Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2009
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission File No. 333-157281
SWEET SPOT GAMES, INC.
NEVADA 26-2909561
------------------------------ ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2840 HIGHWAY 95 ALT. S, SUITE 7
SILVER SPRINGS, NV 89429
-----------------------------------------
(Address of principal executive offices)
(519) 872-2539
--------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ] NO
Indicate by check mark whether the registrant is a shell company as defined in
Rule 12b-2 of the Exchange Act.
[ ] YES [X] NO
APPLICABLE TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. [x ] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: September 30, 2009:
30,110,000
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
Page
Table of Contents
10-Q - Sweet Spot Games, Inc.
FORM 10-Q
PART I
ITEM 1. FINANCIAL STATEMENTS 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 10
ITEM 4T.CONTROLS AND PROCEDURES 11
PART II
Items 1 through 5 not applicable.
ITEM 6. EXHIBITS 12
SIGNATURES 13
EX-1 (EXHIBIT 31.1)
EX-2 (EXHIBIT 32.1)
ITEM 1. FINANCIAL STATEMENTS
SWEET SPOT GAMES, INC.
SWEET SPOT GAMES, INC.INC.
(An Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
September June 30, 2009
30, 2009
(Unaudited)
---------- -------------
ASSETS
Current assets
Cash $ 6,349 $17,802
---------- -------
Property and equipment
Equipment 3,253 3,252
Less: accumulated depreciation (1,204) (933)
---------- -------
Net property and equipment 2,049 2,319
---------- -------
Other assets
Software development costs 4,000 24,900
Less: accumulated amortization - (2,767)
---------- -------
Total other assets 4,000 22,133
---------- -------
$ 12,398 $42,254
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable - trade $ 600 600
Accrued expenses - 558
---------- -------
Total current liabilities 600 1,158
---------- -------
Stockholders' equity
Preferred stock - authorized 5,000,000 shares, - -
$0.001 par value; none issued
Common stock - authorized 75,000,000 shares, 30,110 30,110
$0.001 par value; issued and outstanding
30,180,000 and 30,110,000 shares at September
30, 2009 and June 30, 2009, respectively.
Additional paid in capital 717,755 704,390
Deficit accumulated during the
development stage (736,067) (693,404)
---------- ---------
Total stockholders' equity 11,798 41,096
---------- ---------
$ 12,398 $42,254
========== =========
Difference $ - $ -
*The accompanying notes to the unaudited condensed financial statements are an
integral part of these statements.
Page 1
Sweet Spot Games, Inc.
(A Development Stage Company)
Unaudited Condensed Income Statements
For the Three For the Three (Inception) to
Months Ended Months Ended September 30, 2009
September 30, 2009 September 30, 2008
---------------------- ---------------------- ----------------------
Revenue
Sales $ - $ - $ 13,325
---------------------- ---------------------- ----------------------
Operating expenses
Advertising and promotion -
626 626
Automobile expense -
23 23
Bank and other interest charges
518 263 1,672
Depreciation and amortization
271 120 3,971
Legal and professional fees - 650,451
32,500
Management fee 4,442 - 10,000
Supplies
967 493 2,440
Travel and meals 37,388
9,833 472
Website development expense 20,296
3,458 300
---------------------- ---------------------- ----------------------
Total operating expenses 20,138 $ 34,148 726,867
---------------------- ---------------------- ----------------------
Other expenses
Loss on software development 22,133 - 22,133
Loss on foreign exchange 392 -
392
---------------------- ---------------------- ----------------------
Total other expenses 22,525 - 22,525
---------------------- ---------------------- ----------------------
Net loss $ (42,663) $ (34,148) $ (736,067)
============== ============== ==============
Weighted average number of shares 30,112,917 29,765,000 29,929,375
outstanding
Loss per share $ (0.00) $ (0.00) $ (0.02)
*The accompanying notes to the unaudited condensed financial statements are an
integral part of these statements.
Page 2
Sweet Spot Games, Inc.
