10-K 1 mainbody.htm MAINBODY mainbody.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
 
FORM 10-K
_______________________

(MARK ONE)

x           Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the fiscal year ended December 31, 2011

o           Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to ________

Commission file number: 000-27831
 
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 SUNGAME CORPORATION
 (Exact name of registrant as specified in its charter)
     
Delaware
 
20-8017623
(State or other jurisdiction of incorporation or organization)
 
 (IRS Employee Identification No.)
     
3091 West Tompkins Avenue, Las Vegas, NV
 
89103
(Address of principal executive offices) 
 
 (Zip Code)
     
Registrant's telephone number, including area code: (702) 789-0848
     
 
Securities Registered pursuant to Section 12(b) of the Exchange Act:
     
Title of each class 
 
Name of each exchange on which registered
None
 
None
     
Securities Registered pursuant to Section 12(g) of the Exchange Act:
 
Common Stock, $0.001 Par Value
 (Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes  o No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  o No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act.

Large accelerated filer      o
Accelerated filer                        o
Non-accelerated filer        o
Smaller reporting company     x
(Do not check if a smaller reporting company)
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes  o  No  x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
 
 
 
 
 
 
 

 
As of December 31, 2011 the market value was approximately $1.2 billion based upon a close of $6.80 on 31 December 2011.  The Company would like to give fair disclosure in that the market capitalization may be overvalued due to certain factors, such as the Company, at this time, is thinly traded and we do not feel the market price has accurately reflected the merger. There are approximately 480,000 shares of our common voting stock held by non-affiliates.  This valuation is based upon the bid price of our common stock as quoted on the OTCBB on that date ($-0-).
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.  The number of shares outstanding of the registrant's common stock as of  March 15, 2012 is 17,575,014.

(DOCUMENTS INCORPORATED BY REFERENCE)
None

 

 

 
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SUNGAME CORPORATION
FORM 10-K
 


 
Page
   
PART I
4
   
Item 1.               Business.
4
Item 1A.            Risk Factors.
11
Item 1B.            Unresolved Staff Comments.
11
Item 2.               Properties.
11
Item 3.               Legal Proceedings.
11
Item 4.               (Removed and Reserved).
11
   
11
   
12
Item 6.               Selected Financial Data.
14
14
23
Item 8.               Financial Statements And Supplementary Data.
24
33
Item 9A.           Controls And Procedures.
33
Item 9B.            Other Information
33
   
34
   
34
Item 11.             Executive Compensation.
35
37
37
Item 14.             Principal Accounting Fees And Services.
39
   
40
   
Item 15.             Exhibits, Financial Statement Schedules.
40
   
41
 
 
 
 
 

 




PART I

This annual report on Form 10-K contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about the Company, us, our future performance, our beliefs and our Management's assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or  variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict or assess. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Except as required under the federal securities laws and the rules and regulations of the SEC, we do not have any intention or obligation to update publicly any forward-looking statements after the filing of this Form 10-K, whether as a result of new information, future events, changes in assumptions or otherwise.

Unless the context otherwise requires, throughout this Annual Report on Form 10-K the words “Company,” “we,” “us” and “our” refer to Sungame Corporation.


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 and Social Gaming space.

Overview

Background and History

We are an early development stage company in the process of establishing a three dimensional, virtual world communities. 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 based games, we will also offer visitors a broad spectrum of social activities including group chats, music download, media sharing, content creation, advertisements and other features designed to build the community and generate repeat traffic to the Virtual World.
 
 
 
 
 
 

 



In addition, we have the mission to become a leading supplier in social gaming and related services to the business-to-business segment, including customized social games, virtual worlds, virtual eWallets, cross platform solutions and social network branding. In that regard we have focused the development during the period on a Facebook based cross platform game for subagames.com by Wicked Interactive.

In October 2008, we secured a $250,000 investment from Singapore based Mindzeye Consulting Pte, Ltd (Mindzeye) and India based Diamond Star Exports Pvt. Ltd. (Diamond Star).  As a result of such an investment, we have deployed the core system of Sungame and new servers in Singapore.  Customers have begun to participate in the games available in the world and loading money into their eWallets.  We have not recognized sales from the activities at this time, but we have had users of the product.

Since January 2009, we have established a development center in India and in the Philippines for Virtual World and Social Gaming Development.  We have also developed a proprietary Virtual World center with B2C and B2B provisioning.  

We are currently in demonstration mode and will launch Spion, our first Facebook game, in the second quarter of 2012.

Industry

Despite the popularity of game console systems such as the Wii and Nintendo, the number one platform for games in 2007 was still the personal computer.  This is largely attributed to online gaming, and this trend is expected to continue as computer graphics and memory increases and prices decline.

The “average” game player is no longer the 25 year old male.  As consumer exposure to computers and the internet increases, so does this player base. According to the Entertainment Software Association's 2007 ESSENTIAL FACTS ABOUT THE COMPUTER AND VIDEO GAME INDUSTRY, the average gamer is 33 years old and has been playing for 12 years. The following facts from that report provide insight with regard to our target audience.

 
40% of all players are women, and women over 18 years of age are one of the industry's fastest growing demographics; today adult women represent a greater portion of the game-playing population (33%) than boys age 17 or younger (18%).
 
 
26% of game players are over the age of 50, an increase from 9% in 1999. This figure is sure to rise in coming years with nursing homes and senior centers across the nation now incorporating video games into their activities.

 
 

 



 
51% of most frequent game players say they play games online at least one hour per week, up from 31 percent in 2002.
 
 
The average adult woman plays games 7.4 hours per week and the average adult man plays 7.6 hours per week.

 
45% of parents say they play computer and video games with their kids weekly.

