Attached files

file filename
EX-31.1 - EXHIBIT311 - SunGame Corpexhibit311.htm
EX-32.1 - EXHIBIT321 - SunGame Corpexhibit321.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q/A
(Amendment No. 2)

 
þ   
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended:  June 30th, 2013
   
¨     
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the transition period from: ________________ to _______________
   
Commission File No. 333-158946

logo

 
Sungame Corp.
  (Exact name of registrant as specified in its charter)

Delaware
     *    
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)

3091 West Tompkins Avenue, Las Vegas, NV 89103
 (Address of principal executive office)

Registrant's telephone number, including area code: (702) 789-0848

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.¨ Yesþ No
Issuer has filed all reports required to be filed pursuant to §13 and §15(d) on a voluntary basis.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yesþ No

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 definitions of “large accelerated filer,”  “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
 
Large accelerated filer   o
Accelerated filer                      o
Non-accelerated filer     o
Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ YES þ  NO

Indicate the number of the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
 
As of Date
Outstanding
30 June 2013
177,650,734
12 August 2013
 
 

 
 

 
 
Sungame Corp.
(A Development Stage Company Commencing 14 November 2006)


   
 
Page
 
         
PART I-
 
2
 
 
 
 
 
 
ITEM 1-
 
3
 
 
 
 
 
 
 
 
3
 
 
 
 
   
 
 
4
 
 
 
 
   
 
 
5
 
 
 
 
   
 
 
6
 
 
 
 
   
ITEM 2-
 
10
 
 
 
 
   
ITEM 3-
 
14
 
 
 
 
   
ITEM 4-
 
14
 
 
 
 
   
PART II-
 
15
 
 
 
 
   
ITEM 1-
 
15
 
 
 
 
   
ITEM 1A-
 
15
 
 
 
 
   
ITEM 2-
 
15
 
 
 
 
   
ITEM 3-
 
15
 
 
 
 
   
ITEM 4-
 
15
 
 
 
 
   
ITEM 5-
 
16
 
 
 
 
   
ITEM 6-
 
17
 
 
 
 
   
 
 
 
 
 
 
   
Exhibit 31.1
 
   
 
 
 
   
Exhibit 32.2
 
   
 
 
 

 
 
 

 

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”).  These statements are based on management’s beliefs and assumptions, and on information currently available to management.  Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider,” or similar expressions are used.


THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.  SUCH STATEMENTS 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.

 
 
 

 

 
 
ITEM 1    Financial Statements - Balance Sheet

   
June 30,
   
December 31,
 
   
2013
   
2012
 
   
Unaudited
       
ASSETS:
           
             
   Current Assets:
           
      Cash
  $ 38,592     $ 2,604  
      Inventory
    23,161       -  
      Prepaid Expenses
    28,677       -  
                 
Total Current Assets
    90,430       2,604  
                 
   Fixed Assets
               
      Office Equipment
    2,140       2,140  
      Accumulated Depreciation
    (1,740 )     (1,528 )
Total Fixed Assets
    400       612  
                 
Capitalized Software
               
      Capitalized Software
    183,419       183,419  
      Accumulated Depreciation
    (92,946 )     (62,376 )
Total Capitalized Software
    90,473       121,043  
                 
TOTAL ASSETS
  $ 181,303     $ 124,259  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY:
               
                 
    Current Liabilities:
               
        Notes payable
  $ 24,115       -  
        Accounts payable
    305,450       267,079  
        Related party advances
    1,798,771       1,665,819  
        Other liabilities
    7,478       5,209  
Total Current Liabilities
    2,135,814       1,938,107  
                 
Stockholders' Deficiency:
               
                 
Preferred Stock, par value $0.001
               
5,000,000 authorized with none outstanding
               
Common stock subscriptions
    268,000          
Common stock, par value, $0.001
    177,651       177,575  
    300,000,000 authorized with
               
    177,650,734 issued and outstanding
               
Paid in Capital
    (159,895 )     (282,295 )
                 
    Accumulated deficit
    (2,240,267 )     (1,709,128 )
                 
Total Stockholders' Deficiency
    (1,954,511 )     (1,813,848 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY
  $ 181,303     $ 124,259  

 
The accompanying notes are an integral part of these financial statements
 
 




 
                           
October 21,
 
   
Three months ended
   
Six months ended
   
2010, (Inception)
 
   
June 30,
   
June 30,
   
to June 30,
 
   
2013
   
2012
   
2013
   
2012
   
2013
 
                               
Revenue:
  $ 7,000     $ 2,170     $ 7,110     $ 12,435     $ 34,183  
                                         
Total Revenue
    7,000       2,170       7,110       12,435       34,183  
                                         
Costs and Expenses:
                                       
