Attached files
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| EX-31.1 - EXHIBIT311 - SunGame Corp | exhibit311.htm |
| EX-32.1 - EXHIBIT321 - SunGame Corp | exhibit321.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-Q
_______________________
(MARK ONE)
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended: 31, March 2013
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission file number: 000-27831
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SUNGAME CORPORATION
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(Exact name of registrant as specified in its charter)
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Delaware
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20-8017623
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(State or other jurisdiction of incorporation or organization)
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(IRS Employee Identification No.)
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3091 West Tompkins Avenue, Las Vegas, NV
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89103
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including area code: (702) 789-0848
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Securities Registered pursuant to Section 12(b) of the Exchange Act:
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Title of each class
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Name of each exchange on which registered
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None
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None
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Securities Registered pursuant to Section 12(g) of the Exchange Act:
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Common Stock, $0.001 Par Value
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No x
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed first fiscal quarter.
As of March 31, 2013 the market value was approximately $888,000,000 based upon a close of $5.00 on March 31, 2013. The Company would like to give fair disclosure in that the market capitalization may be overvalued due to certain factors, such as the Company, at this time, is thinly traded and we do not feel the market price has accurately reflected the merger. There are approximately 480,000 shares of our common voting stock held by non-affiliates. This valuation is based upon the bid price of our common stock as quoted on the OTCBB on that date ($-0-).
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
The number of shares of common stock as of March 31, 2013 is 177,575,014 issued.
(DOCUMENTS INCORPORATED BY REFERENCE)
None
SUNGAME CORPORATION
FORM 10-Q
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Page
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PART I – FINANCIAL INFORMATION
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Item 1.
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3
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Item 2.
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10
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Item 3.
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23
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Item 4.
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23
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PART II – OTHER INFORMATION
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Item 1.
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24
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Item 1A.
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24
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Item 2.
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24
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Item 3.
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24
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Item 4.
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24
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Item 5.
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Item 6.
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25
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THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH STATEMNTS ARE BASED ON CURRENT EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS AOUT THE COMPANY AND ITS INDUSTRY. FORWARD-LOOKING STATEMENTS ARE SUBJECT TO KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE, ACHIEVEMENTS AND PROSPECTS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.
PART 1 – FINANCIAL INFORMATION
SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Balance Sheets
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March 31,
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December 31,
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2013
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2012
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Unaudited
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ASSETS:
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Current Assets:
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Cash
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$ | 11,732 | $ | 2,604 | ||||
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Prepaid Expenses
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30,000 | - | ||||||
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Total Current Assets
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41,732 | 2,604 | ||||||
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Fixed Assets
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Office Equipment
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2,140 | 2,140 | ||||||
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Accumulated Depreciation
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(1,635 | ) | (1,528 | ) | ||||
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Total Fixed Assets
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505 | 612 | ||||||
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Capitalized Software
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Capitalized Software
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183,419 | 183,419 | ||||||
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Accumulated Depreciation
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(77,661 | ) | (62,376 | ) | ||||
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Total Capitalized Software
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105,758 | 121,043 | ||||||
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TOTAL ASSETS
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$ | 147,995 | $ | 124,259 | ||||
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
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Current Liabilities:
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Accounts payable
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$ | 269,574 | $ | 267,079 | ||||
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Related party advances
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1,833,398 | 1,665,819 | ||||||
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Other liabilities
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40,000 | 5,209 | ||||||
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Total Current Liabilities
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2,142,972 | 1,938,107 | ||||||
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Stockholders' Deficiency:
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Common stock, par value, $0.001
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177,575 | 177,575 | ||||||
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300,000,000 authorized with
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177,575,000 issued and outstanding
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Paid in Capital
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Preferred Stock, par value $0.001
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5,000,000 authorized with none outstanding
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(282,295 | ) | (282,295 | ) | ||||
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Accumulated deficit
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Total Stockholders' Deficiency
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(1,890,257 | ) | (1,709,128 | ) | ||||
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY
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(1,994,977 | ) | (1,813,848 | ) | ||||
| $ | 147,995 | $ | 124,259 | |||||
The accompanying notes are an integral part of these financial statements.
SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations
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November 13,
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Three months ended
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2006, (Inception)
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March 31,
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to March 31,
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2013
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2012
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2013
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Revenue:
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$ | 110 | $ | 10,265 | $ | 27,183 | ||||||
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Total Revenue
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110 | 10,265 | 27,183 | |||||||||
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Costs and Expenses:
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Depreciation
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15,392 | 12,057 | 78,517 | |||||||||
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General & administrative
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170,002 | 159,025 | 1,839,454 | |||||||||
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Total Expenses
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185,394 | 171,082 | 1,917,971 | |||||||||
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Net Loss From Operations
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(180,284 | ) | (160,817 | ) | $ | (1,885,788 | ) | |||||
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Other Income and (Expenses)
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Interest income
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- | - | 10 | |||||||||
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Interest expense
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(845 | ) | (386 | ) | (4,479 | ) | ||||||
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Other income
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5,000 | 5,000 | ||||||||||
| 4,155 | (386 | ) | 531 | |||||||||
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Net Loss
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$ | (181,129 | ) | $ | (161,203 | ) | $ | (1,890,257 | ) | |||
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Per Share Information
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Loss per common share
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$ | (0.00 | ) | $ | (0.00 | ) | ||||||
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Weighted average number
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of shares outstanding
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177,575,014 | 177,575,014 | ||||||||||
The accompanying notes are an integral part of these financial statements.
SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statements of Cash Flows
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October 21, 2010
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(Inception of
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Dev. Stage)
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Period ended
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Through
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March 31,
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March 31 2013
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2013
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2012
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2013
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Cash Flows from Operating Activities
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$ | (181,129 | ) | $ | (161,203 | ) | $ | (1,890,257 | ) | |||
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Net loss
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Adjustments to reconcile net loss to
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net cash provided by (used for)
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operating activities:
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Depreciation and amortization
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15,392 | 12,057 | 78,517 | |||||||||
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Stock issued for licensing agreement
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165,000 | |||||||||||
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Compensatory stock issuances
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12,325 | |||||||||||
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Prepaid expenses
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(30,000 | ) | 1,250 | (30,000 | ) | |||||||
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Accounts payable
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2,495 | 15,151 | 148,856 | |||||||||
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Accrued liabilities
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(5,209 | ) | (4,319 | ) | (316 | ) | ||||||
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Net cash used for
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operating activities
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(198,451 | ) | (137,064 | ) | (1,515,875 | ) | ||||||
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Cash Flows from Investing Activities
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Investment in capitalized
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software
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- | (37,980 | ) | (183,419 | ) | |||||||
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Net cash used for
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investing activities
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- | (37,980 | ) | |||||||||
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Cash Flows from Financing Activities
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Related party advances
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167,579 | 167,627 | 1,671,026 | |||||||||
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Short term notes payable
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40,000 | 40,000 | ||||||||||
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Net cash used for
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financing activities
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207,579 | 167,627 | 1,711,026 | |||||||||
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Net Increase (Decrease) In Cash
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9,128 | (7,417 | ) | 11,732 | ||||||||
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Cash At The Beginning Of The Period
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2,604 | 13,338 | - | |||||||||
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Cash At The End Of The Period
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$ | 11,732 | $ | 5,921 | $ | 195,151 | ||||||
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
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Cash paid for interest expense
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$ | 845 | - | 4,479 | ||||||||
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Cash paid for income taxes
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$ | - | $ | - | $ | - | ||||||
The accompanying notes are an integral part of these financial statements.
SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
1. Business and Summary of Significant Accounting Policies
Business
The accompanying financial statements include the accounts of Sungame Corporation (“the Company”), a Delaware corporation. The Company is an early development stage company.
The Company, trading under the symbol “SGMZ”, is the Company behind the Flighteck.tv content management and discovery platform. Sungame also uses the brand “Freevi” as a d.b.a., as it acquired Freevi Corp. and the brand has retained its value sufficient to keep using the brand Freevi. Sungame’s mission is simple: to enrich people’s lives by becoming a leading social networking, content creation, content discovery and distribution platform. Integral to the site’s functionality is a central aggregation engine that excels at servicing targeted, focused and high quality content and social media interactions based on the user’s specific interests and past usage history. Other tools available on the website are designed to simplify content creation and distribution for content producers, while providing these artists an engaged audience interested in consuming this content. Sungame is also the Company behind Vidirectory, a video based business directory that simplifies online marketing for small businesses.
