accounting and legal expenses associated with being a public company. We estimate that these costs will range up to $200,000 per year for the next few years. Those fees will be higher if our business volume and activity increases.  Those obligations will reduce resources to fund our operations and may limit us in expanding our operations.
 
 
14

 
We operate as a public company, which means we are subject to evolving corporate governance and public disclosure regulations that may result in additional expenses and continuing uncertainty regarding the application of such regulations.
 
Changing laws, regulations, and standards relating to corporate governance and public disclosure, including Sarbanes-Oxley and related rules and regulations, are creating uncertainty for public companies. We are presently evaluating and monitoring developments with respect to new and proposed rules and cannot predict or estimate the amount of the additional compliance costs we may incur or the timing of such costs. These new or changed laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by courts and regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Maintaining appropriate standards of corporate governance and public disclosure may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. In addition, if we fail to comply with new or changed laws, regulations, and standards, regulatory authorities may initiate legal proceedings against us and our business and our reputation may be harmed.
 
We also expect these new rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our Board of Directors or as executive officers.
 
We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
 
Risks Related to Owning our Common Stock:
 
 Volatility of stock price may restrict sale opportunities.
 
Our stock price is affected by a number of factors, including stockholder expectations, financial results, the introduction of new products by us and our competitors, general economic and market conditions, estimates and projections by the investment community and public comments by other persons, and many other factors, many of which are beyond our control.  We may be unable to achieve analysts’ revenue or earnings forecasts, which may be based on projected volumes and sales of many product types and/or new products, certain of which are more profitable than others.  There can be no assurance that we will achieve projected levels of revenues. As a result, our stock price is subject to significant volatility and stockholders may not be able to sell our stock at attractive prices.
 
Our shares may have limited liquidity.
 
Our shares of common stock are quoted on the OTCQB, which has limited liquidity.  Due to this limited liquidity, our stockholders may be unable to sell their shares into the open market.  In addition, they may encounter difficulty selling large blocks of shares or obtaining a suitable price at which to sell their shares.
 
Our stock price may be volatile, which may result in losses to our stockholders.
 
The stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies quoted on the OTCQB marketplace, where our shares of common stock are quoted, generally have been very volatile and have experienced sharp share price and trading volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many of the following factors, some of which are beyond our control:
 
·
variations in our operating results;
·
changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;
·
changes in operating and stock price performance of other companies in our industry;
·
additions or departures of key personnel; and
·
future sales of our common stock.
 
Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock. In particular, the market prices for stocks of companies often reach levels that bear no established relationship to the operating performance of these companies. These market prices are generally not sustainable and could vary widely.
 

 
15

 
Our management owns a substantial portion of our outstanding common stock, which enables them to influence many significant corporate actions and in certain circumstances may prevent a change in control that would otherwise be beneficial to our stockholders.
 
Our management beneficially controls approximately 20% of our outstanding shares of common stock as of July 7, 2014.  Such concentrated control could have a substantial impact on matters requiring the vote of the stockholders, including the election of our directors and most of our corporate actions. This control could delay, defer, or prevent others from initiating a potential merger, takeover or other change in our control, even if these actions would benefit our stockholders and us. This control could adversely affect the voting and other rights of our other stockholders and could depress the market price of our common stock.
 
Our common shares may be thinly-traded, and our stockholders may be unable to sell at or near ask prices or at all if they need to sell their shares to raise money or otherwise desire to liquidate such shares.
 
We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.
 
The market for our common shares may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number of factors. First, as noted above, our common shares may be sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price. Secondly, an investment in us is a speculative or “risky” investment due to our lack of significant revenues or profits to date and uncertainty of future market acceptance for current and potential products. As a consequence of this enhanced risk, more risk-averse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.
 
We do not anticipate paying any cash dividends.
 
We presently do not anticipate that we will pay any dividends on our common stock in the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will be within the discretion of our Board of Directors. We presently intend to retain all earnings, if any, to implement our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.
 
Our common stock may be subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.
 
Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC.  Penny stocks generally are equity securities with a price of less than $5.00 per share.  The penny stock rules require a broker-dealer, prior to a purchase or sale of a penny stock not otherwise exempt from the rules, to deliver to the customer a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market.  The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account.  In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.  These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.

 
16

 
Volatility in our common stock price may subject us to securities litigation.
 
The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.
 
We will need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our stockholders.
 
We believe that our current cash and cash equivalents and anticipated cash flow from operations will not be sufficient to meet our anticipated cash needs for the near future. We may also require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. Consequently, we will seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities will result in additional dilution to our stockholders. The incurrence of additional indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing, if necessary, will be available in amounts or on terms acceptable to us, if at all.
 
The exercise of outstanding options and warrants to purchase our common stock could substantially dilute your investment, impede our ability to obtain additional financing, and cause us to incur additional expenses.
 
Under the terms of our outstanding options and warrants to purchase our common stock issued to employees and others, the holders are given an opportunity to profit from a rise in the market price of our common stock that, upon the exercise of the options and/or warrants, could result in dilution in the interests of our other stockholders.  The terms on which we may obtain additional financing may be adversely affected by the existence and potentially dilutive impact of our outstanding options and warrants.  In addition, holders of the warrants have registration rights with respect to the common stock underlying such warrants, the registration of which has caused and will continue to cause us to incur a substantial expense.

We have a substantial number of authorized common shares available for future issuance that could cause dilution of our stockholders’ interest and adversely impact the rights of holders of our common stock.
 
We have a total of 975,000,000 shares of common stock authorized for issuance.  As of July 7, 2014, we had approximately 858,000,000 shares of common stock available for issuance.  We have reserved 6,038,750 shares for issuance upon the exercise of outstanding options, 16,145,179 shares for issuance upon the exercise of outstanding warrants and 20,000,000 shares for issuance upon the exercise of outstanding Series B Preferred Stock.  We may seek financing that could result in the issuance of additional shares of our capital stock and/or rights to acquire additional shares of our capital stock. We may also make acquisitions that result in issuances of additional shares of our capital stock.  Those additional issuances of capital stock would result in a significant reduction of your percentage interest in the Company.  Furthermore, the book value per share of our common stock may be reduced. This reduction would occur if the exercise price of any issued warrants or the conversion price of outstanding Series B Preferred Stock is lower than the book value per share of our common stock at the time of such exercise or conversion.

The addition of a substantial number of shares of our common stock into the market or by the registration of any of our other securities under the Securities Act of 1933 may significantly and negatively affect the prevailing market price for our common stock.  The future sales of shares of our common stock issuable upon the exercise of outstanding warrants and options or conversion of outstanding Series B Preferred Stock may have a depressive effect on the market price of our common stock, as such warrants, options and Series B Preferred Stock would be more likely to be exercised or converted at a time when the price of our common stock is greater than the exercise or conversion price.
 
Our board of directors has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial to common stockholders and may grant voting powers, rights and preference that differ from or may be superior to those of the registered shares.
 
Our articles of incorporation allow us to issue 25,000,000 shares of preferred stock without any vote or further action by our stockholders. As of July 7, 2014, we had approximately 24,000,000 shares of preferred stock available for issuance.  Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority to issue preferred stock without further stockholder approval, including large blocks of preferred stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock.
 
 
17

 
 
None.
 
 
We do not own any interests in real estate. We lease approximately 1,578 square feet of office space located at 20300 Venture Blvd., Suite 330, Woodland Hills, California. The term of our lease is for six months and expires on October 31, 2014. Our rent is $3,242 per month.

Plaor rents approximately 4,500 square feet of office space at its headquarters located at 12 Channel Street, Boston, MA 02210. Our rent is $5,500 per month. On August 1, 2014, Plaor is moving to a new office with approximately 10,000 square feet of office space. The new rent will be $14,000 per month.
 
 
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business.  As of the date of this report, we are not currently involved in any legal proceeding that we believe has a material adverse effect on our business, financial condition or operating results.  
 
On October 11, 2013, the Company entered into a Settlement Agreement and Release (“Settlement”) with Andrew Moeck and Wendell Brown (collectively, the “Plaintiffs”) settling the Plaintiffs’ complaint against the Company.   The complaint was filed in the Superior Court of California, Los Angeles County and related to the earn-out calculation in the Securities Escrow Agreement dated June 9, 2010 from the Company’s acquisition of Adisn, Inc ("Adisn"). 