Traditional online, virtual world games require players to pay a monthly fee to take part in the virtual world. In order to participate in these worlds, users must create an avatar - a character that will represent them in the virtual world.  This endeavor, in and of itself has spawned an industry; there are businesses devoted solely to the creation of customized avatars and their accessories and eBay regularly auctions “turnkey” avatars.  The maintenance of a virtual designee is an art that many individuals take great pride in, with some participants logging substantial amounts of time and money to create.

The general strategy of the virtual communities is to create a virtual world around a game on a massive scale, so that millions can use it at any time.  Games are initially free, enabling the community to develop, then as the audience reaches critical mass, retailer and advertising revenue will follow.  It seems that this strategy is working quite effectively.

In May of 2007, IBM announced a new virtual IBM Business Center offering a place for IBM sales people, clients and partners to meet and conduct business together. The center has six divisions: Reception; Sales Center; Technical Support Library; Innovation Center; Client Briefing Center; and Conference Center, all accessible through Second Life.  Staffed by real IBM sales representatives from around the world, their avatars can chat with visitors in several languages and build business relationships.

Consumer Applications

As a member of our Virtual Worlds, residents utilize their avatar to access a multitude of activities. Navigation is intuitive and the site is designed to attract members to the profit centers such as tournaments and music download.

Our Virtual Worlds offer virtual currencies, which can be earned by players as they spend time in the Virtual World. While many residents will elect this option, as the average age of gamers rises and they assume the responsibilities of families and jobs, gamers have less time and more money, many prefer depositing cash into the virtual wallet.  To that end, residents can also purchase Sun Bucks at a rate of 100 for each $1.

Game Play

The primary focus of the GameConnect community is gaming.  Visitors will be able to select from a broad spectrum of chance and skill-based games.  They will be able to challenge one or more other visitors to enter tournaments for cash prizes.
 
 
 
 

 



Game Creation

Our games, both Virtual Worlds and Facebook games, will be focusing on the gaming community.  To that end, we have, and will continue to establish relationships with independent gamer developers around the world.  Game developers will be able to register and be certified to upload their games to the GameConnect portfolio.  Once there, our incentive program offers registered programmers a percentage of the revenue generated by their games, in addition to technical support with regard to system requirements, site code, etc.  Management is confident this structure will attract a substantial number of developers to the Virtual World.

Music Downloading

Music is a highly popular online media, which will be offered to visitors in a number of ways within our games.  Music is streamed continuously over the site with a feature that enables visitors to click on the details of a title and/or buy and download the song at any time.

Media Upload

Users will be able to upload and share their own photos, music, documents and videos for display in their virtual residence on our Virtual Worlds.

Networking

·
Chat

Community is the backbone of the Virtual Worlds. While many visitors will come to play games, residents are also there to socialize with others.

·
Events

Once a resident has established their avatar and “personal space” i.e., a home or apartment, they may invite other residents, alone or in groups, to visit their Virtual World home, host an event, or go visit other Virtual World features together.

Administrative

·
Profile Management

Subscribers will be able to create their own content online, including the design of their room, changes to their avatar and updating of their profile.

Rather than having each individual create their own unique avatar, we provide users with a broad range of “fixed” avatars with some variables to change - i.e., hair color, outfit etc.  This structure provides us with some control with regard to the server capacity and speed, in addition to reducing the general system requirements for all users (i.e., not all residents will have the
capacity on their system to interact with high resolution).

·
Account Management

Once registered, users can manage their finances,  including deposit cash  to their Wallet, purchasing virtual goods,  upgrading their membership or  paying  subscription fees.

With our Virtual Worlds, basic membership is available at no charge to visitors; however users will also have the option of a VIP membership for a monthly fee.  As a VIP member, users will have access to a premier apartment, be granted a monthly Sun Bucks allowance, secure priority reservations for high profile tournaments, and early notification of special events and new features.
 
 
 

 



Business Applications

The substantial opportunities in the interactive market give corporations a significant economic incentive to develop multi-media marketing campaigns.  This “Transmedia” approach is particularly popular within the entertainment industry as it enables producers to convey a story through a myriad of layers, encouraging fan participation and interaction.

Conventional websites are no longer adequate for success.  Television shows such as LOST and Heroes are the definitive examples, offering their audience an “experience” including ancillary materials, wikis, exploration games, back stories, cast bios, blogs, fan discussions, spoiler rumors, and screenshots.  Sungame will pursue this sector, offering its development services to companies looking to utilize a multi-media marketing strategy.

Third Party/Private Label Development

We will create turnkey virtual worlds for companies seeking to establish a presence in this sector. Initially our focus will be on the entertainment sector.  Management believes this market represents a significant opportunity as their focus on promotion is well established, and a virtual presence provides a distinct marketing advantage.  Longer term it is expected that a virtual component will be commonplace within many market sectors, particularly those websites looking to appeal to a younger or computer savvy audience.  We offer a natural outsourcing alternative for those firms with the desire but without the capabilities to develop or maintain such an operation.

Operational

Companies can build private, secure, virtual “corporate headquarters” on GameConnect. Business residents will essentially enter their own “world” as created for them by us.  The activities and features of these worlds will be determined by the host.

Access Administration

Our platform will enable each business to remotely control the entry to their own virtual world.  Office administrators can establish passwords and clearance levels to ensure that only the proper employees gain access to confidential information.

Commercial

Product placement is common in all forms of media, however brand marketing in the virtual world provides customers with a significantly improved product interaction, and many companies and organizations now incorporate virtual worlds in their advertising budget.

E-Commerce

By creating an online store within our Virtual Worlds, users will be able to “interact” with products.  For example, IBM has built a virtual store for Sears, where users can mock up a kitchen with Sears' appliances.
 
 
 
 

 



 
Gaming

As virtual worlds continue to gain in popularity, corporations will continue to seek ways to participate in this media.  Sungame will work with corporate clients to develop online games for consumers. Games will be designed to generate brand and product awareness.

Advertising

While the use of advertising within “Virtual Worlds” is a comparatively new idea, management expects advertisement placement within its virtual world games will make a contribution to revenue in the relatively near term.