(A Development Stage Company)
Unaudited Condensed Statements of Stockholder Equity
Common Stock
Number of Amount Additional Accumulated Total
Shares Paid Deficit
in Capital
----------- ------- ----------- ------------ -------
Balance at June 2, 2008 26,500,000 $ 26,500 $ (14,000) $ - $ 12,500
(Date of Inception)
Common stock issued for services performed 3,000,000 3,000 597,000 - 600,000
Net loss for June 2, 2008 to June 30, 2008 - - - (612,101) (612,101)
----------- ------- ----------- ------------ -------
Balance at June 30, 2008 29,500,000 29,500 583,000 (612,101) 399
Private placement memorandum, shares issued from July 1, 2008 to 450,000 450 89,550 - 90,000
September 30, 2008 at $0.20 per share
Private placement memorandum, shares issued in April and May 2009 at 160,000 160 31,840 - 32,000
$0.20 per share
Net loss for the year ended June 30, 2009 - - - (81,303) (81,303)
----------- ------- ----------- ------------ -------
Balance at June 30, 2009 30,110,000 30,110 704,390 (693,404) 41,096
Private placement memorandum, shares issued in September 2009 at $0.20 70,000 70 13,930 - 14,000
per share
Syndication fees - - (635) - (635)
Net loss for the quarter ended September 30, 2009 - - - (42,663) (42,663)
----------- ------- ----------- ------------ -------
Balance at September 30, 2009 30,180,000 $ 30,180 $ 717,685 $ (736,067) $ 11,798
=========== ======= =========== ============ =======
* The accompanying notes to the unaudited condensed financial statements are an integral part of these statements.
Page 3
Sweet Spot Games, Inc.
(A Development Stage Company)
Unaudited Condensed Statements of Cash Flows
For the Three
Months Ended For the Three (Inception) to
September 30, 2009 September 30, 2008 September 30, 2009
------------------ ------------------ -------------------
Cash flows from operating activities
Net loss $ (42,663) $ (34,148) $ (736,067)
Adjustments to reconcile net loss to
cash used in operating activities
Depreciation and amortization 271 120 3,971
Common stock issued for services - - 600,000
performed
Loss on software development 22,133 - 22,133
Loss on foreign exchange 392 -
392
Changes in assets and liabilities
Accounts payable - -
600
Accrued expenses - -
(558)
------------------ ------------------ -------------------
Net cash used in operating activities (20,425) (34,028) (108,971)
------------------ ------------------ -------------------
Cash flows from investing activities
Cash purchases of property and equipment -
(3,253) (3,253)
Cash spent on software development costs (4,000) (28,900)
(6,800)
------------------ ------------------ -------------------
Net cash used in investing activities (4,000) (10,053) (32,153)
------------------ ------------------ -------------------
Cash flows from financing activities
Issuance of common stock 12,972 90,000 147,473
Additional paid in capital 12,972 90,000 148,108
Syndication Fees (635) - (635)
------------------ ------------------ -------------------
Net increase (decrease) in cash (11,453) 45,919 6,349
Cash at beginning of period 17,802 399 -
------------------ ------------------ -------------------
Cash at end of year $ 6,349 $ 46,318 $ 6,349
================== ================== ===================
*The accompanying notes to the unaudited condensed financial statements are an integral part of these statements.
Page 4
SWEET SPOT GAMES, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS
NATURE OF OPERATIONS
Sweet Spot Games, Inc. (the "Company") was organized in Nevada
on June 2, 2008. The Company is a development stage company
and currently has no operations. The Company is a developer of
online multiplayer skill based games.
The Company develops games in a 3D environment allowing users
from around the globe to compete in an environment that very
closely resembles the graphic quality of console based systems
such as Microsoft's Xbox or Sony's Play Station.
The Company's mandate is to continue producing highly
attractive and interactive online multiplayer skill-based
games that revolutionize the environment in which online
gaming applications exist today.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed financial statements of
the Company have been prepared in accordance with the rules
and regulations of the Securities and Exchange Commission (the
"SEC") including the instructions to Form 10-Q and Regulation
S-X. Certain information and note disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles in the United State
of America ("US GAAP") have been condensed or omitted from
these statements pursuant to such rules and regulation and,
accordingly, they do not include all the information and notes
necessary for comprehensive financial statements and should be
read in conjunction with our audited financial statements for
the year ended June 30, 2009, included on form S-1/A.
In the opinion of management of the Company, all adjustments,
which are of a normal recurring nature, necessary for a fair
statement of the results for the three-month periods have been
made. Results for the interim period presented are not
necessarily indicative of the results expected for the entire
fiscal year.
BASIS OF ACCOUNTING
The Company's policy is to prepare its financial statements in
conformity with generally accepted accounting principles in
the United States of America and have been consistently
applied in the preparation of the financial statements on a
going concern basis, which assumes the realization of assets
and the discharge of liabilities in the normal course of
operations for the foreseeable future. The Company maintains
it financial records on an accrual method of accounting.