Per the terms of the Settlement, the Company made a cash payment of $50,000, issued 250,000 shares of common stock and transferred the Adisn trademark, domain and patent to the Plaintiffs in exchange for the Company receiving a royalty-free license to use the patent in perpetuity and a dismissal of all pending claims.
 

Not applicable.
 
 
18

 
PART II
 
 
Market Information.   Our common stock is quoted on the OTCQB under the symbol “CRWG.”  For the periods indicated below, the following table sets forth the high and low bid prices per share of common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.
 
   
High ($)
   
Low ($)
 
Fiscal Year 2014
               
First Quarter
 
$
0.09
   
$
0.03
 
Second Quarter
 
$
0.10
   
$
0.04
 
Third Quarter
 
$
0.09
   
$
0.05
 
Fourth Quarter
 
0.16
   
$
0.07
 
                 
Fiscal Year 2013
               
First Quarter
 
$
0.32
   
$
0.18
 
Second Quarter
 
$
0.22
   
$
0.12
 
Third Quarter
 
$
0.14
   
$
0.08
 
Fourth Quarter
 
0.09
   
$
0.04
 
 
Holders. The approximate number of stockholders of record at July 7, 2014 was 72.  The number of stockholders of record does not include beneficial owners of our common stock, whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.  
 
Dividends . We have never declared or paid a cash dividend on our common stock. We do not expect to pay cash dividends on our common stock in the foreseeable future. We currently intend to retain our earnings, if any, for use in our business. Any dividends declared in the future will be at the discretion of our Board of Directors and subject to any restrictions that may be imposed by our lenders.
 
Securities Authorized for Issuance under Equity Compensation Plans.   The table below includes the following information as of April 30, 2014 for CrowdGather, Inc. 2008 Stock Option and Award Plan.
 
Equity Compensation Plan Information
 
Plan category
Number of securities to be issued upon exercise of outstanding options, warrants and rights
 
 
(a)
Weighted-average exercise price of outstanding options, warrants and rights
 
 
(b)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
 
(c)
 
Equity compensation plans approved by security holders
 
6,038,750
 
0.57
 
5,961,250
 
Equity compensation plans not approved by security holders
 
0
 
0
 
0
Total
6,038,750
0.57
5,961,250
 
 
19

 
Recent Sales of Unregistered Securities. The following sales of unregistered securities by us occurred during the year ended April 30, 2014.
 
On April 8, 2013, we filed with the Secretary of State of Nevada the Certificate of Designation of the Relative Rights and Preferences of the Series B Preferred Stock (the “Certificate of Designation”) specifying the designations, preferences and relative rights of the Series B Convertible Preferred Stock (“Series B Shares”).  The Certificate of Designation created a series of preferred stock consisting of 1,000,000 out of the 25,000,000 shares of our preferred stock, which will be designated “Series B Preferred Stock.”  The Certificate of Designation provides, among other things, that: (i) the conversion price for the shares of Series B Shares is the price per share equal to the quotient of the original issue price of $1.00 per share (the “Original Issue Price”) divided by the number of shares of common stock into which each share of Series B Shares may be converted (the “Conversion Rate”), subject to adjustment from time to time for recapitalizations and as otherwise set forth in the Certificate of Designation; (ii) each share of Series B Shares is convertible into shares of common stock at the option of the holder at any time after the date of issuance at a Conversion Rate of 20 shares of common stock for each share of Series B Shares; (iii) the holder of outstanding Series B Shares will be entitled to receive dividends, when declared by the Board of Directors, at an annual dividend rate of 10% per share of Series B Shares, with such right to receive dividends being cumulative and will accrue and be payable annually; (iv) the shares of Series B Shares may be redeemed by us, at our option, at a redemption price equal to 120% of the amount obtained by multiplying the Original Issue Price of the Series B Shares by the number of shares of Series B Shares to be redeemed from the investor; and (v) so long as any shares of Series B Shares remain outstanding, we will not, among other things, amend or restate any provisions of our Articles of Incorporation or Bylaws, declare or pay dividends on any shares of common stock or other security other than Series B Shares, authorize or issue any equity security having a preference over or being on parity with the Series B Shares, change the authorized number of directors, or enter into indebtedness of more than $1,000,000, without the prior written consent of a majority of outstanding shares of Series B Shares. 
 
On April 8, 2013, we sold 300,000 shares of Series B Shares to one foreign investor in exchange for $300,000, or $1.00 per share, pursuant to a securities purchase agreement (“Purchase Agreement”). In connection with the sale of Series B Shares, the investors also received warrants to purchase 3,000,000 shares of our common stock at a purchase price of $0.08 per share. The warrant agreements (“Warrants”) provide for an expiration period of five years from the date of the investment.
 
On July 16, 2013, pursuant to the Purchase Agreement, we sold 150,000 shares of Series B Shares to a foreign investor in exchange for $150,000, or $1.00 per share. In connection with the sale of Series B Shares, the investor also received Warrants to purchase 1,500,000 shares of our common stock at a purchase price of $0.08 per share.  The Warrants have an exercise term equal to 5 years and are exercisable commencing on July 16, 2013.

The Purchase Agreement provided that the investor would purchase 300,000 shares of Series B Shares and Warrants for a purchase price of $300,000 on or before July 12, 2013 (the “First Subsequent Closing Date”).  However, we then entered into the First Amendment to Securities Purchase Agreement (the “Amendment”), revising the First Subsequent Closing Date from July 12, 2013 to August 2, 2013.  The sale of the 150,000 shares of Series B Shares and Warrants on July 16, 2013 represents the first portion of the first subsequent closing and the remaining 150,000 shares of Series B Shares and Warrants would be purchased by the investor on or before August 2, 2013.  
 
As a result of the Amendment, we issued an Amended and Restated Common Stock Purchase Warrant (“Amended and Restated Warrant”) to replace the Warrants issued at the initial closing and provide that such Warrants will vest only if the Investor purchases an additional 300,000 shares of Series B Shares and Warrants for a purchase price of $300,000 on or before the First Subsequent Closing Date.
 
On August 2, 2013, pursuant to the Purchase Agreement and Amendment, we sold 150,000 shares of Series B Shares to a foreign investor in exchange for $150,000, or $1.00 per share. In connection with the sale of Series B Shares, the investor also received Warrants to purchase 1,500,000 shares of our common stock at a purchase price of $0.08 per share.  The Warrants have an exercise term equal to 5 years and are exercisable commencing on August 2, 2013.

On October 9, 2013, pursuant to the Purchase Agreement, we sold 400,000 shares of Series B Shares to three foreign investors in exchange for $400,000, or $1.00 per share. In connection with the sale of Series B Shares, the investors also received Warrants to purchase 4,000,000 shares of our common stock at a purchase price of $0.08 per share.  The Warrants have an exercise term equal to 5 years and are exercisable commencing on October 9, 2013.

On October 11, 2013, we issued 250,000 shares of our common stock pursuant to settlement and release agreement relating to the Adisn acquisition, as described further in Item 3 Legal Proceedings.

On January 7, 2014, we entered into an agreement with an independent third party to provide investor relation services for a period of three months.  Pursuant to the agreement, we issued 100,000 shares of our restricted common stock upon execution, valued at $6,000. The stock-based expense for these shares included in operating expenses for the year ended April 30, 2014 was $6,000.

On January 21, 2014, we entered into an agreement with an independent third party to provide investor relation services for a period of two months.  Pursuant to the agreement, we issued 100,000 shares of our restricted common stock upon execution, valued at $6,000. The stock-based expense for these shares included in operating expenses for the year ended April 30, 2014 was $6,000.

 
20

 
On April 30 2014, we entered into an agreement with an independent third party to provide investor relation services with a term of two months. This agreement calls for monthly cash compensation of $6,000 and the issuance of 175,000 shares of our restricted common stock upon execution, valued at $12,600. The stock-based expense for these shares included in operating expenses for the year ended April 30, 2014 was $12,600.