Competition

There are a number of companies active in the virtual world and gaming sectors that are already established.  These companies include:

 
·
SecondLife.com
 
 
·
Zynga.com
 
 
·
Pogo.com
 
 
·
King.com
 
 
·
Gameaccount.com

These established sites each have targeted a very specific genre of internet users.  For example SecondLife is developed more towards technical users and Zynga has launched social networking games on Facebook.

There are 3 main market segments within the virtual world industry:

 
1.
Virtual world provisioning to end users
 
2.
White label provisioning of virtual worlds to corporations using own proprietary software
 
3.
Virtual world customization (branding) to corporations using own or 3rd party virtual world systems

We are in a position to be able to offer a solution to all three markets segments.  We have already launched the first virtual world to end users and will ensure successful growth of this business.  We have developed software and will begin the marketing of White Label provisioning of Virtual Worlds.  Each corporate customer that buys a White Label Virtual World System from us will have the opportunity to customize and brand the virtual world using their own resources or place that branding project in conjunction with us.  In many cases, it will be more natural to place most or all of the customization/branding project with the Company.

Expansion Strategy

We have developed a focused, multi-pronged expansion strategy.  The following tactics will be used to achieve our objectives.

Increase Membership Through Managed Growth

We have implemented a controlled approach to growth; seeking to increase membership at rates that will enable it to support its membership and maintain appropriate server to customer ratios.  Management estimates it can service approximately 5,000 registered users for each network server, which will correspond to 200 simultaneous users in each network server.  Management also anticipates the current software platform will support approximately 1 million registered users.

We intend to promote the world through several channels. As the vast majority of virtual world communities achieve critical mass through word-of-mouth and grass roots “buzz”, we will promote Sungames through other social communities.  We will also look to reach potential residents through related blogs, gaming societies and conferences.

 
 

 



Solicit Game Developers

The initial game selection at GameConnect comprises three traditional skill-based games, including bowling, golf and jewel catcher. In keeping with our strategy to outsource the development of content, we expect the majority of its new gaming content will be created by independent game developers.  As new and exciting offerings will be critical to our success, the world's culture will seek to nurture the creative abilities of the independent developer, providing an environment that facilitates their efforts to develop a following.

We have created a package for game developers who become certified to provide content. In addition to retaining ownership of their intellectual property, developers will be entitled to 10% of the revenues generated by their product.

Pursue The Business To Business Market

Management anticipates the business to business (“B2B”) sector represents a significant opportunity for us.  It is estimated that 170 high profile companies, such as Coke, Dell, Ben and Jerry's, and Sun Microsystems have set up Virtual Worlds.  We anticipate the B2B sector will be attracted to our less technical interface, along with our ability to deliver customized, turnkey Virtual Worlds.

As an early entrant in the market, we are looking to establish a presence within the corporate marketplace by providing a comprehensive package for users. Beyond the creation of the virtual world, we will be able to provide a variety of user activities, including back-end provisioning, customer relations management, hardware and software setup, registration pages, profile pages, etc.

Backlog of Orders

We currently have no orders for sales at this time.

Government Contracts

We have no government contracts.

Company Sponsored Research And Development

We are not conducting any research.

Number Of Persons Employed

As of December 31, 2011, we have 6 full-time employees.  Mr. Robert works up to 40 hours per week and other Directors work on an as needed basis up to 40 hours per week.
 
 

 


 
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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.


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.


We do not own any property, real or otherwise.  Our operations are principally located at 3091 West Tompkins Avenue, Las Vegas, NV 89103.  We pay zero rent.


The Company is involved in a litigation in Colorado.  Broadway Holdings, Inc. vs. Sungame Corporation.  The suit is a breach of contract by Broadway Holdings, Inc. filed on or about August 2, 2011, in the District Court, Denver County, Colorado.  The litigation evolves from Broadway Holdings, Inc. contracting to perform services for Sungame and not performing those services, and two years later, the Company attempting to rectify the situation.  No specific award was sought, and the Company has counter claimed against Broadway Holdings, Inc.

The Company will vigorously defend itself in this lawsuit, as it believes the claims against the Company are without merit.

 
 
 
 
 
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Our common stock is quoted on the OTC Bulletin Board (the "OTCBB:).

Quotations on the OTCBB reflect inter-dealer prices, without retail mark-up, markdown or commission and may not reflect actual transactions.  Our common stock will be subject to certain rules adopted by the SEC that regulate broker-dealer practices in connection with transactions in “penny stocks.”  Penny stocks generally are securities with a price of less than $5.00, other than securities registered on certain national exchanges or quoted on the Nasdaq system, provided that the exchange or system provides current price and volume information with respect to transaction in such securities. The additional sales practice and disclosure requirements imposed upon broker-dealers are and may discourage broker-dealers from effecting transactions in our shares which could severely limit the market liquidity of the shares and impede the sale of shares in the secondary market.

The penny stock rules require broker-dealers, prior to a transaction in a penny stock not otherwise exempt from the rules, to make a special suitability determination for the purchaser to receive the purchaser's written consent to the transaction prior to sale, to deliver standardized risk disclosure documents prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock.  In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt.  A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities. Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account and information with respect to the limited market in penny stocks.

As of December 31, 2011, we have 43 shareholders of record of our common stock pursuant to transfer agent records.

 
 

 
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We have not paid any dividends to shareholders.  There are no restrictions which would limit our ability to pay dividends on common equity or that are likely to do so in the future.  The Delaware Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend; we would not be able to pay our debts as they become due in the usual course of business; or our total assets would be less than the sum of the total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

We have sold securities within the past three years without registering the securities under the Securities Act of 1933 as shown in the following table:

Name
 
Equity
 
Paid per Security
 
Date of
Purchase
 
Accredited or
Sophisticated
Adversor, Inc.
 
1500 common shares
 
$1500 services  -formation of company
 
2006
 
Accredited
Adversor, Inc.
 