Sungame builds products that support its mission by creating utility for users, developers and advertisers as follows:
1. Flight deck enables people to stay connected, access and discover new content as well as socialize with their friends and family across different social medial platforms. The platform allows its users to create, discover, share, and fund content they care about.
2. Flightdeck allows developers to use the Flightdeck Platform to create audio, video, editorial content and applications (apps) that they can market and distribute to the platform’s global network of users.
3. Sungame enables advertisers to engage subsets of users based on information the users have chosen to share with the platform such as their age, location, gender or interests. Flightdeck’s content focused strategy gives advertisers a unique combination of reach, relevance, social context, and engagement to enhance the value of their ads.
The Company merged with Freevi Corporation on April 15, 2011. Freevi brings a rich media platform to the Company revolving around its core product the “Freevi Flightdeck” ™, a graphical user interface that allows users to consume video and audio content, network with other Freevi users, engage in e-commerce transactions, and access games and other applications. Freevi’s proprietary technologies were licensed from Chandran Holding Media, Inc., its majority shareholder at the time of its acquisition by the Company.
The Company was incorporated in Delaware on November 14, 2006. The Company’s fiscal year end is December 31st.
Summary of Significant Accounting Policies
Development Stage Company
The Company is a development stage company as defined by Accounting Standards Codified No. 915. The Company is devoting substantially all of its present efforts to establish a new business. All losses accumulated since inception, have been considered as part of the Company’s development stage activities.
SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
Risks and Uncertainties
Our business is rapidly evolving and intensely competitive, and is subject to changing technology, shifting user needs and frequent introductions of new products and services. We have many competitors in different industries, including traditional search engines, vertical search engines, e-commerce sites, social networking sites, traditional media companies, and providers of online products and services. Our current and potential competitors range from large and established companies to emerging startups. Established companies have longer operating histories and more established relationships with customers and end users, and they can use their experience and resources against us in a variety of competitive ways, including by making acquisitions, investing aggressively in research and development, and competing aggressively for advertisers and websites. Emerging startups may be able to innovate and provide products and services faster than we can. If our competitors are more successful than we are in developing competing products or in attracting and retaining users, advertisers, and content providers, our revenues and growth rates could decline.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts and timing of revenue and expenses, the reported amounts and classification of assets and liabilities, and disclosure of contingent assets and liabilities. These estimates and assumptions are based on management’s future expectations for the Company’s operations. The Company’s actual results could vary materially from management’s estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. Included in cash of $11,732 at March 31, 2013 is $3,182 held in reserve by the Company’s sales processing agency.
Property and Equipment
Property and equipment, when acquired, will be stated at cost. Depreciation will be computed using the straight-line method to allocate the cost of depreciable assets over the estimated useful lives of the assets.
Software Costs
The costs for internal use software, whether developed or obtained, are assessed to determine whether they should be capitalized or expensed in accordance with American Institute of Certified Public Accountants’ Statement (“SOP”) 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”. Capitalized software costs are reflected as property and equipment on the balance sheet and are to be depreciated when functional.
Long Lived Assets
“Long-lived assets” are reviewed for impairment of value whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable or at least at the end of each reporting period. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying value of an asset is not recoverable. For long-lived assets to be held and used, management measures fair value based on quoted market prices or based on discounted estimates of future cash flows.
Concentration of Credit Risk
The Company’s financial instruments that are exposed to concentrations and credit risk primarily consist of amounts due to related parties. (see Note 5) The Company presently uses one vendor for all of its software development.
SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
Income Taxes
Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for significant deferred tax assets when it is more likely than not, that such asset will not be recovered.
At March 31, 2013 and 2012, the Company had net operating loss carry-forwards of approximately $1,890,000 and $1,195,000, which begin to expire in 2026. At March 31, 2013 and 2012 the Company had deferred tax assets of approximately $662,000 and $418,000 created by the net operating losses, which have been offset by a 100% valuation allowance.