Additionally, during the year ended April 30, 2014, we granted 2,660,000 shares of our restricted common stock to certain key employees, officers, consultants, advisors and directors.  Such shares vest annually over a four year period.

Use of Proceeds of Registered Securities. There were no sales or proceeds during the calendar year ended April 30, 2014, for the sale of registered securities.
 
Purchases of Equity Securities. None during the period covered by this report.
 
Penny Stock Regulation.   Shares of our common stock will probably be subject to rules adopted by the SEC that regulate broker-dealer practices in connection with transactions in “penny stocks.”  Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in those securities is provided by the exchange or system).  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the SEC, which contains the following:
 
·  
a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
·  
a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to violation to such duties or other requirements of securities’ laws;
·  
a brief, clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and the significance of the spread between the “bid” and “ask” price;
·  
a toll-free telephone number for inquiries on disciplinary actions;
·  
definitions of significant terms in the disclosure document or in the conduct of  trading in penny stocks; and
·  
such other information and is in such form (including language, type, size and format), as the SEC shall require by rule or regulation.
 
Prior to effecting any transaction in penny stock, the broker-dealer also must provide the customer the following:
 
·  
the bid and offer quotations for the penny stock;
·  
the compensation of the broker-dealer and its salesperson in the transaction;
·  
the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and
·  
monthly account statements showing the market value of each penny stock held in the customer’s account.
 
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.  These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules.  Holders of shares of our common stock may have difficulty selling those shares because our common stock will probably be subject to the penny stock rules.
 
 
Not applicable.
 
 
21

 
 
Critical Accounting Policies and Estimates. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, contingencies and litigation. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. In addition, these accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in this report for the year ended April 30, 2014.

Overview.  CrowdGather operates a network of forum and online communities focused on a broad number of vertical interests.  Following the merger with Plaor we also operate a social casino game available free to play on Facebook, iOS, and Android.  We will continue to focus on building each of our online communities and games while pursuing opportunities to unite the two businesses in mutually beneficial ways.  Through our Merger with Plaor, we believe will be able to offer additional engagement and retention features to both our forum and our game user bases.  These features may also facilitate new channels of user acquisition as we cross promote and integrate our forums and our social games.

Our forum business specializes in monetizing a network of online forums and message boards designed to engage, provide information to and build community around users. We are in the process of building what we hope will become an important social, advertising and user generated content network by consolidating existing groups of online users who post on message boards and forums. Our goal is to create superb user experiences for forum communities and world class service offerings for forum owners. We believe that the communities built around message boards and forums are one of the most dynamic sources of information available on the web because forums are active communities built around interest and information exchange on specific topics.

Our network is comprised of two types of forum communities: branded and hosted communities that are built on one of our forum hosting platforms.  The branded communities, such as Pocketables.com and Digishoptalk.com, are wholly owned by us and we monetize them through a combination of text and display ads.  The hosted communities comprise the majority of our revenues, traffic, and page views, and are built upon one of our leading forum hosting platforms - Yuku.com and Freeforums.org.  We monetize the web traffic on these sites through a combination of Internet advertising mediums at our discretion in exchange for providing free software, support and hosting.  In some instances, we may derive subscription revenues in lieu of or in addition to advertising revenue because the site administrator has decided to pay monthly fees in exchange for providing an ad-free experience and other services for their members.  Our goal is to ultimately build an advertising network that allows us to leverage the targeted demographics of the combined network in order to generate the highest advertising rates for all of our member sites.
 
As a result of the Merger with Plaor, we have subsequently devoted a significant portion of our operations to the business of Plaor and expect to continue to do so in order to expand our operations. Plaor specializes in developing highly scalable multi-platform games that are available on Facebook, Google Play, and the Apple App Store. Plaor’s initial social gaming platform is a simulated casino environment referred to as Mega Fame Casino wherein individual gamers are able to play online casino style games socially with other players from around the world. Unlike traditional casinos or their online counterparts, the betting on Mega Fame is virtual and no real money bets are accepted and there is no ability for a player to redeem their winnings for cash. Despite the lack of traditional cash betting, we believe that players experience the same entertainment as they experience in a casino setting. Mega Fame Casino is a gaming platform, which includes multiple games, combined to emulate a casino environment. Along with the company’s initial Hollywood Poker offering, the Mega Fame Casino also includes Video Poker, multiple slot machines, and a daily celebrity challenge designed to increase engagement and retention of players.

We continue to focus on improving our forum network to enhance our user and community experience, and on seeking avenues to grow our business and contribute to our long-term viability, whether through improving advertising opportunities on our existing ad inventory or developing partnerships with third party publishers to improve monetization.   We recognize that many online advertisers seek engagement with online enthusiasts and users who are passionate about specific topics and products.  We believe that forums offer a significant opportunity to advertisers, as they are tightly knit social communities with concentrations of influencers who are often experts on the forum subject matter.  Forum users have traditionally been inaccessible to advertisers with larger budgets and who prefer making broad category or vertically oriented purchases.  Through the use of technology we intend to pursue a strategy that will help us better connect advertisers to our users in niche specific verticals.  We are also evaluating strategic options, including potential business combinations as well as debt and equity financing.
 
 
22

 
We are committed to delivering quality, brand safe content for forum advertisers.  Since advertisers are drawn to quality content and curated home pages, we have been working diligently to improve our branded sites.  We have thousands of volunteer moderators and forum administrators patrolling our network, and we are in the process of deploying our own content filter that will consistently identify and prune non-monetizable content that violates our terms of service.  
  
We also continue to conduct ongoing software development across all of our forum network properties to keep improving the administrator and user experience in the communities.  We are constantly working toward offering our communities favorable terms, features and incentives to help them grow and prosper.   
 
The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements for the year ended April 30, 2014, together with notes thereto, which are included in this report.  
 
For the year ended April 30, 2014 as compared to the year ended April 30, 2013.
 
Results of Operations
 
Revenues and Gross Profit.  We realized revenues of $1,537,051 for the year ended April 30, 2014, as compared to revenues of $1,933,298 for the year ended April 30, 2013.  The decrease is primarily due to lower than anticipated rates earned from multiple advertising networks and certain direct advertising campaigns that did not reoccur during the year ended April 30, 2014 as compared to the prior year.
 
Our cost of revenue for the year ended April 30, 2014, was $3,980, as compared to cost of revenue of $52,805 for the year ended April 30, 2013.  The decrease in cost of revenue was due to reduced purchases of ad inventory on behalf of direct advertisers and their agencies during the year ended April 30, 2014 as compared to the prior year.

 Our gross profit for the year ended April 30, 2014 was $1,533,071 as compared to gross profit of $1,880,493 for the year ended April 30, 2013.
 
As a result of the Merger with Plaor,  we expect to devote a significant portion of our operations to the business of Plaor in order to expand our operations. To grow our business during the next twelve months, we need to generate increased revenues from users engaging with Plaor social casino games and our online forum communities.   Our failure to increase revenues will hinder our ability to increase the size of our operations. If we are not able to generate additional revenues to cover our operating costs, we may not be able to expand our operations.
 
Operating Expenses. For the year ended April 30, 2014, our total operating expenses were $9,252,665 as compared to total operating expenses of $4,651,945 for the year ended April 30, 2013. The increase between the comparable periods of $4,600,720 is primarily due to impairment of goodwill and loss on disposal of assets of $5,909,187.  During the year ended April 30, 2014, we recorded $4,500,202 of impairment loss, $140,026 of which related to a settlement agreement with the former shareholders of Adisn, Inc. whereby the trademarks and trade names originally purchased from Adisn, Inc. were returned, and $4,360,176 relating to the writedown of the goodwill relating to our subsidiary Adisn, Inc.  Additionally, we recorded a $1,408,985 loss on the intellectual property relating to Adisn, Inc. offset by a gain on the disposal of assets relating to the sale of certain forums.  During the 2014 fiscal year, we had been developing a solution to create an ad serving marketplace based on the technology originally purchased from Adisn.  However, due to strategic changes in the 4th quarter of fiscal 2014, we discontinued the marketplace project based on Adisn's technology, and focused instead on the merger with Plaor and the development of social casino games, some of which will be integrated onto our forum network.  We are still focused on fully monetizing our forum network through advertising, but we will also leverage our user base to engage with Plaor’s suite of social casino games.  We do not anticipate using the Adisn technology as part of our go-forward strategy.
 