4,125,500 common shares
 
$775,000 debt relief
 
2008
 
Accredited
Friedland Capital
 
902,000 common shares
 
$50,000 corporate advisory finance services
 
2008
 
Accredited
Ranulf Jose Goss
 
1,375,000 common shares
 
$137,500 development services
 
2008
 
Accredited
Mindzeye Consulting Pte. Ltd
 
500,000 common shares
 
$125,000 cash
 
2008
 
Accredited
Mindzeye Consulting Pte. Ltd
 
500,000 warrant
 
$125,000 cash
 
2008
 
Accredited
Diamond Star Exports Ltd.
 
1,600,000 common shares
 
$400,000  in programming services
 
2008
 
Accredited
Mindzeye Consulting Pte. Ltd
 
500,000 common shares
 
$125,000 cash
 
2009
 
Accredited
Mindzeye Consulting Pte. Ltd
 
100,000 common shares
 
$25,000 in development services
 
2009
 
Accredited
Diamond Star Exports Ltd.
 
900,000 common shares
 
Payment of services under agreement
 
2009
 
Accredited

However, it should be noted Sungame Corp. and Freevi Corp. successfully engaged in a business combination, with Sungame being the surviving entity, and there was a 177,000,000 share exchange where Freevi shares were exchanged for Sungame shares, pursuant to the terms and conditions of the combination (See 8K dated April 15, 2011).  On May 2, 2011, the Board of Directors authorized 25,000 shares for Mundial Financial Group, LLC for investment banking services, and authorized the issuance of 300,000 shares to Marshal Shichtman and Associates, PC as a gratuity for services rendered. 

Exemptions From Registration For Unregistered Sales

All of the sales by the Company of the unregistered securities listed immediately above were made by the Company in reliance upon Section 4(2) of the Act. All of the individuals and/or entities listed above that purchased the unregistered securities were all known to the Company and its management, through pre-existing business relationships, as long standing business associates, friends, and employees. All purchasers were provided access to all material information, which they requested, and all information necessary to verify such information and were afforded access to management of the Company in connection with their purchases. All purchasers of the unregistered securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to the Company. All certificates or agreements representing such securities that were issued contained restrictive legends, prohibiting further transfer of the certificates or agreements representing such securities, without such securities either being first registered or otherwise exempt from registration in any further resale or disposition.

 
 
 

 

 
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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.


THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR AUDITED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED HEREIN. FORWARD-LOOKING STATEMENTS ARE STATEMENTS NOT BASED ON HISTORICAL INFORMATION AND WHICH RELATE TO FUTURE OPERATIONS, STRATEGIES, FINANCIAL RESULTS OR OTHER DEVELOPMENTS. FORWARD LOOKING STATEMENTS ARE NECESSARILY BASED UPON ESTIMATES AND ASSUMPTIONS THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND OUR CONTROL AND MANY OF WHICH, WITH RESPECT TO FUTURE BUSINESS DECISIONS, ARE SUBJECT TO CHANGE. THESE UNCERTAINTIES AND CONTINGENCIES CAN AFFECT ACTUAL RESULTS AND COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING STATEMENTS MADE BY, OR ON OUR BEHALF. WE DISCLAIM ANY OBLIGATION TO UPDATE FORWARD-LOOKING STATEMENTS.

Overview

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 communities. 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 based games, we will also offer visitors a broad spectrum of social activities including group chats, music download, media sharing, content creation, advertisements and other features designed to build the community and generate repeat traffic to the virtual world.

In addition, we have the mission to become a leading supplier in social gaming and related services to the business-to-business segment, including customized social games, virtual worlds, virtual eWallets, cross platform solutions and social network branding. In that regard we have focused the development during the period on a Facebook based cross platform game for subagames.com by Wicked Interactive.
 
 

 


 
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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 Facebook now boast over 800 million members, and the YouTube phenomenon is influencing the nature of presidential elections.

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. A number of successful virtual worlds are growing fast including Mindark’s Entropia and Club Penguin (bought by Disney for $350M, plus possible $350 earnout).

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 games through various partners, at the virtual world online community, the players can socialize, play games, share content and compete in tournament and buy virtual goods.

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 online game 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.

 
 

 

 
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Sungame/FREEVI
 
In the beginning of January 2011 the Board of Directors, as well as key staff of the Company, met in Las Vegas, Nevada for two reasons: the first was to map out the goals to be completed for the year of 2011, and the second was to attend CES, where the Company exhibited some of our completed projects, and to also spread the word/hype/buzz about what it is, that we are building.
 
With the successful exposition of the Company at CES it was now time to turn all attention to the Plan of Action for the year.  We are glad to say that after extensive deliberations, we set forth a solid plan of action, which some thought was overly aggressive, but we completed all of our goals. These goals included firstly finding a clear, concise definition of what of what the desired environment needs to be.
 
Sungame/Freevi - is the group of social communities that empowers and rewards its users by their actions. It consists of Community Members who conceive, collaborate, create and commercialize their ideas, build Social Communities within the network, create content, nominate, vote and award content. With that understanding we were able to map out a complete plan of action. The first action item was Vidirectory.
 
Vidirectory is the brand for our Local Business Directory. The system for Vidirectory was developed during the first two quarters of 2011 by our development team in the Philippines and was beta launched on the 4th of July 2011 with 27 million companies listed, while also showcasing a few of the key features that had been developed, such as Predictive search, Listing of various videos, Image and logo Provisioning, Maps, and business Descriptions. Development continued well into Q4 of 2011 when we launched our ALPS system. ALPS stands for our Automated Listing Provisioning Subsystem and its purpose is to make it simple for companies to apply and pay for listings online.
 
During the later part of the year in Q3 and Q4 a Search Engine Optimization campaign was prepared with 1.3 Million companies included in this campaign. In 2012 we expect to continue to improve Vidirectory to meet all of Clients needs and expectations, while staying up-to-date and exceeding standards in this rapidly expanding market.
 