2. Reverse Merger
Effective April 15, 2011 Sungame Corporation entered into a merger agreement (the “Agreement”) with Freevi Corporation, acquiring 100% of the outstanding common stock of Freevi Corporation through the issuance of 177,000,000 shares of its common stock with no readily available market price. Freevi Corporation was incorporated in Nevada on October 21, 2010. The transaction was accounted for as a reverse merger as the shareholders of Freevi Corporation retained the majority of the outstanding common stock of Sungame Corporation after the share exchange. Effective with the Agreement, the Company’s stockholders equity was recapitalized as that of Freevi Corporation, while 100% of the assets and liabilities of Sungame Corporation valued at $(282,045), consisting of cash $231, net fixed assets $1,361, accounts payable $121,265, and related party advances of $162,372, were recorded as being acquired in the reverse merger for its outstanding common shares (250,000) on the merger date. Subsequent to the April 15, 2011 recapitalization Freevi Corporation ceased to exist, with Sungame Corporation as the sole surviving entity.
3. Going Concern Uncertainty and Managements’ Plans
In the Company’s audited financial statements for the fiscal year ended December 31, 2012, the Report of the Independent Registered Public Accounting Firm includes an explanatory paragraph that describes substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements for the three months ended March 31, 2013 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company reported a net loss of $181,129 and $161,203 for the three months ended March 31, 2013, and 2012 respectively, and an accumulated deficit of $1,890,257 as of March 31, 2013. As of December 31, 2012 the accumulated deficit was $1,709,128. At March 31, 2013, the Company’s total current liabilities exceed total current assets by $2,101,240. At December 31, 2012 this amount was $1,935,503.
The future success of the Company is likely dependent on its ability to attain additional capital, or to find an acquisition to add value to its present shareholders and ultimately, upon its ability to attain future profitable operations. There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash flow from operations. Management believes that actions presently being taken to revise the Company’s operating and financial requirements provide the opportunity for the Company to continue as a going concern.
4. Property and Equipment
Capitalized software costs were $0 and $7,415 for the three months ended March 31, 2013 and 2012 for two products that have proven technologically feasible. Depreciation expense amounted to $15,392 and $12,057 for the three months ended March 31, 2013 and 2012, respectively.
SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
5. Note Payable
During the three months ended March 31, 2013, we borrowed $40,000 for a six month term with a 60% interest rate. Payments will be $4000 biweekly.
6. Advance Payable, Related Party
At March 31, 2013 and December 31, 2012, the Company’s had working capital advances due to one of the Company’s then minority shareholders, Adversor, Inc. (“Adversor”), of $162,372. These funds are non-interest bearing and are due on demand. Included in the Company’s accounts payable at March 31, 2013 and December 31, 2012 was $254,513 and $238,013 owed to Adversor.
During the three months ended March 31, 2013 and 2012, the Company’s majority shareholder, Chandran Holding Media, Inc. (Chandran) advanced funds to the Company for operations. The Company and Chandran also share certain members of executive management and certain employees. At March 31, 2013 and December 31, 2012, the Company owed Chandran $1,671,026 and $1,503,447. These funds are non-interest bearing and due on demand.
7. Legal Matters
The Company settled the litigation in Colorado. Broadway Holdings, Inc. (Broadway) vs. Sungame Corporation. The suit was a breach of contract by Broadway Holdings, Inc. filed on or about August 2, 2011, in the District Court, Denver County, Colorado. The settlement was confidential. All claims and counterclaims were dismissed in the confidential settlement. All Sungame shares held by the Broadway Plaintiffs Shareholders are to be cancelled in 2013.
Statement Regarding Forward-Looking Information
The following discussion should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q.
Statement Regarding Forward-Looking Information. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations regarding our financial position, estimated working capital, business strategy, the plans and objectives of our management for future operations and those statements preceded by, followed by or that otherwise include the words “believe”, “expects”, “anticipates”, “intends”, “estimates”, “projects”, “target”, “goal”, “plans”, “objective”, “should”, or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements, including, but not limited to, the availability and pricing of additional capital to finance operations.
Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The following discussion should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q.