      Cost of goods sold
    3,118               3,118               3,118  
      Depreciation
    15,392       13,559       30,784       25,616       93,909  
      General & administrative
    345,937       164,164       515,939       323,189       2,185,391  
                                         
Total Expenses
    364,447       177,723       549,841       348,805       2,282,418  
                                         
Net Loss From Operations
    (357,447 )     (175,553 )     (542,731 )     (336,370 )     (2,248,235 )
                                         
                                         
Other Income and (Expenses)
                                       
      Interest income
                                    10  
      Interest expense
    (8,563 )     (771 )     (9,408 )     (1,157 )     (13,042 )
      Other income
    16,000               21,000               21,000  
      7,437       (771 )     11,592       (1,157 )     7,968  
                                         
Net Loss
  $ (350,010 )   $ (176,324 )   $ (531,139 )   $ (337,527 )   $ (2,240,267 )
                                         
Per Share Information
                                       
Loss per common share
    0.00       0.00       0.00       0.00          
                                         
                                         
Weighted average number
                                       
of shares outstanding
    177,592,548       177,575,014       177,587,794       177,575,014          
 

 
 
The accompanying notes are an integral part of these financial statements
 
 
 


 

 

               
October 21, 2010
 
               
(Inception of
 
               
Dev. Stage)
 
   
Six months ended
   
Through
 
   
June 30,
   
June 30 2013
 
   
2013
   
2012
   
2013
 
                   
Cash Flows from Operating Activities
  $ (531,139 )   $ (337,527 )   $ (2,240,267 )
    Net Loss
                       
                         
    Adjustments to reconcile net loss to
                       
    net cash provided by (used for)
                       
    operating activities:
                       
        Depreciation and amortization
    30,784       25,616       93,909  
        Compensatory stock issuances
    90,500               102,825  
        Stock issued for licensing agreement
                    165,000  
        Inventory
    (23,161 )             (23,161 )
        Prepaid expenses
    (28,677 )     1,250       (28,677 )
        Accounts payable
    38,371       (12,953 )     184,732  
        Accrued liabilities
    (2,269 )     (49 )     7,162  
            Net cash (used for)
                       
            operating activities
    (421,053 )     (323,663 )     (1,738,477 )
                         
Cash Flows from Investing Activities
                       
        Investment in capitalized
                       
           software
    -       (37,980 )     (183,419 )
          Net cash (used for)
                       
          investing activities
    -       (37,980 )     (183,419 )
                         
Cash Flows from Financing Activities
                       
        Common stock issued
    31,974               31,974  
        Common stock subscriptions
    268,000               268,000  
        Related party advances
    282,952       361,909       1,786,399  
        Payments on related party advances
    (150,000 )             (150,000 )
        Notes payable borrowing
    40,000               40,000  
        Payments on notes payable
    (15,885 )             (15,885 )
            Net cash provided by
                       
            financing activities
    457,041       361,909       1,960,488  
                         
Net Increase In Cash
    35,988       266       38,592  
                         
Cash At The Beginning Of The Period
    2,604       13,338          
                         
Cash At The End Of The Period
  $ 38,592     $ 13,604     $ 38,592  
                         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
                       
       INFORMATION
                       
                         
     Cash paid for interest expense
  $ 9,408                  
     Cash paid for income taxes
  $ -     $ -          
 
 
The accompanying notes are an integral part of these financial statements
 
 


 

 
SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FOR THE SIX MONTHS ENDED JUNE 30, 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.  The Company is making efforts to offer an innovative 3D line of tablets.  This new tablet line, due to the proprietary and patented glass viewing screen assembly, has the ability to display HD quality glasses-free 3D pictures and videos, as well as maintaining the ability to act as standard 2D tablets to take full advantage of the existing content currently available.

Sungame shapes 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

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 $38,592 at June 30, 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.

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 June 30, 2013 and 2012, the Company had net operating loss carry-forwards of approximately $2,240,000 and $1,371,000, which begin to expire in 2026.  At June 30, 2013 and 2012 the Company had deferred tax assets of approximately $784,000 and $480,000 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 six months ended June 30, 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 $526,139 and $337,527 for the six months ended June 30, 2013, and 2012 respectively, and an accumulated deficit of $2,240,267 as of June 30, 2013. As of December 31, 2012 the accumulated deficit was $1,709,128. At June 30, 2013, the Company’s total current liabilities exceed total current assets by $2,045,384.  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.

5.  Property and Equipment

Capitalized software costs were $0 and $27,980 for the six months ended June 30, 2013 and 2012, for two products that have proven technologically feasible.  Depreciation expense amounted to $30,784 and $25,616 for the six months ended June 30, 2013 and 2012, respectively.