Our focus then turned to Flightdeck, which was a massive development project completed by our teams in both Philippines and India, and was Beta Launched 11/11/11. Flightdeck is our Social Network Platform with advanced features and services such as Chat, Instant messaging, Video Chat, Virtual Wallet with Multiple currencies, Games and Applications area, Video Channels, Groups provisioning, Advertisement support and also the ability to upload Videos, Photos, as well as standard messaging between members. All of these things, and more, will be added to the Flightdeck, as it continues to  come out of its infancy and mature.
 
 
 

 
 

 
- 16 -


 

 
 
Our last Project of 2011 was the development of SPION, which is a Facebook game that we are wrapping up and expected to launch in Q2 of 2012. SPION is a combination of HTML based environment and an Isometric environment with 3D ‘feeling’. The game is being developed in cooperation with Wicked Interactive, who are a part of the Subabgames.com gaming community.
 
In 2012 Sungame/Freevi expects to continue to move forward creating and developing advanced products and services that will be key in the Digital Media Market. All of our products are continuously being developed and launched, as new versions are released.
 
The Sungame/Freevi suite of services is envisioned to not just be a standalone item or service, which is the majority of the market at the current time. Sungame/Freevi goal is to offer a wide variety of services offered in synergistic harmony. We see this as the future and strive to be one of the first to market to bring our vision to the market place. This is why the Sungame/Freevi network, unlike any other, exists as a mesh of the best most advanced features of Video Directories (Vidirectory), Virtual Money Manager (Viwallet),  Content Network for creating, publishing, and sharing, Citizen Network for social interactions, Merchant Networking for business owners, App Network, and, of course, a Gaming Network for developers and curators to create, share, and collaborate.
 
Sungame/Freevi’s proprietary system allows cohesiveness and fluidity between each and every part of it, like never seen before.  We are in the position to not only occupy significant market share, but to redefine the actual market and be the catalyst for the evolution of the next generation.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosure of contingent assets and liabilities.  On an ongoing basis, we evaluate our estimates.  We based our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances.  These estimates and assumptions provide a basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions, and these differences may be material.

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.


 
 
 
- 17 -

 
 
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.
 
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.

Income Taxes

We have effectively provided a full valuation allowance for the tax effects of our net operating losses during the years ended December 31, 2011 and for the period from inception (October 21, 2010) to December 31, 2010 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.
 
 


 
- 18 -




RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011
COMPARED TO THE YEAR ENDED DECEMBER 31, 2010

Revenues

For the year ended December 31, 2011 we generated revenue of $4,569 compared to $0 for the period from inception (October 21, 2010) to December 31, 2010. The increase is due to monthly subscriptions of Vidirectory in 2011 whereas Freevi had no revenue from its inception on October 21, 2010 to December 31, 2010.

Operating Expense

Operating expenses for the year ended December 31, 2011 were $731,068 compared to $290,653 for the period from inception (October 21, 2010) to December 31, 2010.  This net increase of $440,414 was the result of a decrease of $101,886 in software development costs as we capitalized $123,444 of our web development costs due to the fact that we had working models of two of our products, an increase in general and administrative expenses of $212,869 as we added four administrative people due to the merger, and an increase in consulting costs of $329,432 for investing, legal, and financial services consulting during the year ended December 31, 2011 versus the period from inception (October 21, 2010) to December 31, 2010 for Freevi.

Net Loss

The next loss for the year ended December 31, 2011 was $727,294 compared to a net loss of $290,653 for the period from inception October 21, 2010) to December 31, 2010 for Freevi.  The increase in net loss is directly attributable to the increase in revenue and increase in operating expenses described above.  As of December 31, 2011, we have an accumulated deficit of $1,017,947.

Net Loss Applicable to Common Stock

Net income applicable to Common Stock was $0.00 for the year ended December 31, 2011 compared to a net loss per share of $0.00 for the period from inception (October 21, 20100 to December 31, 2010 for Freevi.

 
 

 

 
- 19 -




LIQUIDITY AND CAPITAL RESOURCES

Outlook

The United States has been experiencing a widespread and severe economic recession that, among other things, has reduced availability of credit and capital financing and heightened economic risks.  We have been grossly undercapitalized in 2011 and unable to raise a significant amount of capital, other than receiving $753,929 in advances from our majority shareholder.

The continuing effects and duration of these developments and related uncertainties on the Company’s future operations and cash flows cannot be estimated at this time but likely will be significant, and in its audit report on our consolidated financial statements, our independent registered accounting firm has expressed substantial doubt as to our ability to continue as a going concern (see Note 2 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 2012.  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 2012 to incur expenses related to software development.  The further delay of the rollout of our virtual world products, will have material adverse effects on our cash flow, results of operations and financial condition including significant uncertainty as to our ability to continue as a going concern.  No assurance can be given that we will be able to secure any third party financing or that such financing will be available to us on acceptable terms.

Given the current financial market disruptions, credit crisis and economic recession, it is difficult at this time to obtain any third-party financing on acceptable terms, whether public or private equity or debt, strategic relationships, capital leases or other arrangements.  Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restricting covenants.  Strategic arrangements, if necessary to raise additional funds, may require that we relinquish rights to certain of our technologies or products or agree to other material obligations and covenants.

Other than the insignificant revenue realized, we do not expect to begin to realize revenue from our virtual world and Facebook games until the third quarter of 2012.  So far though, we cannot provide assurance that the market will ever accept our games.  Any failure by us to sell our games 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 the virtual world and Facebook games market.  A lack of market acceptance of our virtual world and Facebook games, 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.

Cash Flows

Cash used in operating activities decreased by $542,522 for the year ended December 31, 2011, versus the period from inception (October 21, 2010) to December 31, 2010 primarily because of our increase in net loss of $466,641. Our cash outflows from investing activities amounted to $123,444 for capitalized software.  Our inflows from financing activities of $753,929 in the year ended December 31, 2011, consisted of $753,929 in advances from our majority shareholder.