Background
We are an early development stage company. Prior to the merger with Freevi Corporation, Sungame was in the process of establishing a 3D virtual world communities. Sungame (also known as the “Company”), trading under the symbol “SGMZ”, is the Company behind the Flightdeck.tv content management and discovery platform. Sungame also uses the brand “Freevi” from time to time as a d.b.a., as it acquired Freevi Corp. and the brand has retained its value sufficient to keep using the brand Freevi. Sungame’s mission is simple: to enrich people’s lives by becoming a leading social networking, content creation, content discovery and distribution platform. Integral to the site’s functionality is a central aggregation engine that excels at serving targeted, focused and high quality content and social medial interactions based on the user’s specific interests and past usage history. Other tools available on the website are designed to simplify content creation and distribution for content producers, while providing these artists an engaged audience interested in consuming this content. Sungame is also the Company behind Vidirectory, a video based business directory that simplifies online marketing for small businesses.
Sungame builds products that support its mission by creating utility for users, developers and advertisers:
Flightdeck
The Flightdeck platform is designed to be a web-based homepage that is able to pull social media, news and content feeds from all over the web into one easy to manage central location. This aggregation of feeds will allow Flightdeck members to integrate all their most important online activities into one completely customizable homepage. The platform’s chat functionality is designed to allow users to interact with their user’s Twitter and Facebook friends, as they use the platform. Flightdeck will allow users to post content and links to all their social media accounts through a central location inside the website. The platform will enhance user’s content consumption experience by layering in unique chat and sharing features, while they watch movies, listen to music or play games.
Flightdeck is designed to be the ultimate content discovery, distribution and consumption platform. The platform’s main differentiation compared to competing platforms is likely to include the platform’s multi-medium focus on audio, video, text and social content. The Flightdeck recommendation engine learns from tens of millions of small user interactions, which improves the platform’s ability to serve content that is relevant to the interest and taste of the user. Flightdeck’s mission therefore is to become the user’s central online homepage that they can use to access all their social media and content needs.
Figure 1: Flightdeck landing page
Vidirectory
Sungame will also offer Vidirectory a business directory service designed to help businesses attract customers to their online and physical by providing increased online visibility under the Company’s Vdirectory service offering, Sungame provides both free and paid products to local businesses. Vdirectory will allow businesses to create a free online business account and claim an individual page for each of their businesses locations. With their complimentary business accounts, businesses can view business trends1, message customers2, update information3 and update their product prices and inventory. Premium versions of this directory listing service allows local businesses to promote themselves as a sponsored search result on the shopping platform when users are searching for related product keywords or are visiting related business pages.
Figure 1: Vidirectory landing page
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1 e.g., statistics and charts reflecting the performance of a business’s page on the platform
2 e.g., by replying to customer inquiries either publicly or privately
3 e.g., address, hours of operation
Platform Features
CENTRAL SOCIAL MEDIA HUB FUNCTIONALITY
Flightdeck’s social media aggregation bundles multiple social media accounts into one single channel for each user so everything from Instagram photos, Facebook status updates, tweets and Soundcloud tracks can be found in one easy to access place. The platform’s differentiation will lie in its unique user experience, which will allow users to chat, share and consume content at the same time.
THE FD POST
The platform allows users to simultaneously broadcast updates to multiple social media websites without ever having to leave the platform. The feature will allow users to significantly streamline their sharing, communication and networking activity across social media platforms. This will allow user and content producers to post content to their Facebook, Twitter, LinkedIn and other social media accounts with a single click of the button.
Figure 3: Social network feeds
USER PROFILING AND CONTENT DISCOVERY
The Flightdeck system has been built to offer users seamless content discovery through automatic interest and past usage analysis and profiling. The Flightdeck user profiling system allows the end-user experience to transition from having to search for the content they are looking for to a more organic and natural “curated content” strategy, where the user is exposed to relevant content and social media interactions automatically.
VILLAGES
Flightdeck will feature a community discussion board or a villages feature designed to discuss, collaborate and fund creative projects together. All users are able to apply to become members of different villages or creative projects, where they can contribute by either funding or volunteering for projects. This will allow users and content producers to connect and make creative projects happen.
SHARED ECONOMY
The Company will actively incentivize user engagement, usage and referrals through the use of its virtual currency system. Users will be able to either redeem these points for cash, through licensed debt cards, or use it to purchase the different content as well as fund other user’s creative projects. This virtual system will also provide independent artists a way to monetize the content they produce.
Figure 4: Shared Economy Wallet
Business Model
Flightdeck will generate revenue by monetizing both individual users and businesses. In regard to individuals, revenue will be generated through banner and video advertising, as well as the profit share deriving from our apps store. In regard to businesses, Sungame offers the possibility of inclusion in its database and platforms with both Free and Premium offerings.
