10-Q 1 sungame_10q-033110.htm SUNGAME CORPORATION FORM 10-Q sungame_10q-033110.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 March 31, 2010

[_]
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:   333-158946

SUNGAME CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
 
20-8017623
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)

501 Silverside Road, Suite 105, Wilmington, DE
 
19809
(Address of principal executive offices)
 
(zip code)
 
(310) 666-0051

 (Registrant’s telephone number, including area code)


 (Former Name, former address and former fiscal year, if changed since last report)

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 [_]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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).    Yes [_]    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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  [_]
Accelerated filer  [_]
Non-accelerated filer  [_]
Smaller reporting company  [X]
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the issuer is a shell company (as defined in rule 12b-2 of the Exchange Act)    Yes [_]    No [X]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
 PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court    Yes [_]    No  [_]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of May 13, 2010, there were 10,000,000 shares of the Registrant's Common Stock outstanding.
 


 
 

 

SUNGAME CORPORATION
For The Quarterly Period Ended March 31, 2010

TABLE OF CONTENTS
 
PART I - FINANCIAL INFORMATION
3
   
Item 1.
Financial Statements
3
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
9
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
16
Item 4.
Controls and Procedures
16
     
PART II - OTHER INFORMATION
17
   
Item 1.
Legal Proceedings
17
Item 1A.
Risk Factors
17
Item 2.
Unregistered Sales Of Equity Securities And Use Of Proceeds.
17
Item 4.
(Removed and Reserved).
17
Item 5.
Other Information
17
Item 6.
Exhibits
17
     
SIGNATURES
18

THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE   RISKS AND UNCERTAINTIES. SUCH STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT 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.
 
 
 
2

 

 
PART I - FINANCIAL INFORMATION

Item 1.                      Financial Statements
 
 

[INSERT FINANCIAL STATEMENTS]


 
3

 

SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 2010 AND 2009

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 that intends to become a leader in providing seamless egaming and skill gaming in a virtual world. The Company believes that it can exploit the market that is at the confluence of gaming and egaming, and that this market is very significant. The Company will provide various types of Skill Games in an online Virtual World where the users, regardless of location can compete using virtual money or real money and where the end users can be individuals or corporations.

The main activity will be to provide a network that attracts players who interact in a seamless environment. The main goal will be to introduce competitive and unique products in an already established market place. The Company will be a premier marketer of money related activities that will have distinct comparative advantages compared to both direct and indirect competitors.

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 Financial Accounting Standards No. 7. The Company is devoting substantially all of its present efforts to establish a new business. All losses accumulated since inceptions have been considered as part of the Company’s development stage activities.

Risks and Uncertainties

The Company operates in an emerging industry that is subject to market acceptance and technological change. The Company’s 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.

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.


 
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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 the Company begins recording revenue the deemed date that the software is placed in service. As of the date of these financial statements the development of the software necessary to achieve the business purposes of the Company is in an undeterminable state causing the Company to deem the asset to be impaired. This conclusion requires that the costs incurred to date be treated as expenses as opposed to the capitalizing of the software.

Start-up Costs

Start-up costs that would commonly be capitalized as Other Assets to be amortized over a period of five years have also been deemed to be impaired for the same reasons stated in the paragraph on “Software Costs”. Based on these circumstances, management has elected to expense these start-up costs as well.

“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. The Company presently uses one vendor for all of its software development.


 
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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.
 
Deferred tax asset at March 31, 2010
  $ 549,987  
Valuation allowance
  $ (549,987 )
Net deferred tax asset
    -0-  

2.            Going Concern Uncertainty and Managements’ Plans

In the Company’s audited financial statements for the fiscal year ended December 31, 2009, 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 interim financial statements for the quarter ended March 31, 2010 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 $35,038 for the quarter ended March 31, 2010, and an accumulated deficit of $2,337,516 as of March 31, 2010.  At March 31, 2010, the Company’s total current liabilities exceed total current assets by $367,659.