6.  Note Payable

During the six months ended June 30, 2013, we borrowed $40,000 for a six month term with a 60% interest rate.  Payments will be $4,000 biweekly.  The balance outstanding at June 30, 2013 is $24,116.

7.  Related Parties

At June 30, 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 June 30, 2013 and December 31, 2012 was $272,581 and $204,313 owed to Adversor.

During the six months ended June 30, 2013 and 2012, the Company’s majority shareholder, Chandran Holding Media, Inc. (Chandran) advanced funds of $282,952 to the Company for operations, of which $150,000 was paid back during the six months ended June 30, 2013.  The Company and Chandran also share certain members of executive management and certain employees.  At June 30, 2013 and December 31, 2012, the Company owed Chandran $1,636,399 and $1,503,447.  We paid $150,000 against our Chandran balance with proceeds from the sale of common stock (see Note 7).  These funds are non-interest bearing and due on demand.

The Company sold 3D tablets to Chandran totaling $7,000 at a profit of $3,882 during the six months ended June 30, 2013.

8.  Equity Transactions

The company issued 11,000 shares of common stock, at $3 per share for a total capital raise of $33,000 during the six months ended June 30, 2013.  The company issued stock bonuses amounting to 75,500 shares to its Chief Executive officer and charged executive compensation $90,500 during the six months ended June 30, 2013.  In addition, the Company received $268,000 in stock subscriptions in June, 2013 which has been classified as equity in our June 30, 2013 balance sheet.

9.  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, which amounted to 10,780 shares, were cancelled on June 30, 2013.
 
 
 



10.  Commitments and Contingencies

On September 23, 2011, the Company entered into an independent contractor agreement with Guy Robert, a Board member and key development consultant.  The term of the agreement was for three years at an annual payment of $120,000 to Adversor, a company 100% owned by Guy Robert, with a European option agreement granting the following tranches of contingent stock options with an exercise price of $.001 per share:  3,000,000 on April 1, 2011, 2,667,000 on April 1, 2012, 2,667,000 on April 1, 2013, 2,667,000 on April 1, 2014, and 2,667,000 upon severance of this agreement, excluding severance of the term of this agreement.  The options will be issued and exercised upon the average daily trading volume exceeding 500,000 for the prior 90 days which has never occurred since the inception of this agreement.  Guy Robert, is also to receive performance based compensation for all deals, projects, and assets that he initiates.  The performance compensation shall be 2.5% of the net realizable value brought into the Company, which has been zero thus far.

 
 
 
 
 
 

 

 

 
 
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.

RESULTS OF OPERATIONS
SIX MONTHS ENDED June 30, 2013 (Q2 2013)
COMPARED TO SIX MONTHS ENDED JUNE 30, 2012 (Q2 2012)

Revenues
 
For the six months ended June 30, 2013 we generated revenue of $7,110 compared to $12,435 for the six months ended June 30, 2012.  The decrease of $5,325 is due to the Company’s decision to discontinue its social media consulting services for Vidirectory.com, offset by our first sale of 3D tablets of $7,000.

Operating Expense
 
Operating expenses for the six months ended June 30, 2013 were $549,841 compared to $348,805 for the six months ended June 30, 2012.  This increase of $201,036 was due to increased rent of $6,337, increased travel and entertainment of $19,018, increased web development of $47,906, increased consulting costs of $39,873, and an increase in salaries and benefits of $62,362 which results primarily from stock bonuses to the Company’s Chief Executive Officer, during the six months ended June 30, 2013 versus the same period in the prior year.

Other Income
 
We received miscellaneous income of $21,000 during the six months ended June 30, 2013 which includes $5,000 for the settlement of our lawsuit and $16,000 for demonstrating our products and services at a media industry event.
 
 

 
- 10 -


 

 
Net Loss

The net loss for the six months ended June 30, 2013 was $531,139 compared to a net loss of $337,527 for the six months ended June 30, 2012.  The $193,612 increase in net loss is directly attributable to the decrease in revenue and increase in operating expenses described above.  As of June 30, 2013, we have an accumulated deficit of $2,240,267.

Net Loss Applicable to Common Stock

Net loss applicable to common stock was $0.00 for the six months ended June 30, 2013 and $0.00 for the six months ended June 30, 2012.