The Company's ability to continue as a going concern is
dependent upon the continued ability to obtain financing to
repay its current obligations and fund working capital until
it is able to achieve profitable operations. The Company will
seek to obtain capital from equity financing through private
placements. Management hopes to realize sufficient sales in
future years to achieve profitable operations. There can be no
assurance that the Company will be able to raise sufficient
debt or equity capital on satisfactory terms. If management is
unsuccessful in obtaining financing or achieving profitable
operations, the Company may be required to cease operations.
The outcome of these matters cannot be predicted at this time.
These financial statements do not give effect to any
adjustments which could be necessary should the Company be
unable to continue as a going concern and, therefore, be
required to realize its assets and discharge its liabilities
in other than the normal course of business and at amounts
differing from those reflected in the financial statements.
Page 5
SOFTWARE DEVELOPMENT COSTS
In March 2000, the Emerging Issues Task Force, known as
"EITF," reached a consensus on ASC 350, Accounting for Website
Development Costs. Under ASC 350, accounting for website
development costs depends on the stage in which costs are
incurred. During planning the website, all costs incurred are
expensed as incurred. During developing the applications and
infrastructure, costs may be incurred to acquire or develop
both hardware and software needed to operate the site. All
software costs should be accounted for under AICPA Statement
of Position 98-1 ("SOP 98-1"), Accounting for the Cost of
Computer Software Development or obtained for internal use.
Under SOP 98-1, certain software development costs are
capitalized and amortized over the estimated useful life of
the website. Graphics are a component of software and their
initial development costs should be accounted for under SOP
98-1. After the launch of the website, graphics charges should
be expensed as incurred, except for website enhancements,
which should be capitalized. All costs of operating the site
should be expensed as incurred. The costs we incurred and
developing our website are accounted for using ASC 350.
REVENUE RECOGNITION
The Company will recognize sales revenue at the time of
delivery when ownership has transferred to the customer, when
evidence of a payment arrangement exists and the sales
proceeds are determinable and collectible. After the customer
has accessed the website and answered the questions necessary
to execute the forms and documents for participation, the
customer is required to pay for the services with a credit
card. The credit card charge is immediately electronically
processed and approved or declined. Once approved, the Company
immediately completes the actual filing forms and documents
and files them electronically, if possible, or overnights them
to the appropriate state. At that point, we recognize the
revenue from the transaction.
LOSS PER SHARE
Basic loss per share has been calculated using the weighted
average number of common shares issued and outstanding during
the year.
RESEARCH AND DEVELOPMENT COSTS
Research is planned search or critical investigation aimed at
discovery of new knowledge with the hope that such knowledge
will be useful in developing a new product or service or a new
process or technique or in bringing about a significant
improvement to an existing product or process. Development is
the translation of research findings or other knowledge into a
plan or design for a new product or process or for a
significant improvement to an existing product or process
whether intended for sale or use. It includes the conceptual
formulation, design, and testing of product alternatives, and
operation of pilot plants. It does not include routine or
periodic alterations to existing products, production lines,
manufacturing processes, and other on-going operations even
though those alterations may represent improvements and it
does not include market research or market testing activities.
All research and development costs have been expensed as
incurred in accordance with ASC 730.
2. ACCOUNTING PRONOUNCEMENTS
Effective for our interim financial statements as of
September 30, 2009, the Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") became the
primary source of authoritative accounting principles
recognized by the FASB to be applied in the preparation of
financial statements in accordance with GAAP. Rules and
interpretations of the SEC are also sources of authoritative
GAAP for SEC registrants. The ASC supersedes all existing non-
SEC accounting and reporting standards but does not change
GAAP. The adoption of the ASC did not have a material impact
on our consolidated financial statements.
In March 2008, the FASB issued ASC No. 815, "Disclosures about
Derivative Instruments and Hedging Activities-an amendment of
FASB Statement No. 133". ASC No. 815 gives financial statement
users better information about the reporting entity's hedges
by providing for qualitative disclosures about the objectives
and strategies for using derivatives, quantitative data about
the fair value of and gains and losses on derivative
contracts, and details of credit-risk-related contingent
features in their hedged positions. FASC No. 815 is effective
for financial statements issued for fiscal years beginning
after November 15, 2008 and interim periods within those
years. The Company does not expect the adoption of FASC No.
815 to have a material effect on the condensed financial
statements.
In December 2007, the FASB released ASC 805 "Business
Combinations". This standard revises and enhances the guidance
set forth in ASC 805 by establishing a definition for the
"acquirer," providing additional guidance on the recognition
of acquired contingencies and non-controlling interests, and
broadening the scope of the standard to include all
transactions involving a transfer in control, irrespective of
the consideration involved in the transfer. ASC 805 is
effective for business combinations for which the acquisition
date occurs in a fiscal year beginning on or after December
15, 2008. Although the standard will not have any impact on
the current condensed financial statements, application of the
new guidance could be significant to the Company in the
context of future merger and acquisition activity.