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.

3.             Property and Equipment

The Company has incurred software costs in the development of its virtual world in the amount of $388,343 at March 31, 2010. Per the discussion under “Software Costs” this amount has been expensed at this time.


 
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4.            Accounts Payable

At December 31, 2007, account payable totaled $775,000 and was owed to one creditor, Adversor, a majority shareholder of the Company. During the year ended December 31, 2008, the creditor agreed to forgive the $775,000 in exchange for 4,123,500 shares of the Company’s restricted common stock (See Note 7).

5.            Contracts Payable

During the year ended December 31, 2008, the Company entered into a Corporate Finance Advisory Services Agreement with Friedland Global Capital Markets, LLC (Friedland) the Agreement provides that the Company would pay a total of $190,000 for services as set forth in the Agreement.  In July 2008, Friedland agreed to suspend payment of the fees until the completion of financing.  These funds are non-interest paying and due on demand. During the year ended December 31, 2009 the Company made payments in the amount of $25,000 against this obligation.

6.            Advance Payable, Related Party

During the year ended December 31, 2007, the Company’s majority shareholder, Adversor, Inc. (Adversor) advanced funds of $118,369 to the Company for operations. During the year ended December 31, 2008, Adversor advanced an additional $78,740 to support operations.  During the year ended December 31, 2008, the Company repaid $8,369 of the outstanding amount.  At December 31, 2008, Adversor is owed $110,000.  During the year ended December 31, 2009 Adversor advanced an additional $7,470 and paid bills amounting to $17,000 on behalf of the Company. During the quarter ended March 31, 2010 Adversor advanced an additional $14,300 and paid bills in the amount of $30,302 on behalf of the Company. These funds are non-interest bearing and due on demand.

7.            Stockholders’ Deficiency

Common Stock

In October 2008, the Company entered into a Security Purchase Agreement (Security Purchase Agreement) with a third party, the Company received cash of $125,000 in exchange for 500,000 shares of restricted common stock and a warrant exercisable for 500,000 shares of the Company’s restricted common stock.  The warrant has an exercise price of $0.80 per share and a term of three years.  The shares were sold at a price of $0.25 per share with $0.24 per share allocated to the common stock and $0.01 per share allocated to the warrant.


 
7

 

In October 2008, the Company entered into a Services Agreements with two parties.  The Services Agreements provides for the Company to receive services totaling up to $625,000 in connection with the development of its website and gaming software to be paid for by the issuance of up to 2,500,000 shares of the Company’s common stock.  During the year ended December 31, 2008, the Company issued 1,600,000 of these shares in exchange for services performed at that time totaling $400,000.  The shares were issued at a price of $0.25 per share.

In October 2008, the Company issued 4,123,500 shares of its restricted common stock to its majority shareholder, Adversor, in exchange for their efforts in the settlement of $775,000 of outstanding accounts payable owed to an unrelated third party vendor.  The shares were issued at a price of $0.188 per share.

In September 2008, the Company issued 1,373,000 shares of its restricted common stock to a director, Mr. Goss, of the Company as payment for services totaling $1,373,000.  The shares were issued at a price of $0.10 per share.

In June 2008, the Company issued 902,000 shares of its restricted common stock to Friedland, in exchange for services totaling $50,000 provided under the Finance Advisory Services Agreement.  The shares were issued at a price of $0.055 per share.

In March of 2009, the Company issued 500,000 shares of its common stock in exchange for $125,000 cash. The Company also issued 100,000 shares of its restricted common stock in exchange for consulting services valued at $25,000.

In October of 2009, the Company issued 900,000 shares of its restricted common stock in exchange for consulting services valued at $225,000.