Offsetting the increases discussed above was a reduction of Payroll and related expenses of $660,699 from $1,850,509 for the year ended April 30, 2013 to $1,189,810 for the year ended April 30, 2014 as a result of our expense reduction plan.   We also had a decrease in general and administrative expenses of $701,168 from $2,193,436 for the year ended April 30, 2013 to $1,492,268 for the year ended April 30, 2014, as a result of our expense reduction plan.  Last, we had an increase of $53,400 from $608,000 for the year ended April 30, 2013 to $661,400 for the year ended April 30, 2014 primarily due to the issuance of restricted common stock.  
  
Other Income (Expense). For the year ended April 30, 2014, we had other expense (net) of $5,376 as compared to other expense (net) of $10,199, consisting primarily of interest expense related to our capital lease obligation.
 
Net Loss.   For the year ended April 30, 2014, our net loss was $7,725,770, as compared to a net loss of $2,782,451 for the year ended April 30, 2013.
 
 
23

 
Liquidity and Capital Resources. Our total assets were $8,246,201 as of April 30, 2014, which consisted of cash of $546,158, accounts receivable of $130,709, inventory of $31,913, prepaid expenses and deposits of $48,652, property and equipment with a net value of $130,518, intangible and other assets of $7,336,771, represented by our domain names and other intellectual property owned and investments of $21,480. By comparison, Our total assets were $14,657,001 as of April 30, 2013, which consisted of cash of $375,512, accounts receivable of $214,931, inventory of $33,168, prepaid expenses and deposits of $50,561, property and equipment with a net value of $225,980, intangible and other assets of $9,368,103, represented by our domain names and other intellectual property owned, and goodwill of $4,360,176 and investments of $28,570.

In May 2012, we entered into a master lease agreement with Dell Financial Services in the amount of $209,384 payable over 24 months with a monthly payment of $9,326. This covers all equipment needs for migration of our third-party hosted sites into our network operating center, through which we have realized savings ranging from approximately $12,000 to $15,000 per month.

Our current liabilities as of April 30, 2014 totaled $206,824, compared to our current liabilities as of April 30, 2013, which totaled $256,897. The decrease in current liabilities between the two periods is primarily due to the completion of the Dell master lease agreement in April 2014. We had no long-term liabilities at April 30, 2014 as compared to long-term liabilities of $9,267 relating to the Dell master lease agreement.  We have no other liabilities and no long-term commitments or contingencies at April 30, 2014.
  
As of April 30, 2014, we had cash of $546,158. We estimate that our cash on hand will not be sufficient for us to continue our current operations for the next twelve months. On May 19, 2014, we entered into a web site purchase agreement to sell the PbNation.com online forum and related website assets for $1,380,000 to an unrelated third party.  The cash received as part of the closing of this purchase agreement will help sustain our operations, however, the period for which our existing financial resources as well as the financial resources necessary to support our operations involves risks and uncertainties and could differ as a result of a number of factors including our assumptions for increasing revenues through the monetization of our forum advertising and social gaming businesses, anticipated efficiencies gained from the completion of ongoing automation and technical initiatives and anticipated further cost reductions. Subsequent to our merger with Plaor, we are now experiencing a net cash burn of approximately $300,000 per month. We remain optimistic about our ability to reduce costs and our net cash burn rate further and are concentrating on optimizing our network of forum properties and social casino games.  However, in addition to generating revenues from our current operations, we will need to raise additional capital to sustain our operations and expand our business to the point at which we are able to operate profitably.

We have been, and intend to continue, working toward identifying and obtaining new sources of financing. No assurances can be given that we will be successful in obtaining additional financing in the future.  Any future financing that we may obtain may cause significant dilution to existing stockholders. Any debt financing or other financing of securities senior to common stock that we are able to obtain will likely include financial and other covenants that will restrict our flexibility. Any failure to comply with these covenants would have a negative impact on our business, prospects, financial condition, results of operations and cash flows.
 
If adequate funds are not available, we may be required to delay, scale back or eliminate portions of our operations or obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain of our assets. Accordingly, the inability to obtain such financing could result in a significant loss of ownership and/or control of our assets and could also adversely affect our ability to fund our continued operations and our expansion efforts.
 
The majority of our research and development activity is focused on development of the social casino games on our forum network. For Plaor’s business, we believe it is necessary to invest in the development of new games, code, and tools in an effort to achieve our strategic goals and objectives.
   
We do not anticipate that we will purchase any significant equipment over the next twelve months.

We do not anticipate any significant changes in the number of employee, subsequent to the Plaor merger, unless we significantly increase the size of our operations. We believe that we do not require the services of additional independent contractors to operate at our current level of activity. However, if our level of operations increases beyond the level that our current staff can provide, we may need to supplement our staff in this manner.
 
 
24

 
Contractual Obligations and Reserves.
 
None.
 
Off-balance Sheet Arrangements.
 
We had no off-balance sheet arrangements at April 30, 2014.

 
Not applicable.
  
 
The financial statements required by Item 8 are presented in the following order:
 
TABLE OF CONTENTS
 
 
Report of Independent Registered Public Accounting Firm
26
Consolidated Balance Sheets 
27
Consolidated Statements of Operations
28
Consolidated Statements of Comprehensive Loss
29
Consolidated Statements of Stockholders’ Equity 
30
Consolidated Statements of Cash Flows
31
Notes to Consolidated Financial Statements
32
 



 
25

 
 

To the Board of Directors and Stockholders
Crowdgather, Inc.

We have audited the accompanying consolidated balance sheets of Crowdgather, Inc. as of April 30, 2014 and 2013 and the related statements of operations, comprehensive loss, changes in stockholder’s equity and cash flows for the years then ended.  These 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 audit 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Crowdgather, Inc. as of April 30, 2014 and 2013, and the results of its operations, comprehensive loss, and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2, the Company has incurred recurring operating losses and has an accumulated deficit.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Q Accountancy Corporation


Irvine, California
July 24, 2014
 
 
 
 

 
26

 
CROWDGATHER, INC.
APRIL 30, 2014 AND 2013
 
   
2014
   
2013
 
ASSETS
Current assets
           
   Cash
 
$
546,158
   
$
375,512
 
   Accounts receivable 
   
 130,709
     
 214,931
 
   Investments
   
21,480
     
28,570
 
   Inventory
   
31,913
     
33,168
 
   Prepaid expenses and deposits
   
48,652
     
50,561
 
                 
    Total current assets
   
778,912
     
702,742
 
                 
Property and equipment, net of accumulated
   depreciation of $493,887 and $363,746, respectively
   
130,518
     
225,980
 
                 
Intangible and other assets, net of accumulated amortization of $0 and
   $45,224, respectively
   
7,336,771
     
9,368,103
 
Goodwill
   
-
     
4,360,176
 
                 
Total assets
 
$
8,246,201
   
$
14,657,001
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities
           
   Accounts payable
 
$
8,000
   
$
8,000
 
   Accrued vacation
   
44,078
     
63,838
 
   Other accrued liabilities
   
154,746
     
69,138
 
   Capital lease obligation, current portion 
   
-
     
115,921
 
                 
    Total current liabilities
   
206,824
     
256,897
 
                 
Capital lease obligation, net of current portion
   
-
     
9,267
 
                 
Stockholders’ equity
               
Convertible Preferred Series B stock, $0.001 par value, 1,000,000
   shares authorized, 1,000,000 and 300,000 shares issued and
   outstanding, respectively
   
1,000,000
     
300,000
 
Common stock, $0.001 par value, 975,000,000 shares
   authorized, 61,657,708 and 58,372,708 issued and
   outstanding, respectively
   
61,658
     
58,373
 
Additional paid-in capital
   
29,748,961
     
29,070,846
 
Accumulated deficit
   
(22,742,722
)
   
(15,016,952
)
Accumulated other comprehensive loss
   
(28,520)
     
(21,430)
 
                 
    Total stockholders’ equity
   
8,039,377
     
14,390,837
 
                 
Total liabilities and stockholders’ equity
 
$
8,246,201
   
$
14,657,001
 
 
See accompanying notes to financial statements.
 