 
 

 

 
- 20 -



 

 
Sources of Capital

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 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.

 
 

 

 
- 21 -




 
Going Concern

The independent registered public accounting firm's report on our financial statements as of December 31, 2011 and 2010 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.

Need For Additional Financing

We do not have capital sufficient to meet our cash needs. We have not generated revenue and have minimal resources to conduct planned operations. We estimate that our monthly expenses to commence planned operations within the next 12 months are approximately $125,000 (approximately $1,500,000 per year). Thus, using currently available capital resources (the primary source of which is non-binding commitments and expectations from management and current shareholders), we expect to be able to conduct planned operations for a minimum period of 3 to 4 months. We are currently relying solely on current shareholders and management to provide the necessary funds to continue operations. We do not have any commitments for such funding from shareholders or management.

At the present time, we have not made any arrangements to raise additional cash. Management and current shareholders are expected, but have not committed, to provide the necessary working capital so as to permit us to conduct planned operations until such time as we have begun to generate revenue and/or have become sufficiently funded.  However, if we do not begin to generate revenue or cannot raise additional needed funds, we will either have to suspend development operations until we do raise the funds, or cease operations entirely.

In addition, the United States and the global business community is experiencing severe instability in the commercial and investment banking systems which is likely to continue to have far-reaching effects on the economic activity in the country for an indeterminable period. The long-term impact on the United States economy and our operating activities and ability to raise capital cannot be predicted at this time, but may be substantial.
 
 
 

 
- 22 -




Off-Balance Sheet Arrangements and Contractual Obligations

As of December 31, 2011, 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 presently do not use any derivative financial instruments to hedge our exposure to adverse fluctuations in interest rates, foreign exchange rates, fluctuations in commodity prices, or other market risks, nor do we invest in speculative financial instruments.


         
Less than
           
Type of Obligation
 
Total
   
one year
 
1-3 years
 
3-5 years
 
Longer
  Loans payable majority
                     
       shareholder
  $ 849,854     $ 849,854            
  Loans payable minority
                         
       shareholder
  $ 162,372     $ 162,372            
Operating Lease Obligations
    -0-       -0-            
  Real Estate
                         
  Other
                         
Total
  $ 1,012,226     $ 1,012,226  
 
 
 
 
 

 

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.

 
 

 

 
- 23 -




 

 
RONALD R. CHADWICK, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado  80014
Telephone (303)306-1967
Fax (303)306-1944


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors
Sungame Corporation
Las Vegas, Nevada

I have audited the accompanying balance sheets of Sungame Corporation (a development  stage company) as of December 31, 2011 and 2010, and the related statements of operations, stockholders' equity and cash flows for the years then ended and for the period from October 21, 2010 (inception of the development stage) through December 31, 2011. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sungame Corporation as of December 31, 2011 and 2010, and the  results of its operations and its cash flows for the years then ended and for the period from October 21, 2010 (inception of the development stage) through December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

The accompanying  financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations and has a working capital deficit and stockholders' deficit. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Aurora, Colorado                                                                            /s/ Ronald R. Chadwick, P.C.                                          
March 29, 2012                                                                                      RONALD R. CHADWICK, P.C.

 
 
 
 
 

 

 
- 24 -




SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Balance Sheets


   
Dec. 31, 2011
   
Dec. 31, 2010
 
ASSETS
       
             
Current assets
           
      Cash
  $ 13,338     $ 10,650  
      Prepaid expenses
    1,250       225  
             Total current assets
    14,588       10,875  
                 
      Fixed assets
    2,140          
      Less accumulated depreciation
    (1,100 )     -  
      1,040          
                 
      Capitalized software
    123,444       -  
      Accumulated amortization
    (8,468 )        
      114,976          
Total Assets
  $ 130,604     $ 10,875  
           
LIABILITIES & STOCKHOLDERS' EQUITY
               
                 
Current liabilities
               
      Accounts payable
  $ 236,726     $ 26,520  
      Related party advances
    1,012,226       95,925  
      Other liabilities
    4,319       2,083  
             Total current liabilities
    1,253,271       124,528  
                 
Total Liabilities
    1,253,271       124,528  
                 
Stockholders' Equity
               
      Preferred stock, $.001 par value;
               
          5,000,000 shares authorized;
               
          none issued or outstanding
    -       -  
      Common stock, $.001 par value;
               
          300,000,000 shares authorized;
               
          177,575,014 (2011) & 177,000,000 (2010)
               
          shares issued and outstanding
    177,575       177,000  
      Additional paid in capital
    (282,295 )     -  
      Deficit accumulated during the dev.  stage
    (1,017,947 )     (290,653 )
                 
Total Stockholders' Equity
    (1,122,667 )     (113,653 )
                 
Total Liabilities and Stockholders' Equity
  $ 130,604     $ 10,875  


 
The accompanying notes are an integral part of these financial statements
 
 
 

 
 
- 25 -




SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations

               
Oct. 21, 2010
 
               
(Inception of
 
               
Dev. Stage)
 
   
Year Ended
   
Year Ended
   
Through
 
   
Dec. 31, 2011
   
Dec. 31, 2010
   
Dec. 31, 2011
 
                   
Revenues
  $ 4,569     $ -     $ 4,569  
                         
Operating expenses:
                       
     Depreciation and
         amortization
     8,789               8,789  
     General and administrative
    722,279       290,653       1,012,932  
      731,068       290,653       1,021,721  
                         
Gain (loss) from operations
    (726,499 )     (290,653 )     (1,017,152 )
                         
Other income (expense):
                       
     Interest income
    10       -       10  
     Interest expense
    (805 )     -       (805 )
      (795 )     -       (795 )
                         
Income (loss) before
                       
     provision for income taxes
    (727,294 )     (290,653 )     (1,017,947 )
                         