In December 2007, the FASB released ASC 810, "Non-Controlling
Interests in Consolidated Financial Statements-an amendment of
ARB No. 51". This statement amends ARB 51 to establish
accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a non-controlling interest in a
subsidiary is an ownership interest in the consolidated entity
that should be reported as equity in the consolidated
financial statements. ASC 810 is effective for fiscal years,
and interim periods within those fiscal years, beginning on or
after December 15, 2008. The Company does not expect the
standard to have a material impact on the condensed financial
statements.
In April 2009, the FASB released ASC 820, "Determining Fair
Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly." This position provides
additional guidance for estimating fair value in accordance
with ASC 820, "Fair Value Measurements," when the volume and
level of activity for the asset or liability have
significantly decreased as well as identifying circumstances
that indicate a transaction is not orderly. The Company does
not expect the standard to have a material impact on the
condensed financial statements.
In April 2009, the FASB released ASC 320 and FASC 958,
"Recognition and Presentation of Other-Than-Temporary
Impairments," which is intended to provide greater clarity to
investors about the credit and noncredit component of an other
than temporary impairment charge ("OTTI") and to more
effectively communicate when an OTTI event has occurred. This
FSP applies to debt securities and requires that the total
OTTI be presented in the consolidated statement of income with
an offset for the amount of impairment that is the noncredit
component recognized in other comprehensive income. Noncredit
component losses are to be recorded in other comprehensive
income if an investor can assess that it does not have the
intent to sell the security or it is more likely than not that
it will not have to sell the security prior to its anticipated
recovery. Also in accordance with FSP ASC 320 and ASC 958,
prior periods' noncredit component other than temporary
impairment charges are reclassified as additions to retained
earnings and reductions in accumulated other comprehensive
income. The Company does not expect the standard to have a
material impact on the condensed financial statements.
In May 2009, the FASB released ASC 855, "Subsequent Events,"
which establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date
but before the financial statements are issued or available to
be issued. Effective for our interim financial statements as
of September 30, 2009, we reviewed events occurring through
the filing date of this document.
Page 6
3. RELATED PARTY TRANSACTIONS
The Company incurred compensation and payroll tax expense in
the amount of $5,000 and $5,558 which was paid to a relative
of the Company's President for the quarter ended September 30,
2009 and the year ended June 30, 2009, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Forward Looking Statements
We make certain forward-looking statements in this report. Statements that are
not historical facts included in this Form 10-Q are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 that involve risks and uncertainties that could cause actual results to
differ from projected results. Such statements address activities, events or
developments that the Company expects, believes, projects, intends or
anticipates will or may occur, including such matters as future capital, debt
restructuring, pending legal proceedings, business strategies, expansion and
growth of the Company's operations, and cash flow. Factors that could cause
actual results to differ materially ("Cautionary Disclosures") are described
throughout this Form 10-Q. Cautionary Disclosures include, among others:
general economic conditions, the strength and financial resources of the
Company's competitors, environmental and governmental regulation, labor
relations, availability and cost of employees, material and equipment,
regulatory developments and compliance, fluctuations in currency exchange rates
and legal proceedings. Statements concerning our future operations, prospects,
strategies, financial condition, future economic performance (including growth
and earnings), demand for our services, and other statements of our plans,
beliefs, or expectations, including the statements contained under the captions
"Risk Factors," "Management's Discussion and Analysis or Plan of Operation,"
"Description of Business," as well as captions elsewhere in this document, are
forward-looking statements. In some cases these statements are identifiable
through the use of words such as "anticipate," "believe," "estimate," "expect,"
"intend," "plan," "project," "target," "can," "could," "may," "should," "will,"
"would," and similar expressions. We intend such forward-looking statements to
be covered by the safe harbor provisions contained in Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and in Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All
written and oral forward-looking statements attributable to the Company are
expressly qualified in their entirety by the Cautionary Disclosures. The
Company disclaims any obligation to update or revise any forward-looking
statement to reflect events or circumstances occurring hereafter or to reflect
the occurrence of anticipated or unanticipated events.