Warrants

At December 31, 2008, the following warrants to purchase common stock were outstanding:

Number of common
shares covered by warrants
Exercise Price
Expiration Date
       
                          50,000
 
$0.80
October 2011
50,000
 
$0.80
March 2012
       100,000
     
 
Other Capital Transactions

During the year ended December 31, 2008, our majority shareholder, Adversor, paid $20,000 for services on our behalf.  In addition, during the year ended December 31, 2008, Adversor forgave $87,109 in debt owed to them.  The Company has treated such amounts as capital contributions and as such has increased Additional Paid in Capital by $107,109.


 
8

 
 
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

THE  FOLLOWING  DISCUSSION  SHOULD  BE READ  IN  CONJUNCTION WITH  THE COMPANY'S  FINANCIAL  STATEMENTS  AND THE  NOTES TO THOSE  STATEMENTS  AND OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS REPORT.

Background and History
 
SunGame Corporation (“We,” “Us,” “Our”) was organized under the laws of the State of Delaware on November 14, 2006 as SunGame International, Inc.  On November 17, 2006, we changed our name to SunGame Corporation. We are a Delaware corporation organized for the purpose of engaging in any lawful business with a current plan to engage in the internet virtual world space.

We are an early development stage company in the process of establishing a three dimensional, virtual world community called GameConnect.  Leveraging the increasing popularity of online communities with this proprietary “virtual world”, we intend to capitalize on the ever increasing popularity of gaming.  With an initial focus on casual and tournament skill-based gaming, we will also offer visitors a broad spectrum of social activities including group chats, music download, media sharing, content creation and other features designed to build the community and generate repeat traffic to the Virtual world.

As each generation of computers become more powerful and affordable, and access to broadband internet increasingly available within the home, the gaming industry has become one of the most successful industries online.  The most popular online game, World of Warcraft, a “Massively Multiplayer Online Role-Playing Game” or “MMORPG” enables over 1 million players from around the world to play simultaneously.  Released in November 2004, it is estimated that World of Warcraft generated revenues in excess of $100 million in each of several different markets in its first year alone and recently announced it had signed its 10 millionth registered user. The potential for success in this sector has resulted in a perpetual delivery of new games to the market, much to the delight of the consumers, who seem to have a strong appetite for product.

The other component of the GameConnect experience is the social networking aspect.  The original web-based communities were formed to serve people with shared interests and activities, enabling them to communicate through message boards and email services.  Relevant content is created and posted by the members.  Within relatively short order, social networking revolutionized the way we communicate and share information on an everyday basis.  Networks such as MySpace and Facebook now boast millions of members, and the YouTube phenomenon
is influencing the nature of presidential elections.


 
9

 
 
 
The next generation of the social network is set in a virtual world, members can create avatars to represent themselves and buy “real estate” which is then developed and customized to reflect their own personality and lifestyle. The leader in this new social network is SecondLife, which opened in June 2003.

However, while people around the world participate in these communities every day, few social networks have been able to establish a successful business model.  We intend to capitalize on the social networking, gaming and virtual world trends, providing users with a wide variety of skill games through GameConnect, a Virtual World online community where the members can socialize, play games, share content and compete in tournament with cash prices.  We will work to balance the more popular “standard” games such as bowling and golf, with original content created by independent game developers.  Like many of the traditional gaming sites, ours has instituted an “outsourcing” strategy, allowing members of the community to develop the content -- for gamers, by gamers.  The developer friendly culture is expected to result in continual generation of original and challenging games to keep residents within the world.

Since January 1, 2009, we have focused on making improvements to our network architecture.  We have enhanced the overall appearance of the world; what was formerly SunIsland is now GameConnect.com, and has a world view.  This updated version features landmarks and buildings from around the world, such as the Great Wall of China, the Pyramids, the Hollywood sign, etc.

In an effort to optimize and manage our growth, we have segregated our operation into two divisions, consumer and business to business.

The consumer division, now branded as GameConnect.com (GameConnect), continues to focus on the continued development and implementation of SunGame's Virtual World Systems for individuals.  GameConnect is available to users in both the United States and Canada.  The world focuses on targeting men and women, ages 18 to 28, the primary focus is on the development of a virtual community through casual games and other social networking activities.