Revenues

For the three months ended June 30, 2013, we generated revenue of $7,000 compared to $2,170 for the three months ended June 30, 2012.  This increase of $4,830 is due to our first sale of 3D tablets of $7,000 offset by Company’s decision to discontinue its social media consulting services for Vidirectory.com

Operating Expense

Operating expense for the three months ended June 30, 2013 were $364,447 compared to $177,723 for the three months ended June 30, 2012.  This increase of $186,724 is primarily due to increased travel and entertainment of $18,503, increased salaries and benefits of $88,103, which results primarily from stock bonuses to the Company’s Chief Executive officer, and increased web development expenses of $49,858 during the three months ended June 30, 2013 versus the same period in the prior year.

Other Income
We received miscellaneous increase of $16,000 during the three months ended June 30, 2013, for demonstrating our products and services at a media industry event.

Net Loss

The net loss for three months ended June 30, 2013 was $350,010 compared to a net loss of $176,324 for the three months ended June 30, 2012.  This increase of $173,686 in net loss directly attributable to the increase in revenue offset by the increase I operating expenses described above.

Net Loss Applicable to Common Stock

Net loss applicable to common stock was $0.00 for the three months ended June 30, 2013 and $0.00 for the three months ended June 30, 2012.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2013, we had cash on hand of $38,592 and total assets of $181,303; consisting of cash of $38,592, net fixed assets of $400 and capitalized software of $90,473.  At June 30, 2013, we had total current liabilities of $2,135,814; consisting of $305,450 of accounts payable, short-term notes payable of $24,115 and related party advances of $1,798,771.  At June 30, 2013, we had a working capital deficit of $2,045,384.

During the six months ended June 30, 2013, cash used in operating activities was ($421,053) compared to ($323,663) during the six months ended June 30, 2012.  The decrease is primarily due to the increase in net loss of $193,612, offset by compensatory stock issuance of $90,500, which was a non-cash item.

During the six months ended June 30, 2013, investment in capitalized software was $0 compared to $37,980 during the six months ended June 30, 2012.  During the six months ended June 30, 2013, we increased our advances from related parties by $282,952 in financing activities, and paid $150,000 back to our related parties. We borrowed $40,000 and paid them back $15,885.  During the six months ended June 30, 2012, we increased our related party advances by $361,909 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 net financing and heightened economic risks.  We have been grossly undercapitalized in 2013 and unable to raise a significant amount of capital, other than receiving $132,052 in advances from our majority shareholder and raising $299,974 through issuance of common stock and common stock subscriptions.
 
 
 

 
 
- 11 -

 

 

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 products and services 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:

System Development and Integration
 
$
700,000
 
Professional Fees
 
$
100,000
 
Sales, Marketing, Strategic Partnerships
 
$
100,000
 
General & Administrative
 
$
500,000
 
Working Capital
 
$
100,000
 
Total
 
$
1,500,000
 
 
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 the sale of our 3D tablets and from our advertisers.  Since we cannot control the potential adoption rate of 3D in the digital market by consumers, our growth maybe inhibited.  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.
 
 
 

 
 
- 12 -



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, the acquisition of 3D tablet inventory, 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 raised $299,974 from the issuance and subscriptions of our common stock during the three months ended June 30, 2013 and expect additional equity raising transactions in the final six months of this calendar year.

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 six months ended June 30, 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.
 
 

 
- 13 -



Income Taxes

We have effectively provided a full valuation allowance for the tax effects of our net operating losses during the six months ended June 30, 2013 and for the period from inception (October 21, 2010) to June 30, 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 June 30, 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 June 30, 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 June 30, 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.
 
 


 
- 14 -







The Company is not a party to, or the subject of, any material pending legal proceedings.


The Company is a Smaller Reporting Company.  A Smaller Reporting Company is not required to provide the risk factor disclosure required by this form.

 
We sold $11,000 shares of our common stock at $3 per share to two investors totaling $33,000 and we sold stock subscriptions for 89,333 shares at $3 per share to two investors totaling $268,000.


Not Applicable


 
Quarterly Highs and lows for the relevant periods
     
QUARTER
HIGH
LOW
     
Q1 2012
$6.80
$3.75
Q2 2012
$23.00
$4.73
Q3 2012
$10.00
$1.55
Q4 2012
$11.50
$6.00
Q1 2013
$11.25
$3.87
Q2 2013
$16.75
$2.60
 
grpahic1


 

 
- 15 -

 
 
 

(a)            Exhibits and Reports on Form 8-K


(b)           Reports on Form 8-K during Quarter

None.
 
 
 
 
 
 
 
 

 
 
- 16 -


 



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:
      President, Chief Executive Officer, Principal Accounting Officer,
      Chief Financial Officer, Director
Date:
      October 17, 2013
   
   
By:
 /s/ Raj Ponniah                                                                                           
Name:
      Raj Ponniah
Title:
      Director
Date:
      October 17, 2013

Date:     October 17,  2013






 
- 17 -