The nature of our business makes predicting the future trends of our revenues,
expenses, and net income difficult. Thus, our ability to predict results or the
actual effect of our future plans or strategies is inherently uncertain. The
risks and uncertainties involved in our business could affect the matters
referred to in any forward-looking statements and it is possible that our
actual results may differ materially from the anticipated results indicated in
these forward-looking statements. Important factors that could cause actual
results to differ from those in the forward-looking statements include, without
limitation, the factors discussed in the section entitled "Risk Factors" and
the following:
- the effect of political, economic, and market conditions and geopolitical
events;
- legislative and regulatory changes that affect our business;
- the availability of funds and working capital;
- the actions and initiatives of current and potential competitors;
- investor sentiment; and
- our reputation.
Page 7
We do not undertake any responsibility to publicly release any revisions to
these forward-looking statements to take into account events or circumstances
that occur after the date of this report. Additionally, we do not undertake any
responsibility to update you on the occurrence of any unanticipated events
which may cause actual results to differ from those expressed or implied by any
forward-looking statements.
The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto as filed with
the SEC and other financial information contained elsewhere in this Form 10-Q.
Overview
Sweet Spot Games, Inc. (the "Company") is currently a developmental stage
company that has limited revenues. The company has developed and launched an
online multiplayer game known as "Combat" which it expects to allow worldwide
users to connect through the internet. In March, 2009 we issued our first
annual license for the Combat game to "Cribwars" Corporation, a Canadian
purveyor of a board game of the same name for the sum of $13,325 plus 50% of
the online revenues generated from the online version of the cribwars game. To
date we have received no royalties from the game. To play combat, players
download the proprietary software from our website to compete with other
players for small prizes and recreation the company hopes to generate revenue
through in-game advertisement, product placement, and, in the future, possibly
gaming. The company hopes to position itself as an online multiplayer game
developer and to create in market other online games in the future.
In September, 2009 the Company determined that the Combat game failed to reach
commercial success and decided to abandon the game. A charge of $22,133 was
taken as loss on software development which represented the unamortized
capitalized value of the game.
The company expects to launch its first fully developed online multiplayer
game, "Jockey" early in 2010. The game is an online horse racing simulator
which allows users worldwide to connect through the Internet, download the
software and become virtual jockeys.
The "pay to play" aspect of the game and advertising are the two methods that
the company will use to generate revenue. The payment from each participant is
broken down into four categories that will allow users to be able to choose the
intensity of their bet on each race. They will have the ability to setup an
online account with an online payment processing company and will be able to
withdraw and deposit funds in real-time. Payment will be categorized into $2,
$5, $10 and $20 dollar rooms. Once a room is filled with the necessary 8
players the race will commence. There will be multiple rooms for each category.
The company will take a 25% cut from each race, leaving the remaining 75% to be
distributed among the top three finishers.
The game itself allows users to control the horse and easily manoeuvre camera
angles which will enable them to view 360 degrees from their current position,
similar to real life. Jockey has also built-in collision detection that slows
down the horse if the rider happens to bump into another horse or if they hit a
barrier. Each user will be allowed to use 10 lashes that speed up the horse by
15%. Steering and the timing of the lashes will be determining factors in the
race. The bottom of each users' screen displays the elapsed time, current
position on the track, placement and speed in km/h.
The Company has the ability to develop gaming applications in a true 3D
environment featuring skill-based multi-player connectivity and a "pay-for-
play" payment platform. The Company has chosen the approach of marketing its
applications to existing online portals that have the ability to host and
feature the applications to their existing audience. This strategy allows the
Company to focus on using its current resources on developing an extensive
portfolio of online gaming applications rather than marketing the games
independently.
Plan of Operations
To date the Company has financed its operations exclusively from private
placements. Until the Company begins to generate revenues, it expects to
continue to rely on raising capital through the sale of its common stock to
third parties. The Company has no other sources of capital and there can be no
guarantee that the Company will be able to meet its obligations or obtain
sufficient capital to complete its plan of operations for the next twelve (12)
months. There is no assurance that our officers can or will provide such funds
when the need arises.
The Company was organized in Nevada on June 2, 2008. The Company is a
development stage company and currently has limited operations. The Company is
a developer of online multiplayer skill-based "pay-for-play" gaming
applications.
Page 8
The Company has the ability to develop gaming applications in a true 3D
environment featuring multi-player connectivity and a "pay-for-play" payment
platform. The Company has chosen the approach of marketing its applications to
existing online portal that have the ability to host and feature the
applications to their existing audience. This strategy allows the company to
focus on using its current resources on developing an extensive portfolio of
online gaming applications rather than marketing the games independently.
The Company has initiated development of the "Jockey" gaming application.
"Jockey" is expected to be an online multi-player skill-based horse racing
simulator that allows users from around the world to connect and compete
amongst each other in a true 3D environment for real-money. Upon completion,
the Company intends to license the "Jockey" game on a "white-label" revenue-
sharing basis to existing online portals that already have a significant amount
of traffic and are looking to expand their offering within the gaming market.