GameConnect now offers a number of free applications, including, game play, chat, music download, and limited customization of their virtual world.  Subscribers have access to a growing number of features, currently including; significant customization of their virtual world and avatar, including accessories, furniture, clothing, etc.  Subscribers can download music, upload videos and pictures, challenge friends to and compete in online game tournaments, earning SunGameBucks for further use in the GameConnect community.  The system now includes a cross platform solution where mobile users with Java and Internet can log in to the Virtual World, see a list over the friends that are on line and are able to chat with them.

In addition to working on the continued development of the GameConnect virtual world, the Company continues to establish its capabilities to offer virtual world development and support functions for third parties.
 

 
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RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2010 (Q1 2010)
COMPARED TO THREE MONTHS ENDED MARCH 31, 2009 (Q1 2010)

Revenues

For the three months ended March 31, 2010 we generated revenue of $6265 compared to the three months ended March 31, 2009 in which we did not generate any revenue as we were still very early development at that point.  The $6265 of revenue was attributable to­ normal operating revenue.

Operating Expenses

Operating expenses for the three months ended March 31, 2010 were $36,195 compared to $64,561 for the three months ended March 31, 2009.  This net decrease of $28,366 was the result of the decrease of expenses attributable to software development costs and start-up costs, on the one hand, and the increase of expenses attributable to depreciation and consulting costs, on the other hand.  The decrease in start-up costs is attributable primarily to the reduced SEC activity in connection with the effectiveness of our Registration Statement on Form S-1.

Interest Expense

We incurred interest expense of $5108 for the three months ended March 31, 2010 as compared to zero interest expense for the three months ended March 31, 2009.  This interest expense is attributable to interest on loans and credit cards.

Loss From Operations

Loss from operations for the three months ended March 31, 2010 was $29,930 compared to $64,561 for the three months ended March 31, 2009. The $34,631 decrease in net loss is directly attributable to the increase in revenue and decrease in operating expenses described above.  As of March 31, 2010, we have an accumulated deficit of $2,337,516.

Net Loss Applicable To Common Stock

Net loss applicable to Common Stock was $0.00 for the three months ended March 31, 2010 compared to $0.01 for the three months ended March 31, 2009.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2010, we had cash on hand of $6,450 and total assets of $12,216; consisting of cash of $6,450, accounts receivable of $4,714 and net fixed assets of $1,052.  At March 31, 2010, we had total current liabilities of $378,823; consisting of $47,582 of accounts payable, $4,169 of other payables, $165,000 in contracts payable and $162,072 loan payable to a stockholder.  At March 31, 2010, we had a working capital deficit of $366,607.


 
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During the three months ended March 31, 2010, cash used in operating activities was $45,163 compared to $45,373 during the three months ended March 31, 2009.  During the three months ended March 31, 2010, net losses of $35,038 were adjusted for a non-cash item consisting of $68 in depreciation.  During the three months ended March 31, 2009, net losses of $65,441 were adjusted for non-cash items consisting of $68 in depreciation, and $25,000 in compensatory stock issuances.

During the three months ended March 31, 2010 and March 31, 2009, we did not use or receive funds from investing activities.  During the three months ended March 31, 2010, we received $44,602 from our financing activities.  During the three months ended March 31, 2009, we received $152,471 from our financing activities.

In October 2008, we entered into a Security Purchase Agreement with a third party pursuant to which we received, in March 2009, cash of $125,000 in exchange for 500,000 shares of restricted common stock and a warrant exercisable for 500,000 shares of our restricted common stock. The warrant has an exercise price of $0.80 per share and a term of three years. The shares were sold at a price of $0.25 per share with $0.24 per share allocated to the common stock and $0.01 per share allocated to the warrant.