Figure 5: Sungame’s business model
Value Proposition
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Flightdeck’s primary value proposition is its successful functional integration of video streaming, social media, shopping and apps into one easy to use platform.
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Access to high quality and original content will increase the longterm customer value and increase unique visits, and engagement of the platform's users. The platform’s recommendation engine is expected to significantly streamline the content discovery process and increase consumption of high quality targeted content.
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The platforms will also generate significant user interest by monetizing and rewarding users based on their engagement and usage of the website. This will provide users a strong economic incentive to use the website over other competing platforms. Developed with a content creator centric approach, Flightdeck will provide content producers a revenue sharing deal that is significantly better than agreements other larger content sites offer their content creators.
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Access to a large number of engaged users will allow the platform to connect these users with small businesses through its Vidirectory service. The service will allow these businesses a proven video-based online marketing strategy at an affordable price.
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Future developments
Although a growing number of users is without question the most relevant Company goal in 2013, Sungame’s team and its endless desire to grow and expand has already set up a few more objectives for the near term.
The first would be to make Sungame’s service available on mobile and tablet devices. The incredible growth in these segments of the market speaks for itself and Sungame wants to take advantage of a large potential adoption in that market.
In addition, the team is investigating the feasibility of releasing an innovative Sungame -branded tablet, The team has been working on licensing the business line of the device and recently could appreciate the output of the hard work with a prototype device that exceeded any expectation. The tablet has not officially been presented, but it is thinner than any other 7” tablet on the market and allows for 3D vision without the use of any kind of glasses.
Upon further understanding of the economics of these new products and services, as well of its distribution strategy, the Sungame team will promptly take action to present and exploit these new opportunities.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2013 (Q1 2013)
COMPARED TO THREE MONTHS ENDED MARCH 31, 2012 (Q1 2012)
Revenues
For the three months ended March 31, 2013 we generated revenue of $110 compared to $10,265 for the three months ended March 31, 2012. The decrease of $10,155 is due to the Company’s decision to discontinue its social media consulting services for Vidirectory.com.
Operating Expense
Operating expenses for the three months ended March 31, 2013 were $185,394 compared to $171,082 for the three months ended March 31, 2012. This net increase of $14,312 was due to increased rent of $4,337, increased legal fees of $2,912, and increased consulting costs of $35,763 offset by a decrease in salaries and benefits of $32,772 during the three months ended March 31, 2013 versus the same period in the prior year.
Other Income
We received miscellaneous income of $5,000 during the three months ended March 31, 2013.
Net Loss
The net loss for the three months ended March 31, 2013 was $181,129 compared to a net loss of $161,203 for the three months ended March 31, 2012. The $19,926 increase in net loss is directly attributable to the decrease in revenue and increase in operating expenses described above. As of March 31, 2013, we have an accumulated deficit of $1,890,257.
Net Loss Applicable to Common Stock
Net loss applicable to common stock was $0.00 for the three months ended March 31, 2013 and $0.00 for the three months ended March 31, 2012.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2013, we had cash on hand of $11,732 and total assets of $147,995; consisting of cash of $11,732, net fixed assets of $505 and capitalized software of $105,758. At March 31, 2013, we had total current liabilities of $2,142,972; consisting of $269,574 of accounts payable, short-term notes payable of $40,000 and related party advances of $1,833,398. At March 31, 2013, we had a working capital deficit of $2,184,704.
During the three months ended March 31, 2013, cash used in operating activities was ($198,451) compared to ($137,064) during the three months ended March 31, 2012. The increase is primarily due to the increase in net loss of $19,926 and an increase in prepaid expenses of $30,000 for expenses of the second quarter 2013 which were paid in advance for the three months ended March 31, 2013 versus the same period in the prior year.
During the three months ended March 31, 2013, investment in capitalized software was $0 compared to $37,980 during the three months ended March 31, 2012. During the three months ended March 31, 2013, we increased our advances from related parties by $167,579 in financing activities. During the three months ended March 31, 2012, we increased our related party advances by $167,627 in financing activities.