 
27

 
CROWDGATHER, INC.
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013
 
   
2014
   
2013
 
             
Revenue
 
$
1,537,051
   
$
1,933,298
 
                 
Cost of revenue
   
3,980
     
52,805
 
                 
Gross profit
   
1,533,071
   
1,880,493
 
                 
Operating expenses
               
  Payroll and related expenses
   
1,189,810
     
1,850,509
 
  Stock based compensation
   
661,400
     
608,000
 
  General and administrative
   
1,492,268
     
2,193,436
 
  Impairment of goodwill and intangibles
   
4,500,202
     
-
 
  Loss on disposal of assets
   
1,408,985
         
Total operating expenses
   
9,252,665
     
4,651,945
 
                 
Loss from operations
   
(7,719,594
)
   
(2,771,452
)
                 
Other income (expense), net
   
(5,376
)
   
(10,199)
 
                 
Net loss before provision for income taxes
   
(7,724,970
)
   
(2,781,651
)
                 
Provision for income taxes
   
800
     
800
 
                 
                 
Net loss
 
$
(7,725,770
)
 
$
(2,782,451
)
                 
                 
Weighted average shares outstanding- basic and diluted
   
60,082,803
     
58,349,811
 
                 
                 
Net loss per share – basic and diluted
 
$
(0.13
)
 
$
(0.05
)
 
See accompanying notes to financial statements.

 
28

 
CROWDGATHER, INC.
FOR THE YEARS ENDED APRIL 30, 2014 AND 2013


   
2014
   
2013
 
             
Net loss
  $ (7,725,770 )   $ (2,782,451 )
                 
Other comprehensive loss
               
Unrealized loss on available for sale securities
    (7,090 )     ---  
Total other comprehensive loss
    (7,090 )     ---  
                 
   Total comprehensive loss
  $ (7,732,860 )   $ (2,782,451 )
                 



See accompanying notes to financial statements.

 
29

 

 
CROWDGATHER, INC.
APRIL 30, 2014 AND 2013

   
Preferred Series B
   
Common Stock
   
Paid-in
   
Accumulated
    Accumulated
Other
Comprehensive
       
    Shares     Amount    
Shares
   
Amount
   
Capital
   
Deficit
   
Income/(Loss)
   
Total
 
                                                 
Balance, April 30, 2012  
-
   
-
   
58,234,216
    $
58,234
    $
28,436,644
    $
(12,234,501
)   $ (21,430   $ 16,238,947  
                                                 
Shares issued for services  
-
   
-
   
138,492
   
139
   
38,202
   
-
   
-
    38,341  
                                                 
Shares purchased
   
300,000
     
300,000
     
-
     
-
     
-
     
-
     -      
300,000
 
                                                               
Amortization of stock options
   
-
     
-
     
-
     
-
     
596,000
     
-
     
-
     
596,000
 
                                                                 
Unrealized loss on available for sale securities
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
                                                                 
Net (loss) for the year ended April 30, 2013
   
-
     
-
     
-
     
-
     
-
     
(2,782,451
)
   
-
     
(2,782,451
)
                                                                 
Balance April 30, 2013
   
300,000
     
300,000
     
58,372,708
   
$
58,373
   
$
29,070,846
   
$
(15,016,952
)
   
(21,430
)
 
$
14,390,837
 
                                                                 
                                                                 
Shares issued for services
   
-
     
-
     
3,035,000
     
3,035
     
261,365
     
-
     
-
     
264,400
 
                                                                 
Shares issued for settlement and disposal of assets
   
-
     
-
     
250,000 
     
250 
     
19,750 
     
-
     
-
     
20,000
 
                                                                 
Shares purchased
   
700,000
     
700,000
       -                  
-
     
-
     
700,000
 
                                                                 
Amortization of stock options
   
-
     
     
-
           
397,000
     
-
     
-
     
397,000
 
                             
 
                                 
Unrealized loss available for sale securities
   
-
     
     
-
      -      
-
     
-
     
(7,090)
     
(7,090)
 
                             
 
                                 
Net (loss) for the year ended April 30, 2014
   
-
     
     
-
     
-
     
-
     
(7,725,770
)
   
-
     
(7,725,770
)
                                                                 
Balance April 30, 2014
   
1,000,000
   
$
1,000,000
     
61,657,708
   
$
61,658
   
$
29,748,961
   
$
(22,742,722
   
(28,520
 
$
8,039,377
 
 
See accompanying notes to financial statements
 

 
30

 
CROWDGATHER, INC.
FOR THE YEARS ENDED APRIL 30, 2014 AND 2012
 
   
2014
   
2013
 
Cash flows from operating activities:
           
    Net loss
 
$
(7,725,770
)
 
$
(2,782,451
)
    Adjustments to reconcile net loss to net cash used in operating activities:
               
      Depreciation and amortization
   
134,892
     
152,177
 
      Stock-based compensation
   
661,400
     
608,000
 
      Stock issued for services
   
-
     
38,341
 
      Impairment of goodwill and intangibles
   
 4,500,202
     
 -
 
      Loss on disposal of assets
   
1,408,985
         
  Changes in operating assets and liabilities:
               
     (Increase) decrease in accounts receivable
   
84,222
     
(171,936)
 
     Decrease in inventory
   
1,255
     
1,964
 
     Decrease in prepaid expenses and deposits
   
1,909
     
38,371
 
     Increase in accounts payable and accrued liabilities
   
65,848
     
30,524
 
                 
Net cash used in operating activities
   
(867,057
)
   
(2,085,010
)
                 
Cash flows from investing activities:
               
    Purchase of property and equipment
   
(34,860
)
   
(7,597
)
    Proceeds from sale of intangible assets, net of fees
   
  497,751
     
  -
 
    Purchase of intangible assets
   
-
     
(64,175
)
                 
Net cash provided (used) by investing activities
   
462,891
     
(71,772
)
                 
Cash flows from financing activities:
               
    Proceeds from the issuance of preferred stock
   
700,000
     
300,000
 
    Payments on capital lease obligations
   
(125,188)
     
(96,198)
 
                 
Net cash provided by financing activities
   
574,812
     
203,802
 
                 
Net increase (decrease) in cash
   
170,646
     
(1,952,980
)
    Cash, beginning of period 
   
 375,512
     
 2,328,492
 
    Cash, end of period 
 
 $
 546,158
   
 $
 375,512
 
                 
                 
Supplemental disclosure of cash flow information:
               
   Cash paid for:
               
      Interest
 
$
-
   
$
-
 
      Income taxes
 
$
800
   
$
800
 
   Non-cash transactions:
               
      Purchase of property and equipment
 
$
-
   
$
209,384
 
      Stock-based compensation
 
$
661,400
   
$
608,000
 
      Stock issued for services
 
$
-
   
$
38,341
 
 
See accompanying notes to financial statements.
 
 
31

 
CROWDGATHER, INC.
APRIL 30, 2014
 
1.            NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Nature of Operations
 
CrowdGather, Inc. (hereinafter referred to as “we”, “us”, “our”, or “the company”) is a social networking, internet company that specializes in developing and hosting forum based websites and provides targeted advertising and marketing services for online customers.  We are headquartered in Woodland Hills, California, and were incorporated under the laws of the State of Nevada on April 20, 2005.

Principles of Consolidation
 
The accompanying consolidated financial statements include our activities and our wholly-owned subsidiary, Adisn, Inc. All intercompany transactions have been eliminated.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us 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 reported periods. Actual results could materially differ from those estimates.
 
Identifiable Intangible Assets
 
In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification No. 350, Intangibles – Goodwill and Other (ASC 350), goodwill and intangible assets with indefinite lives are not amortized but instead are measured for impairment at least annually in the fourth quarter, or when events indicate that impairment exists. As required by ASC 350, in the impairment tests for indefinite-lived intangible assets, we compare the estimated fair value of the indefinite-lived intangible assets, website domain names, using a combination of discounted cash flow analysis and market value comparisons. If the carrying value exceeds the estimate of fair value, we calculate the impairment as the excess of the carrying value over the estimate of fair value and accordingly record the loss.
 