To date we have received no royalties or revenues from the "Jockey" game. The
Company hopes to position itself as a leader in the development of multi-player
skill-based gaming applications for the online and mobile application market.
The game itself allows users to control the horse and easily manoeuvre camera
angles which will enable them to view 360 degrees from their current position,
similar to real life. Jockey has also built-in collision detection that slow
down the horse if the rider happens to bump into another horse or if they hit a
barrier. Each user will be allowed to use 10 lashes that speed up the horse by
15%. Steering
and the timing of the lashes will be determining factors in the race. The
bottom of each users' screen displays the elapsed time, current position on the
track, placement and speed in km/h.
The revenue making aspect of the company is generated by a "pay to play" model.
Users pay a specified amount depending on which game room they enter. They are
allowed to spend $2, $5, $10 and $20. Once a room is filled with 8 players the
race begins. The top three finishers split 75% of the pot while the house takes
a cut of 25%.
We believe the online gaming portal community exceeds 1,200 major players
throughout the global landscape. Our approach from the onset was to specialize
in our niche in becoming a developer of online multi-player skill-based games
and in turn license these applications on a white-label revenue-sharing basis.
Our approach in marketing our gaming applications includes the initial
generation of an extensive database that will contain the contact information
of each online gaming portal that exceeds certain minimum specifications in
terms of membership size, geographic scope, licensing retention and
jurisdiction and daily traffic volumes. Once we have narrowed down our contact
list with portals that we determine would benefit most from incorporating our
applications, an initial call will be placed into each company to determine who
has the role of Director of Marketing or Business Development. Once determining
our point of contact, an initial package will be sent out containing
information on Sweet Spot Games, Inc. and a proposed Partnership Plan.
Our initial goal is to establish the core gaming infrastructure that will
facilitate the licensing mechanism to our partner network. Our approach in
licensing our applications included a "black box" local installation and a
monetary audit tool that monitors the cash flow of "pay-for-play" revenue from
our specific applications installed on the partner portal.
Our secondary goal is to initiate our marketing initiatives and focus
exclusively on generating solid relationships with large online gaming portals.
Our partnership agreements will be structured on a revenue sharing model. Our
system is currently structured to conduct a bi-weekly cash-flow audit and will
generate a report that will show what revenues have been generated and what
percentage of "net" revenue is owed to our affiliate.
We are aware that each application that we launch within our partner network
retains a "life-cycle". The community of users that participate in playing
these applications are on the constant look-out for the next best "app". Our
mandate includes the constant development of gaming applications that will
facilitate the constant demand. Expanding and retaining our development team is
top-priority.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. Overall, we had a net loss of $(42,663) for the three months ended
September 30, 2009. During the three months ended September 30, 2009, we had
net cash used in operating activities of $(20,425), net cash used in investing
activities of $(4,000), and net cash provided by financing activities of
$12,972. At the end of the three-month period, our cash balance was $6,349.
CASH FLOWS FROM OPERATING ACTIVITIES. Net cash used in operating activities of
$(20,425) for the three months ended September 30, 2009 was primarily
attributable to the net loss from operations. The adjustments to reconcile the
net loss to net cash included depreciation and amortization expense of $271 ,
loss on software development of $22,133, loss on foreign exchange of $392, and
accrued expenses of $(558).
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CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing activities of
$(4,000) for the three months ended September 30, 2009 was entirely
attributable to the $4,000 from cash spent on software development costs.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash of $12,972 provided by financing
activities in the three months ended September 30, 2009 was due to additional
paid in capital of $13,607 with syndication fees of $(635).
FINANCING. We ended September 2009 with $6,349 of cash and cash equivalents on
our balance sheet. The cash at the beginning of the period was $17,802, and the
net decrease in cash was $(11,453).
INTERNAL SOURCES OF LIQUIDITY. There is no assurance that funds from our
operations, if and when they commence, will meet the requirements of our daily
operations in the future. In the event that
funds from our operations are insufficient to meet our operating requirements,
we will need to seek other sources of financing to maintain liquidity.
EXTERNAL SOURCES OF LIQUIDITY. We intend to pursue all potential financing
options in 2009 as we look to secure additional funds to both stabilize and
grow our business operations and begin extraction. Our management will review
any financing options at their disposal and will judge each potential source of
funds on its individual merits. We cannot assure you that we will be able to
secure additional funds from debt or equity financing, as and when we need to
or if we can, that the terms of such financing will be favorable to us or our
existing shareholders.