During the three months ended March 31, 2010, our majority shareholder, Adversor, Inc. advanced additional funds of $44,602 to support operations.  During the year ended December 31, 2008, Adversor advanced additional funds of $98,740 to support operations.  In 2008 Adversor contributed $107,109 to the Company's capital.  During the year ended December 31, 2009, Adversor advanced an additional $7,470 to support operations. The balance owed to Adversor at March 31, 2010 is $162,072.  The amounts owed are non-interest bearing and due on demand.
 
 
In October 2008, we entered into a Services Agreements with two parties. The Services Agreements provides for us to receive services totaling up to $625,000 in connection with the development of our system and gaming software to be paid for by the issuance of up to 2,500,000 shares of our common stock.  During the year ended December 31, 2008, we issued 1,600,000 of these shares in exchange for services performed at that time totaling $400,000. The shares were issued at a price of $0.25 per share.

In October 2008, we issued  4,123,500  shares of our restricted  common stock to our  majority  shareholder,  Adversor,  in  exchange  for their  efforts  in the settlement  of $775,000 of  outstanding  accounts  payable  owed to an unrelated third party vendor.  The shares were issued at a price of $0.188 per share.

In September 2008, we issued 1,373,000 shares of our restricted common stock to our director, Mr. Goss as payment for services totaling $137,5,00. The shares were issued at a price of $0.10 per share.

In June 2008, we issued 902,000 shares of our restricted common stock to Friedland, in exchange for services totaling $50,000 provided under the Finance Advisory Services Agreement. The shares were issued at a price of $0.055 per share.


 
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We anticipate funding operations through private investments and loans made by our current shareholders and management, 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 $300,000 to fund our operations for the next 12 months as follows:

System Development and Integration
  $ 150,000  
Professional Fees
    50,000  
Sales, Marketing, Strategic Partnerships
    50,000  
General & Administrative
    25,000  
Working Capital
    25,000  
Total
  $ 300,000  

We will need substantial additional capital to support our proposed future operations.  We have minimal revenues.  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.

As a result of becoming a publicly reporting company with the SEC we will incur costs in connection with complying with the reporting requirements of the SEC.  Such costs will include annual audits and those legal costs in connection with making filings with the SEC.  We have accounted for such costs above in “Professional Fees” and “General & administrative”.

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.


 
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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, 2009 and 2008 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 participation, investigation, exploration, acquisition 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 $24,000 (approximately $300,000 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 1-3 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.


 
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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, 2010, 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, 2009 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 depreciated when we begin recording revenue the deemed date that the software is placed in service. As of the date of these financial statements the development of the software necessary to achieve the business purposes of our Company is in an undeterminable state causing us to deem the asset to be impaired. This conclusion requires that the costs incurred to date be treated as expenses as opposed to the capitalizing of the software.

 
 
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Start-Up Costs
 
Start-up costs that would commonly be capitalized as Other Assets to be amortized over a period of five years have also been deemed to be impaired for the same reasons stated in the paragraph on “Software Costs”. Based on these circumstances, management has elected to expense these start-up costs as well.

“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.

Off-Balance Sheet Arrangements
 
As of March 31, 2010, 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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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 4. Controls and Procedures

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, 2010.  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.
 

 
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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, 2010.  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

Item 1. Legal Proceedings

We are not a party to any pending legal proceedings nor is any of our property the subject of any pending legal proceedings.

Item 1A. Risk Factors

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 And Use Of Proceeds.

none

Item 3. Defaults Upon Senior Securities

none

Item 4. (Removed and Reserved).

Item 5. Other Information

none


 
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Item 6. Exhibits

EXHIBIT
 
NUMBER
DESCRIPTION
   
31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Sarbanes-Oxley Section 302
   
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Sarbanes-Oxley Section 906
 
 
SIGNATURES

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.
 
     
By:
/s/ Guy M. Robert  
 
Name: Guy M. Robert
 
 
Title: Principal Executive Officer, President and Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, Director
 
     
 
Date: May 13, 2010
 

     
By:
/s/ Michael Segal  
 
Name: Michael Segal
 
 
Title: Director
 
     
 
Date: May 13, 2010
 


 
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