Intangible assets that are determined to have definite lives are amortized over the shorter of their legal lives or their estimated useful lives and are measured for impairment only when events or circumstances indicate the carrying value may be impaired in accordance with ASC 360, Property, Plant and Equipment discussed below.
   
Impairment of Long-Lived Assets
 
In accordance with ASC 360, we estimate the future undiscounted cash flows to be derived from the asset to assess whether or not a potential impairment exists when qualitative events or circumstances indicate the carrying value of a long-lived asset may be impaired. If the carrying value exceeds our estimate of future undiscounted cash flows, we then calculate the impairment as the excess of the carrying value of the asset over our estimate of its fair value.

 
 
32

 
CROWDGATHER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2014
 
1.            NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
Investments

Investments are classified as available for sale and consist of marketable equity securities that we intend to hold for an indefinite period of time. Investments are stated at fair value and unrealized holding gains and losses, net of the related tax effect, are reported as a component of accumulated other comprehensive income until realized. Realized gains or losses on disposition of investments are computed on the “specific identification” method and are reported as income or loss in the period of disposition on our consolidated statements of operations.

Inventory

Inventory is valued at the lower of cost or market, using the first-in, first-out (FIFO) method.
 
Revenue Recognition
 
We currently work with third-party advertising networks and advertisers pay for advertising on a cost per thousand views, cost per click or cost per action basis. All sales are recorded in accordance with ASC 605, Revenue Recognition. Revenue is recognized when all the criteria have been met:
 
• When persuasive evidence of an arrangement exists.
• The services have been provided to the customer.
• The fee is fixed or determinable.
• Collectability is reasonably assured.

  Cost of Revenue
 
Our cost of revenue consists primarily of expenses associated with the fulfillment of specific customer advertising campaigns, including the purchases of advertising inventory and the costs associated with the manufacturing and distribution of our synthetic human pheromone consumer products.
 
Stock Based Compensation
 
We account for employee stock option grants in accordance with ASC 718, Compensation – Stock Compensation. ASC 718 establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. ASC 718 requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award - the requisite service period (usually the vesting period).
 
For options and warrants issued as compensation to non-employees for services that are fully vested and non-forfeitable at the time of issuance, the estimated value is recorded in equity and expensed when the services are performed and benefit is received as provided by ASC 505-50, Equity – Disclosure . For unvested shares, the change in fair value during the period is recognized in expense using the graded vesting method.
 
 
33

 
CROWDGATHER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2014
 
1.            NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
Comprehensive Loss
 
We apply ASC No. 220, Comprehensive Income (ASC 220).  ASC 220 establishes standards for the reporting and display of comprehensive income or loss, requiring its components to be reported in a financial statement that is displayed with the same prominence as other financial statements.  For the fiscal year ended April 30, 2014, Our comprehensive loss was $7,732,860.
 
Recent Accounting Pronouncements
 
There were various accounting updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our consolidated financial position, results of operations or cash flows.
 
Reclassifications
 
Certain amounts in the prior year financial statements have been reclassified for comparative purposes.
 
2.            GOING CONCERN

We have incurred a net loss of $7,725,770 for the year ended April 30, 2014 and have an accumulated deficit of $22,742,722 as of April 30, 2014, and additional debt or equity financing will be required to fund our activities and to support our operations.  In May 2014, we received $1,380,000 from the sale of certain forums websites.  However, there is no assurance we will be able to obtain additional financing.  Furthermore, there is no assurance that rapid technological changes, changing customer needs and evolving industry standards will enable us to introduce new products on a continual and timely basis so that profitable operations can be attained.
 
We are currently devoting our efforts to assimilate our subsequent business combination with a social gaming company to enhance our product offerings and revenues as further described in Note 15.  There can be no assurance that our efforts will translate in a beneficial manner. The accompanying statements do not include any adjustments that might result should we be unable to continue as a going concern.
 
3.           INVENTORY

As of April 30, 2014, inventory consisted of all finished goods of our synthetic human pheromone consumer products in the amount of $31,913.

4.            INVESTMENTS
 
Pursuant to our agreement with Human Pheromone Sciences, Inc., we converted our $50,000 advance payment into 714,286 shares of Human Pheromone Sciences, Inc. restricted common stock in January 2012.  These securities are classified as available for sale and are stated at fair value.
 
 
 
34

 
CROWDGATHER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2014

5.            PROPERTY AND EQUIPMENT
 
Property and equipment consisted of the following:
 
     
April 30,
   
April 30,
 
     
2014
   
2013
 
               
 
Furniture, fixtures and office equipment
 
$
30,919
   
$
30,919
 
 
Computers, servers and equipment
   
593,486
     
558,807
 
       
624,405
     
589,726
 
 
Less: accumulated depreciation
   
(493,887
)
   
(363,746
)
                   
     
$
130,518
   
$
225,980
 
 
Depreciation expense was $130,142 and $122,177 for the years ended April 30, 2014 and 2013, respectively.
 
6.             CONCENTRATIONS OF CREDIT RISK
 
As of April 30, 2014 and 2013, five customers accounted for approximately 70% and 50% of our outstanding receivables, respectively. In addition, our top five customers accounted for approximately 45% and 60% of our sales for the years ended April 30, 2014 and 2013, respectively.
 
7.             INTANGIBLE ASSETS
 
Intangibles are either amortized over their estimated lives, if a definite life is determined, or are not amortized if their life is considered indefinite. We account for the intangible assets at cost. Intangible assets acquired in a business combination, if any, are recorded under the purchase method of accounting at their estimated fair values at the date of acquisition. During the years ended April 30, 2014 and 2013, we recorded $4,750 and $30,000, respectively, of amortization associated with our definite lived intangibles. Intangibles consist of the following:
 
       
April 30,
   
April 30,
 
   
Est. Life
 
2014
   
2013
 
                 
 
Online forums and related websites
Indefinite
 
$
7,336,771
   
$
7,663,327
 
 
Target advertising technology
Indefinite
   
-
     
1,560,000
 
 
Trademarks and trade names
10 years
   
-
     
190,000
 
         
7,336,771
     
9,413,327
 
 
Less: accumulated amortization
     
(-
   
(45,224)
 
                     
       
$
7,336,771
   
$
9,368,103
 
 
 

 
35

 
CROWDGATHER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2014
  
7.             INTANGIBLE ASSETS (Continued)
 
During the year ended April 30, 2014, we entered into a web site purchase agreement to sell certain online forums and related website assets for $570,000 to an unrelated third party.  The cost of the online forums and websites was approximately $346,500 and as a result, we recorded a gain on sale of these assets of approximately $221,000, after fees of $2,500.
 
We also entered into a settlement agreement with the former shareholders of Adisn, Inc.  As a result of the settlement, the trademarks and trade names originally purchased from Adisn, Inc. were returned and we recorded a net impairment of $140,026 ($190,000 asset less $49,974 accumulated amortization).  In addition, we transferred the technology patent to the former shareholders of Adisn, Inc. along with cash of $50,000 for fees and 250,000 shares of our common stock valued at $0.08 per share, or $20,000, in exchange for receiving a royalty-free license to use the patent in perpetuity.  However, due to strategic changes in the 4th quarter of fiscal 2014 and our resulting merger with Plaor, we decided to discontinue further development of the marketplace based on Adisn's technology, and focus on development of social casino games, as well as their integration within our existing forum network to additionally engage our broad user base beyond display advertising.  Accordingly, we recorded a loss of $1,630,000 ($50,000 + $20,000 + $1,560,000).
 
8.            GOODWILL IMPAIRMENT
 
Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Goodwill is not amortized, but is tested for impairment on an annual basis and between annual tests in certain circumstances. An impairment charge is recognized for the excess of the carrying value of goodwill over its implied fair value.
 
Our goodwill related to our business combination with our subsidiary, Adisn, Inc.  As a result of our strategic shift and cessation of the development on our marketplace utilizing the Adisn technology, during the year ended April 30, 2014, we recorded an impairment of the goodwill in the amount of $4,360,000.
 