Outlook
The United States has been experiencing a widespread and severe economic recession that, among other things, has reduced availability of credit and capital financing and heightened economic risks. We have been grossly undercapitalized in 2013 and unable to raise a significant amount of capital, other than receiving $167,579 in advances from our majority shareholder.
The continuing effects and duration of these developments and related uncertainties on the Company’s future operations and cash flows cannot be estimated at this time but likely will be significant, and in its audit report on our consolidated financial statements, our independent registered accounting firm has expressed substantial doubt as to our ability to continue as a going concern (see Note 3 to our consolidated financial statements).
We presently are unable to satisfy our obligations as they come due and do not have enough cash to sustain our anticipated working capital requirements and our business expansion plans for the remainder of 2013. Subject to unforeseen effects of the economic risks and uncertainties discussed in the foregoing paragraph and to our ability to raise working capital, we expect to continue for the remainder of the calendar year 2013 to incur expenses related to software development. The further delay of the rollout of our virtual world products, will have material adverse effects on our cash flow, results of operations and financial condition including significant uncertainty as to our ability to continue as a going concern. No assurance can be given that we will be able to secure any third party financing or that such financing will be available to us on acceptable terms.
Given the current financial market disruptions, credit crisis and economic recession, it is difficult at this time to obtain any third-party financing on acceptable terms, whether public or private equity or debt, strategic relationships, capital leases or other arrangements. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restricting covenants. Strategic arrangements, if necessary to raise additional funds, may require that we relinquish rights to certain of our technologies or products or agree to other material obligations and covenants.
We cannot provide assurance that the market will ever accept our products and services. Any failure by us to sell our products and services within our expected schedule or on terms acceptable to us will likely have a material adverse impact on our cash flow, results of operations and financial condition. In addition, we expect to face competition from larger, more formidable competitors as we enter various markets. A lack of market acceptance, failure to obtain additional financing, or unforeseen adverse competitive, economic, or other factors may adversely impact our cash position, and thereby materially adversely affect our financial condition and business operations.
We anticipate funding operations through private investments and loans made by our current shareholders. However, we have no commitments for such funding as of the date of this report. In addition, we anticipate generating revenue in the near future, however, we have no current commitments or contracts that could result in such revenue. Management will have complete discretionary control over the actual utilization of said funds and there can be no assurance as to the manner or time in which said funds will be utilized.
We foresee that we will need a minimum of $1,500,000 to fund our operations for the next 12 months as follows:
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System Development and Integration
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$
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700,000
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Professional Fees
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$
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100,000
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Sales, Marketing, Strategic Partnerships
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$
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100,000
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General & Administrative
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$
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500,000
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Working Capital
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$
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100,000
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Total
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$
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1,500,000
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We will need substantial additional capital to support our proposed future operations. We have no significant revenues from operations. We have no committed source for any funds as of the date hereof. No representation is made that any funds will be available when needed. In the event funds cannot be raised when needed, we may not be able to carry out our business plan, may never achieve sales or royalty income, and could fail in business as a result of these uncertainties.
Because of the limited financial resources that we have, it is unlikely that we will be able to diversify our operations. Our probable inability to diversify our activities into more than one area will subject us to economic fluctuations within the virtual world industry and therefore increase the risks associated with our operations due to lack of diversification.
We anticipate generating the vast majority of our revenues from our advertisers. Advertisers can generally terminate their contracts, at any time. Advertisers could decide to not do business with us if their investment in advertising with us does not generate sales leads, and ultimately customers, or if we do not deliver their advertisements in an appropriate and effective manner. If we are unable to remain competitive and provide value to advertisers, they may stop placing ads with us, which would negatively harm future revenues and business. In addition, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. Any decreases in or delays in advertising spending due to general economic conditions could delay or reduce our revenues or negatively impact our ability to grow our revenues.
In the event we are unable to achieve additional capital raising through future private or public offerings, we will limit operations to fit within our capital availability. In such event, we will probably seek loans for operating capital. We have not achieved any commitments for loans from any source. In any event our business can be operated with a skeleton staff and have limited advertising/marketing budget, which could cause us to remain unprofitable and eventually fail.
Going Concern
The independent registered public accounting firm's report on our financial statements as of December 31, 2012 and 2011 includes a “going concern” explanatory paragraph that describes substantial doubt about our ability to continue as a going concern.