Provision for income tax
    -       -       -  
                         
Net income (loss)
  $ (727,294 )   $ (290,653 )   $ (1,017,947 )
                         
Net income (loss) per share
                       
(Basic and fully diluted)
  $ (0.00 )   $ (0.00 )        
                         
Weighted average number of
                       
common shares outstanding
    177,181,255       151,436,620          


 
 
The accompanying notes are an integral part of these financial statements
 
 
 

 
- 26 -




SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statements of Cash Flows

               
Oct. 21, 2010
 
               
(Inception of
 
               
Dev. Stage)
 
   
Year Ended
   
Year Ended
   
Through
 
   
Dec. 31, 2011
   
Dec. 31, 2010
   
Dec. 31, 2011
 
                   
Cash Flows From Operating Activities:
                 
     Net income (loss)
  $ (727,294 )   $ (290,653 )   $ (1,017,947 )
                         
     Adjustments to reconcile net loss to
                       
     net cash provided by (used for)
                       
     operating activities:
                       
          Depreciation and amortization
    8,789       -       8,789  
          Stock issued for licensing agreement
    -       165,000       165,000  
          Compensatory stock issuances
    325       12,000       12,325  
          Prepaid expenses
    (1,025 )     (225 )     (1,250 )
          Accounts payable
    89,172       26,520       115,692  
          Accrued liabilities
    2,236       2,083       4,319  
               Net cash provided by (used for)
                       
               operating activities
    (627,797 )     (85,275 )     (713,072 )
                         
Cash Flows From Investing Activities:
                       
           Investment in capitalized
                 software
    (123,444 )     -       (123,444 )
               Net cash provided by (used for)
    (123,444 )     -       (123,444 )
               investing activities
                       
                         
Cash Flows From Financing Activities:
                       
          Related party advances
    753,929       95,925       849,854  
               Net cash provided by (used for)
                       
               financing activities
    753,929       95,925       849,854  
                         
Net Increase (Decrease) In Cash
    2,688       10,650       13,338  
                         
Cash At The Beginning Of The Period
    10,650       -       -  
                         
Cash At The End Of The Period
  $ 13,338     $ 10,650     $ 13,338  
                         
Schedule Of Non-Cash Investing And Financing Activities
                 
                         
In 2011 the Company issued 250,000 shares of common stock pursuant to a reverse merger for net liabilities of $282,045.
                 
                         
Supplemental Disclosure
                       
                         
Cash paid for interest
  $ 805     $ -     $ 805  
Cash paid for income taxes
  $ -     $ -     $ -  


 
The accompanying notes are an integral part of these financial statements
 
 


 
- 27 -




SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statements of Stockholders Equity (Deficit)


                     
Deficit
       
   
Common Stock
         
Accumulated
   
Stock-
 
         
Amount
   
Paid in
   
During The
   
holders'
 
   
Shares (1)
   
($.001 Par)
   
Capital
   
Dev. Stage
   
Equity
 
                               
Balances at December 31, 2009
    -     $ -     $ -     $ -     $ -  
                                         
Issuance of founders' stock for services
    12,000,000       12,000                       12,000  
                                         
Shares issued for licensing agreement
    165,000,000       165,000                       165,000  
                                         
Net income (loss) for the year
                            (290,653 )     (290,653 )
                                         
 
Balances at December 31, 2010
    177,000,000     $ 177,000     $ -     $ (290,653 )   $ (113,653 )
                                         
Shares issued for reverse merger
    250,000       250       (282,295 )             (282,045 )
                                         
Shares issued for services
    325,014       325                       325  
                                         
Net income (loss) for the year
                            (727,294 )     (727,294 )
                                         
 
Balances at December 31, 2011
    177,575,014     $ 177,575     $ (282,295 )   $ (1,017,947 )   $ (1,122,667 )
                                         
(1) As restated for a reverse merger effective
 April 15, 2011
                                       


 
 
 
The accompanying notes are an integral part of these financial statements
 
 

 


 
- 28 -




SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
   FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010


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 virtual worlds and online games. The Company believes that it can exploit the market that is at the confluence of social games and social virtual world, and that this market is very significant. The Company will provide various types of Games in an online Virtual World where the users, regardless of location can play games, chat, buy virtual goods and where our customers are corporations and game aggregators.

The main activity will be to provide a social games and social virtual worlds 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 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.

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.

 
 

 

 
- 29 -

 
 
SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
(continued)


 

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 December 31, 2011 and 2010, the Company had net operating loss carry-forwards of approximately $1,018,000 and $291,000, which begin to expire in 2026.  At December 31, 2011 and 2010 the Company had deferred tax assets of approximately $356,000 and $102,000 in 2011 and 2010 created by the net operating losses, which have been offset by a 100% valuation allowance.

 
 

 

 
- 30 -


SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
(continued)


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 $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. The accompanying financial statements exclude the financial position, results of operations and cash flows of Sungame Corporation prior to the April 15, 2011 merger.

If Sungame Corporation's operating activity for the years ended December 31, 2010 and 2011 is combined with Freevi Corporations activity for the same periods, the pro forma results are as follows:

   
2011
   
2010
 
             
Pro forma revenue
  $ 31,150     $ 50,112  
                 
Pro forma net loss
  $ (746,409 )   $ (404,390 )
                 
Pro forma net income (loss) per share
  $ (0.00 )   $ (0.00 )
                 
Pro forma weighted average common shares outstanding
    177,575,014       151,686,620  

3.           Going Concern Uncertainty and Managements’ Plans

In the Company’s audited financial statements for the fiscal year ended December 31, 2011, 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 year ended December 31, 2011 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 $727,294 and $290,653 for the years ended December 31, 2011 and 2010, respectively, and an accumulated deficit of $1,017,947 as of December 31, 2011. As of December 31, 2010 the accumulated deficit was $113,653. At December 31, 2011, the Company’s total current liabilities exceed total current assets by $1,238,693.  At December 31, 2010 this amount was $113,653.