9.           PREFERRED SERIES B STOCK

On April 8, 2013, we filed with the Secretary of State of Nevada the Certificate of Designation of the Relative Rights and Preferences of the Series B Preferred Stock (the “Certificate of Designation”) specifying the designations, preferences and relative rights of the Series B Convertible Preferred Stock (“Series B Shares”).  The Certificate of Designation created a series of preferred stock consisting of 1,000,000 out of the 25,000,000 shares of our preferred stock, which will be designated “Series B Preferred Stock.”  The Certificate of Designation provides, among other things, that: (i) the conversion price for the shares of Series B Shares is the price per share equal to the quotient of the original issue price of $1.00 per share (the “Original Issue Price”) divided by the number of shares of common stock into which each share of Series B Shares may be converted (the “Conversion Rate”), subject to adjustment from time to time for recapitalizations and as otherwise set forth in the Certificate of Designation; (ii) each share of Series B Shares is convertible into shares of common stock at the option of the holder at any time after the date of issuance at a Conversion Rate of 20 shares of common stock for each share of Series B Shares; (iii) the holder of outstanding Series B Shares will be entitled to receive dividends, when declared by the Board of Directors, at an annual dividend rate of 10% per share of Series B Shares, with such right to receive dividends being cumulative and will accrue and be payable annually; (iv) the shares of Series B Shares may be redeemed by us, at our option, at a redemption price equal to 120% of the amount obtained by multiplying the Original Issue Price of the Series B Shares by the number of shares of Series B Shares to be redeemed from the investor; and (v) so long as any shares of Series B Shares remain outstanding, we will not, among other things, amend or restate any provisions of our Articles of Incorporation or Bylaws, declare or pay dividends on any shares of common stock or other security other than Series B Shares, authorize or issue any equity security having a preference over or being on parity with the Series B Shares, change the authorized number of directors, or enter into indebtedness of more than $1,000,000, without the prior written consent of a majority of outstanding shares of Series B Shares. 
 
On April 8, 2013, we sold 300,000 shares of Series B Shares to one foreign investor in exchange for $300,000, or $1.00 per share, pursuant to a securities purchase agreement (“Purchase Agreement”). In connection with the sale of Series B Shares, the investors also received warrants to purchase 3,000,000 shares of our common stock at a purchase price of $0.08 per share. The warrant agreements (“Warrants”) provide for an expiration period of five years from the date of the investment.
 

 
36

 
CROWDGATHER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2014
9.           PREFERRED SERIES B STOCK (Continued)
 
On July 16, 2013, pursuant to the Purchase Agreement, we sold 150,000 shares of Series B Shares to a foreign investor in exchange for $150,000, or $1.00 per share. In connection with the sale of Series B Shares, the investor also received Warrants to purchase 1,500,000 shares of our common stock at a purchase price of $0.08 per share.  The Warrants have an exercise term equal to 5 years and are exercisable commencing on July 16, 2013.
 
The Purchase Agreement provided that the investor would purchase 300,000 shares of Series B Shares and Warrants for a purchase price of $300,000 on or before July 12, 2013 (the “First Subsequent Closing Date”).  However, we then entered into the First Amendment to Securities Purchase Agreement (the “Amendment”), revising the First Subsequent Closing Date from July 12, 2013 to August 2, 2013.  The sale of the 150,000 shares of Series B Shares and Warrants on July 16, 2013 represents the first portion of the first subsequent closing and the remaining 150,000 shares of Series B Shares and Warrants would be purchased by the investor on or before August 2, 2013.  
 
As a result of the Amendment, we issued an Amended and Restated Common Stock Purchase Warrant (“Amended and Restated Warrant”) to replace the Warrants issued at the initial closing and provide that such Warrants will vest only if the Investor purchases an additional 300,000 shares of Series B Shares and Warrants for a purchase price of $300,000 on or before the First Subsequent Closing Date.
 
On August 2, 2013, pursuant to the Purchase Agreement and Amendment, we sold 150,000 shares of Series B Shares to a foreign investor in exchange for $150,000, or $1.00 per share. In connection with the sale of Series B Shares, the investor also received Warrants to purchase 1,500,000 shares of our common stock at a purchase price of $0.08 per share.  The Warrants have an exercise term equal to 5 years and are exercisable commencing on August 2, 2013.
 
On October 9, 2013, pursuant to the Purchase Agreement, we sold 400,000 shares of Series B Shares to three foreign investors in exchange for $400,000, or $1.00 per share. In connection with the sale of Series B Shares, the investors also received Warrants to purchase 4,000,000 shares of our common stock at a purchase price of $0.08 per share.  The Warrants have an exercise term equal to 5 years and are exercisable commencing on October 9, 2013.

10.           COMMON STOCK

On October 11, 2013, we issued 250,000 shares of our common stock valued at $20,000 pursuant to settlement and release agreement relating to our subsidiary, Adisn, Inc. as described previously in Note 6.

On January 7, 2014, we entered into an agreement with an independent third party to provide investor relation services for a period of three months.  Pursuant to the agreement, we issued 100,000 shares of our restricted common stock upon execution, valued at $6,000. The stock-based expense for these shares included in operating expenses for the year ended April 30, 2014 was $6,000.

On January 21, 2014, we entered into an agreement with an independent third party to provide investor relation services for a period of two months.  Pursuant to the agreement, we issued 100,000 shares of our restricted common stock upon execution, valued at $6,000. The stock-based expense for these shares included in operating expenses for the year ended April 30, 2014 was $6,000.

On April 30 2014, we entered into an agreement with an independent third party to provide investor relation services with a term of two months. This agreement calls for monthly cash compensation of $6,000 and the issuance of 175,000 shares of our restricted common stock upon execution, valued at $12,600. The stock-based expense for these shares included in operating expenses for the year ended April 30, 2014 was $12,600.

Additionally, during the year ended April 30, 2014, we granted 2,660,000 shares of our restricted common stock valued at $266,000  to certain key employees, officers, consultants, advisors and directors.  Such shares vest annually over a four year period.

 
37

 
CROWDGATHER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2014
 
11.           CAPITAL LEASE OBLIGATION

On May 25, 2012, we entered into a capital lease obligation with Dell Financial Services for the acquisition of computer equipment.  Pursuant to the agreement, we are required to pay $9,326 per month for twenty-four (24) months, including interest of approximately 8% per annum, with option to purchase the products for $1.00 at the end of the lease.  Accordingly, we have capitalized the acquisition cost of $209,384 for the computer equipment.  As of April 30, 2014, the lease was paid in full.
 
12.           STOCK OPTIONS
 
In May 2008 our board of directors approved the CrowdGather, Inc. 2008 Stock Option Plan (the Plan). The Plan permits flexibility in types of awards, and specific terms of awards, which will allow future awards to be based on then-current objectives for aligning compensation with increasing long-term shareholder value.
 
During the years ended April 30, 2014 and 2013, we issued stock options for 1,930,000 and 1,675,000 shares of our common stock, respectively, exercisable at various dates through March 2024 at fair market value at the date of grant ranging from $0.04 to $0.13 per share to recipients pursuant to the Plan.
 
For the years ended April 30, 2014 and 2013, we recognized $661,400 and $608,000 of stock-based compensation costs, respectively, as a result of the issuance of stock options to employees, directors and consultants in accordance with ASC 505.
 
Stock option activity was as follows for the year ended April 30, 2014:
                   
   
Number of Options
 
Weighted-Average Exercise Price
 
Weighted-Average Remaining Contract Term (Years)
 
Aggregate Intrinsic Value
 
                       
 
Outstanding, May 1, 2013
6,098,750
 
$
0.75
 
7.95
 
$
4,780,838
 
 
Granted
1,930,000
   
0.04
 
9.52
   
75,930
 
 
Forfeited/Expired
(1,990,000)
   
0.64
 
7.35
   
(1,444,468)
 
 
Exercised
-
   
-
 
-
   
-
 
                       
 
Outstanding, April 30, 2014
6,038,750
 
$
0.57
 
7.89
 
$
3,412,300
 
 
Exercisable, April 30, 2014
3,318,748
 
$
0.87
 
6.46
 
$
2,902,603
 
                       
 
 
 
38

 
CROWDGATHER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2014
 
12.          STOCK OPTIONS (Continued)
 
       A summary of the status of our unvested shares as of April 30, 2014 is presented below:
     
Number
of Shares
   
Weighted-Average Grant-Date Fair Value
 
               
 
Non-vested balance, May 1, 2013
   
3,161,000
   
$
0.36
 
 
Granted
   
1,930,000
     
0.04
 
 
Vested
   
(1,233,434)
     
0.28
 
 
Forfeited/Expired
   
(1,137,563)
     
0.65
 
                   
                   
 
Non-vested balance, April 30, 2014
   
2,720,002
   
$
0.15
 
 
As April 30, 2014, total unrecognized stock-based compensation cost related to unvested stock options was $529,740, which is expected to be recognized over a weighted-average period of approximately 7.89 years.
 