We are dependent on raising additional equity and/or, debt to fund any negotiated settlements with our outstanding creditors and meet our ongoing operating expenses. There is no assurance that we will be able to raise the necessary equity and/or debt that we will need to be able to negotiate acceptable settlements with our outstanding creditors or fund our ongoing operating expenses. We cannot make any assurances that we will be able to raise funds through such activities.
Capital Resources
We have only common stock as our capital resource.
We have no material commitments for capital expenditures within the next year, however, if operations are commenced, substantial capital will be needed to pay for software development, possible acquisitions and working capital.
Need For Additional Financing
We do not have capital sufficient to meet our cash needs. We have not generated revenue and have minimal resources to conduct planned operations. We estimate that our monthly expenses to commence planned operations within the next 12 months are approximately $125,000 (approximately $1,500,000 per year). Thus, using currently available capital resources (the primary source of which is non-binding commitments and expectations from management and current shareholders), we expect to be able to conduct planned operations for a minimum period of 3 to 4 months. We are currently relying solely on current shareholders and management to provide the necessary funds to continue operations. We do not have any commitments for such funding from shareholders or management.
At the present time, we have not made any arrangements to raise additional cash. Management and current shareholders are expected, but have not committed, to provide the necessary working capital so as to permit us to conduct planned operations until such time as we have begun to generate revenue and/or have become sufficiently funded. However, if we do not begin to generate revenue or cannot raise additional needed funds, we will either have to suspend development operations until we do raise the funds, or cease operations entirely.
In addition, the United States and the global business community is experiencing severe instability in the commercial and investment banking systems which is likely to continue to have far-reaching effects on the economic activity in the country for an indeterminable period. The long-term impact on the United States economy and our operating activities and ability to raise capital cannot be predicted at this time, but may be substantial.
Critical Accounting Policies
We have identified the policies below as critical to its business operations and the understanding of our results from operations. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Conditions and Results of Operations where such policies affect our reported and expected financial results. Note that our preparation of this document requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of expenses during the reporting periods. There can be no assurance that actual results will not differ from those estimates. During the three months ended March 31, 2013, there were no significant changes in our critical accounting policies and estimates. You should refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2012 for a more complete discussion of our critical accounting policies and estimates.
Risks and Uncertainties
We operate in an emerging industry that is subject to market acceptance and technological change. Our operations are subject to significant risks and uncertainties, including financial, operational, technological and other risks associated with operating an emerging business, including the potential risk of business failure.
Software Costs
The costs for internal use software, whether developed or obtained, are assessed to determine whether they should be capitalized or expensed in accordance with American Institute of Certified Public Accountants’ Statement (“SOP”) 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”. Capitalized software costs are reflected as property and equipment on the balance sheet and are to be amortized when we begin recording revenue the deemed date that the software is placed in service.
Income Taxes
We have effectively provided a full valuation allowance for the tax effects of our net operating losses during the three months ended March 31, 2013 and for the period from inception (October 21, 2010) to March 31, 2013 to offset the deferred tax asset that might otherwise have been recognized as a result of operating losses in the current period and prior periods since, because of our history of operating losses, management is unable to conclude at this time that realization of such benefit is currently more likely than not.
Recent Accounting Pronouncements
There were no recent accounting pronouncements that would have a significant effect on our future financial position, results of operations, and operating cash flows.
Off-Balance Sheet Arrangements
As of March 31, 2013, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, that had been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we were engaged in such relationships.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of March 31, 2013. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of such date, at a reasonable level of assurance, in ensuring that the information required to be
disclosed by our company in the reports we file or submit under the Exchange Act is: (i) accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission . Based on our evaluation, management has concluded that our internal control over financial reporting was effective as of March 31, 2013. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting pursuant to temporary rules of the Securities and Exchange Commission.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
None.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.
Item 2. Unregistered Sales Of Equity Securities
None.
None
None
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EXHIBIT
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NUMBER
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DESCRIPTION
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31.1
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32.1
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SUNGAME CORPORATION
By: /s/ Neil Chandran
Name: Neil Chandran
Title: Principal Executive Officer,
President and Chief Executive Officer,
Chief Financial Officer and Principal
Accounting Officer, Director
Date: May 14, 2013
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