INFLATION. Our management believes that inflation has not had a material effect
on our results of operations, and does not expect that it will in fiscal year
2009.
OFF-BALANCE SHEET ARRANGEMENTS. We do not have any off-balance sheet
arrangements.
RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 2009, to the three months
ended September 30, 2008:
Operating Expense
The Company recorded an operating loss of $(42,663) for the three months ended
September 30, 2009 compared to a loss of $(34,148) for the three months ended
September 30, 2008. Legal and professional fees were completely eliminated for
the three months ended September 30, 2009, as compared to $32,500 in the same
period of 2008. Depreciation and amortization were $271 for the three months
ended September 30, 2009 as compared to $120 for the three months ended
September 30, 2008. Expenses were added for the three months ended September
30, 2009 for advertising and promotion, totaling $626, management fee, totaling
$4,442, and for automobile expense, totaling $23. None of these expenses were
present for the period of 2008. Also, the travel and meals expense increased
from $472 in the three months ended September 30, 2008 to $9,833 for the same
period of 2009. The website development expense similarly increased from $300
to $3,458 for those same respective periods. Supplies expenses also increased
from $493 to $967 for the same periods.
Other Income (Expense)
Other expense increased from none for the three months ended September 30, 2008
to $22,525 for the three months ended September 30, 2009. The Company took a
charge of $22,133 for the three months ended September 30, 2009,for the
unamortized value of the software development game for the Combat game which
was abandoned by the Company during the quarter. The Company had amortized the
software development cost of the game as compared to no software development
costs for the three months ended September 30, 2008. Foreign exchange expense
increased to $392 for the three months ended September 30, 2009, compared to no
expenses for foreign exchange in the same period of 2009.
Net Loss
The net loss for the three months ended September 30, 2009 was $(42,663) as
compared to a net loss of $(34,148) for the three months ended September 30,
2008.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
Page 10
ITEM 4T. CONTROLS AND PROCEDURES.
CONTROLS AND PROCEDURES
Quarterly Evaluation of Controls
As of the end of the period covered by this quarterly report on Form 10- Q, we
evaluated the effectiveness of the design and operation of (i) our disclosure
controls and procedures ("Disclosure Controls"), and (ii) our internal control
over financial reporting ("Internal Controls"). This evaluation ("Evaluation")
was performed by our President and Chief Executive Officer for the quarter
ended September 30, 2009, Greg Galanis ("CEO") and by our Chief Financial
Officer for the quarter ended September 30, 2009. In this section, we present
the conclusions of our CEO based on and as of the date of the Evaluation, (i)
with respect to the effectiveness of our Disclosure Controls, and (ii) with
respect to any change in our Internal Controls that occurred during the most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect our Internal Controls.
Our auditors, Brock, Schechter & Polakotf, LLP, reported to management on
system deficiencies that constituted material weaknesses in the internal
controls of the Company. We have received their comments and propose to act on
their observations as follows:
1. Internal Control Environment - In order to address the issue, we are
currently implementing an internal control system which, as defined by the
Committee of Sponsoring Organization of the Treadway Commission, achieves the
establishment of a control environment, risk assessment, control activities,
information and communication and monitoring.
2. ATM activity - With the implementation of the internal controls mentioned
above the use of the ATM has been precluded and according to these internal
controls, receipts for business purposes and invoices for services are retained
for the timely and accurate recording into the general ledger system for
monitoring and communicating all financial information.
CEO and CFO Certifications
Attached to this quarterly report, as Exhibits 31.1 and 32.1, are certain
certifications of the CEO and CFO, which are required in accordance with the
Exchange Act and the Commission's rules implementing such section (the "Rule
13a- 14(a)/15d-14(a) Certifications"). This section of the quarterly report
contains the information concerning the Evaluation referred to in the Rule 13a-
14(a)/15d-14(a) Certifications. This information should be read in conjunction
with the Rule 13a- 14(a)/15d-14(a) Certifications for a more complete
understanding of the topic presented.
Disclosure Controls and Internal Controls
Disclosure Controls are procedures designed with the objective of ensuring that
information required to be disclosed in our reports filed with the Commission
under the Exchange Act, such as this quarterly report, is recorded, processed,
summarized and reported within the time period specified in the Commission's
rules and forms. Disclosure Controls are also designed with the objective of
ensuring that material information
relating to the Company is made known to the CEO and the CFO by others,
particularly during the period in which the applicable report is being
prepared. Internal Controls, on the other hand, are procedures which are
designed with the objective of providing reasonable assurance that (i) our
transactions are properly authorized, (ii) our assets are safeguarded against
unauthorized or improper use, and (iii) our transactions are properly recorded
and reported, all to permit the preparation of complete and accurate financial
statements in conformity with accounting principles generally accepted in the
United States.