The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model based on the following weighted-average assumptions:
 
     
April 30, 2013
 
           
 
Risk-free interest rate
   
0.00% to 0.50%
 
 
Expected volatility
   
100.00%
 
 
Expected option life (in years)
   
4.00
 
 
Expected dividend yield
   
0.00
 

The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero coupon issues. The expected volatility is primarily based on historical volatility levels of our public company peer group. The expected option life of each award granted was calculated using the “simplified method” in accordance with ASC 718.
 
13.          COMMITMENTS AND CONTINGENCIES
 
As of April 30, 2014, we lease approximately 1,578 square feet of office space located at 20300 Venture Blvd., Suite 330, Woodland Hills, California. The term of our lease is for six months and expires on October 31, 2014. Our rent is $3,242 per month.
 
 
39

 
CROWDGATHER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2014
 
 14.          PROVISION FOR INCOME TAXES
 
For the years ended April 30, 2014 and 2013, we have recognized the minimum amount of franchise tax required under California corporation law of $800. We are not currently subject to further federal or state tax since we have incurred losses since our inception.
 
As of April 30, 2014, we had federal and state net operating loss carry forwards of approximately $18,225,000 which can be used to offset future federal income tax. The federal and state net operating loss carry forwards expire at various dates through 2034. Deferred tax assets resulting from the net operating losses are reduced by a valuation allowance, when, in our opinion, utilization is not reasonably assured.
 
As of April 30, 2014, we had the following deferred tax assets related to net operating losses. A 100% valuation allowance has been established due to the uncertainty of our ability to realize future taxable income and to recover its net deferred tax assets.
 
     
2014
 
 
Federal net operating loss (at 34%)
 
$
6,200,000
 
 
State net operating loss (at 8.84%)
   
1,600,000
 
       
7,800,000
 
 
Less: valuation allowance
   
(7,800,000
)
           
 
Net deferred tax assets
 
$
-
 
 
Our valuation allowance increased by $1,374,000 and $1,286,000 for the years ended April 30, 2014 and 2013, respectively.
 
15.         SUBSEQUENT EVENTS
 
On May 19, 2014, we sold the online forum PbNation.com and related website and domain name to VerticalScope, Inc for $1,380,000 in cash.  See our Current Report on Form 8-K filed May 1, 2014.

On May 19, 2014, we completed a merger agreement for 100% of the issued and outstanding common stock of Plaor, Inc. (Plaor), a social gaming company, pursuant to which Plaor survived as our wholly-owned subsidiary (“Merger”). The Company issued 55,075,800 shares of its $0.01 par value common stock to the shareholders of Plaor. These shares were valued for the Company's accounting purposes at $0.11 per share which represented the closing share price of the Company’s stock on May 19, 2014. The total value of the acquisition was approximately $6,058,000 and has been allocated in accordance with ASC 805 as per the Company’s management valuation estimate.  These unaudited pro forma financial statements reflect the transaction as if it occurred as of the Balance Sheet date and for the periods ended for the Statements of Operations presented.  In connection with the Merger, Hazim Ansari was appointed a director of CrowdGather.  See our Current Report on Form 8-K filed on May 5, 2014.
 
 
 
40

 
 
15.         SUBSEQUENT EVENTS (Continued)
 
CROWDGATHER, INC.
UNAUDITED PRO FORMA BALANCE SHEET
APRIL 30, 2014
 
               
PRO FORMA
     
PRO FORMA
 
   
CROWDGATHER, INC.
   
PLAOR, INC. *
   
ADJUSTMENTS
     
COMBINED
 
ASSETS
                         
                           
CURRENT ASSETS
                         
  Cash and cash equivalents
  $ 546,158     $ 459,231     $ -       $ 1,005,389  
  Accounts receivable
    130,709       80,466       -         211,175  
  Investments
    21,480       -       -         21,480  
  Inventory
    31,913       -       -         31,913  
  Prepaid expenses and deposits
    48,652       46,662       -         95,314  
                                   
    Total current assets     778,912       586,359       -         1,365,271  
                                   
Property and equipment, net
    130,518       17,293       -         147,811  
                                   
Intangible and other assets, net
    7,336,771       -       4,240,600  
(B)
       
                      (848,120 )
(C)
    10,729,251  
Goodwill
    -       -       1,817,400  
(B)
    1,817,400  
Security Deposits
    -       18,768       -         18,768  
                                   
TOTAL ASSETS
  $ 8,246,201     $ 622,420     $ 5,209,880       $ 14,078,501  
                                   
LIABILITIES AND STOCKHOLDERS' / MEMBERS' EQUITY
                                 
                                   
CURRENT LIABILITIES
                                 
  Accounts payable and accrued expenses
    52,078       499,152       -         551,230  
  Other accrued liabilities
    154,746       144,419       -         299,165  
  Deferred revenue
    -       246,863       -         246,863  
                                   
    Total current liabilities     206,824       890,434       -         1,097,258  
                                   
                                   
STOCKHOLDERS' / MEMBERS' EQUITY (DEFICIT)
                                 
   Convertible Preferred Series B stock, $0.001 par value, 25,000,000
     preferred shares authorized, 300,000 issued and outstanding
    1,000,000       -       -         1,000,000  
   Common stock, $0.001 par value, 975,000,000 shares
     authorized, 61,657,708 issued and outstanding
    61,658       -       55,076  
(B)
    116,734  
   Common stock, $0.001 par value, 60,000,000 shares
     authorized, 55,075,800 issued and outstanding
    -       -       55,076  
(A)
 
                      (55,076 )
(B)
    -  
  Class A Member units, 82,544 units authorized,
     82,544 issued and outstanding
    -       14,465,838       (14,465,838 )
(A)
    -  
  Class B Member units, 32,000 units authorized,
     22,914 issued, and 12,760 outstanding
    -       749,863       (749,863 )
(A)
    -  
  Additional paid-in capital
    29,748,961       -       15,160,625  
(A)
 
                      6,058,000  
(B)
    50,967,586  
  Accumulated deficit
    (22,742,722 )     (15,483,715 )     (848,120 )
(C)
    (39,074,557 )
  Accumulated other comprehensive loss
    (28,520 )     -       -         (28,520 )
                                   
    Total stockholders'/members' equity (deficit)     8,039,377       (268,014 )     5,209,880         12,981,243  
                                   
TOTAL LIABILITIES AND STOCKHOLDERS'/MEMBERS' EQUITY (DEFICIT)
  $ 8,246,201     $ 622,420     $ 5,209,880       $ 14,078,501  
                                   
                                   
 
The unaudited pro forma financial information gives effect to the following pro forma adjustments:
       
  * -  Formerly, Plaor, LLC
                   
(A) - To record the conversion of members' equity of Plaor, LLC into 55,075,800 shares of common stock and additional paid-in capital of Plaor, Inc.
(B) - To record the purchase price and issuance of 55,075,800 shares of common stock of Crowdgather, Inc. for the acquisition of 100%
 
         of the outstanding common stock of Plaor, Inc.  [$0.11/sh. X 55,075,800 = $6,058,338, or approximately $6,058,000]
   
(C) - To record amortization of intangible assets acquired.
             
 
 
 
 
41

 
CROWDGATHER, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 2014
 
               
PRO FORMA
   
PRO FORMA
 
   
CROWDGATHER, INC.
   
PLAOR, INC. *
   
ADJUSTMENTS
   
COMBINED