Limitations on the Effectiveness of Controls
Our management does not expect that our Disclosure Controls or our Internal
Controls will prevent all error and all fraud. A control system, no matter how
well developed and operated, can provide only reasonable, but not absolute
assurance that the objectives of the control system are met. Further, the
design of the control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances so of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision -making
can be faulty, and that breakdowns can occur because of simple error or
mistake.
Page 11
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control. The design of a system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated objectives under
all potential future conditions. Over time, control may become inadequate
because of changes in conditions, or because the degree of compliance with the
policies or procedures may deteriorate. Because of the inherent limitations in
a cost-effective control system, misstatements due to error or fraud may occur
and not be detected.
Scope of the Evaluation
The CEO and CFO's evaluation of our Disclosure Controls and Internal Controls
included a review of the controls' (i) objectives, (ii) design, (iii)
implementation, and (iv) the effect of the controls on the information
generated for use in this quarterly report. In the course of the Evaluation,
the CEO and CFO sought to identify data errors, control problems, acts of
fraud, and they sought to confirm that appropriate corrective action, including
process improvements, was being undertaken. This type of evaluation is done on
a quarterly basis so that the conclusions concerning the effectiveness of our
controls can be reported in our quarterly reports on Form 10-QSB and annual
reports on Form 10-KSB. The overall goals of these various evaluation
activities are to monitor our Disclosure Controls and our Internal Controls,
and to make modifications if and as necessary. Our external auditors also
review Internal Controls in connection with their audit and review activities.
Our intent in this regard is that the Disclosure Controls and the Internal
Controls will be maintained as dynamic systems that change (including
improvements and corrections) as conditions warrant.
Among other matters, we sought in our Evaluation to determine whether there
were any significant deficiencies or material weaknesses in our Internal
Controls, which are reasonably likely to adversely affect our ability to
record, process, summarize and report financial information, or whether we had
identified any acts of fraud, whether or not material, involving management or
other employees who have a significant role in our Internal Controls. This
information was important for both the Evaluation, generally, and because the
Rule 13a-14(a)/15d-14(a) Certifications, Item 5, require that the CEO and CFO
disclose that information to our Board , and to our independent auditors, and
to report on related matters in this section of the quarterly report. In the
professional auditing literature, "significant deficiencies" are referred to as
"reportable conditions". These are control issues that could have significant
adverse affect on the ability to record, process, summarize and report
financial data in the financial statements. A "material weakness" is defined in
the auditing literature as a particularly serious reportable condition where
the internal control does not reduce, to a relatively low level, the risk that
misstatement cause by error or fraud may occur in amounts that would be
material in relation to the financial statements and not be detected within a
timely period by employee in the normal course of performing their assigned
functions. We also sought to deal with other controls matters in the
Evaluation, and in each case, if a problem was identified; we considered what
revisions, improvements and/or corrections to make in accordance with our
ongoing procedures.
Conclusions
Based upon the Evaluation, the changes recommended by our auditors did not take
effect during the quarter ended September 30, 2009 and material weaknesses
still existed as of September 30, 2009. The Company intends to implement
disclosure controls and procedures as designed to provide reasonable assurance
of achieving our objectives subsequent to the quarter ended September 30, 2009.
Our CEO and CFO have concluded that our disclosure controls and procedures are
effective at that reasonable assurance level to ensure that material
information relating to the Company is made known to management, including the
CEO and CFO, particularly during the period when our periodic reports are being
prepared, and that our Internal Controls are effective at that assurance level
to provide reasonable assurance that our financial statements are fairly
presented inconformity with accounting principles generally accepted in the
United States.
Additionally, there has been no change in our Internal Controls that occurred
during our most recent fiscal quarter that has materially affected, or is
reasonably likely to affect, our Internal Controls.
PART II - OTHER INFORMATION
Items 1 through 5 not applicable.
ITEM 6. EXHIBITS
(a) Exhibits required to be filed by Item 601 of Regulation S-B:
31.1 Certification of Chief Executive Officer and Chief Financial Officer Under
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Page 12
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SWEET SPOT GAMES, INC.
December 23, 2009
/s/ GREGORY GALANIS, President
------------------------------
GREGORY GALANIS,
President and Chief Executive Officer
(Principal Executive Officer and Principal Financial and
Accounting Officer