The future success of the Company is likely dependent on its ability to attain additional capital, or to find an acquisition to add value to its present shareholders and ultimately, upon its ability to attain future profitable operations.  There can be no assurance that the Company will be successful in obtaining such financing, or that it will attain positive cash flow from operations.  Management believes that actions presently being taken to revise the Company’s operating and financial requirements provide the opportunity for the Company to continue as a going concern.

4.           Property and Equipment

The Company has incurred software costs in the development of its virtual world in the amount of $97,114 and $199,000 in 2011 and 2010 respectively, which has been expensed.    Capitalized software costs were $123,444 for two products that have proven technologically feasible.

 

 

 
- 31 -

 
 
 
SUNGAME CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
(continued)



5.           Advance Payable, Related Party

At December 31, 2011 the Company had working capital advances due to a related party shareholder, 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 December 31, 2011 and 2010 was $182,513 and $13,500 owed to Adversor.  Due to the merger with Freevi Corporation on April 15, 2011, Adversor is now a minority shareholder.

During 2011 and 2010, the Company’s majority shareholder, Chandran Holding Media, Inc. (Chandran) advanced funds to the Company for operations.  The Company and Chandran also share certain members of executive management and certain employees.  At December 31, 2011 and 2010, the Company owed Chandran $849,854 and $95,925.  These funds are non-interest bearing and due on demand.


6.           Stockholders’ Deficiency

Warrants

At December 31, 2011, the following warrants to purchase common stock were outstanding after the expiration of 12,500 warrants October 2011:

Number of common
shares covered by warrants
 
Exercise Price
 
Expiration Date
         
12,500
 
$32.00
 
March 2012

7.             Legal Matters

The Company is involved in a litigation in Colorado,  Broadway Holdings, Inc. vs. Sungame Corporation.  The suit filed by Broadway Holdings, Inc. on or about August 2, 2011, in the District Court, Denver County, Colorado, alleges in general that the Company failed to fulfill contractual obligations and seeks unspecified monetary damages. The Company has counter claimed against Broadway Holdings, Inc. and intends  to vigorously defend itself in this lawsuit, as it believes the claims against the Company are without merit.

 
 

 

 
- 32 -

 

 


None


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 the end of the period covered by this annual report on Form 10-K.  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 December 31, 2011.  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 annual 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.


None

 

 

 
- 33 -






The following individuals were serving as our executive officers and directors on December 31, 2011:

Name
Age
Position
Guy M. Robert
48
Chief Development Officer and Director
Neil Chandran
40
President, CEO, and CFO
Raj Ponniah
36
COO, Secretary and Director

Guy M. Robert -  Mr. Robert served as the President, Chief Executive Officer, Chief Financial Officer and a Director of Sungame until the Company’s merger with Freevi Corporation. He also serves as President of Adversor, Inc., a beneficial owner of Sungame Corporation, since incorporation. After a career in IT consulting and Global Product Management for Ericsson 1989-1992 and Vodafone from 1992-1995, Mr. Robert has focused his entrepreneurial spirit and management capabilities within the international IT community. He established and was a Director or CEO of companies such as XPonCard Thailand Ltd.1999-2004, MobylNet SL, Spain, 2002-2005 and Communication Information Services 2000-2004 which was acquired by a publicly listed group. Mr. Robert is a Market Economist, graduated from the Stockholm Market Institute.

Neil ChandranPresident, CEO and CFO. 
For the past 20 years, Mr. Chandran has been involved in the interactive media industry. In 1990, Neil founded Intent Communications, a telecommunications firm that specialized in Interactive Voice Response (IVR) programs for 800 and 900 numbers – the predecessor to the modern day Internet. In 1995, he co-founded IEM, Interactive Electronic Media Inc., which developed video-streaming technology long before the feature was commonplace throughout the web. His experience with video led to the launch of Energy TV in 2006, his first broadcast television program and the flagship media property of CHMI. Also formed in 2006, CHMI was the holding company and licensor of Chandran’s concepts. Since then CHMI has raised and generated almost $40 Million through its various media properties. Mr. Chandran lives in Las Vegas with his wife and two children. 
Mr. Chandran holds a Bachelor of Management Degree from the University of Lethbridge, Alberta, Canada.
 
Raj PonniahCOO, Secretary and Director. 
Started his education in electronic engineering and transferred into the business division at Fullerton College. Founded his first company in 1994 servicing local attorneys and paralegals in Southern California area and grew to one of the most trusted servers in the special needs division. In 1998, Raj went on into the auto industry where he opened up the first Daewoo car dealerships in Toronto, Canada. After selling the dealership Raj spent the next decade in finance, starting from running a small savings and loan in Southern California to running and owning a call center in the subprime mortgage industry servicing loans in over 40 states in the Union. Once the industry took a turn, Raj consulted for a few start up broker companies until he found himself recreated by CHMI to open up the retail division of CHMI in the US market which eventually morphed into the vidirectory, an online geotargeted video directory system for local business and the LOFT, a retail co-working space for local production and development teams.  
Mr. Ponniah started his education in Electronical Engineering from DeVry Institute and made his way over to Business Management at Fullerton College.
 
Michael Segal – former Director.  Mr. Segal who was a director since June 8, 2007, resigned from the Company’s Board of Directors on November 3, 2010 citing a difference of opinion with the other Directors relating to the business model of Freevi, Inc. and the future of SGMZ as a result of the merger.

Ranulf Goss – former Director, retired from the Board of Directors on September 26, 2011.

All executive officers are elected by the Board and hold office until the next Annual Meeting of stockholders and until their successors are elected and qualify.

Compliance With Section 16(a) Of The Exchange Act

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the registrant's officers and directors, and persons who own more than 10% of a registered class of the registrant's equity securities, to file reports of ownership and changes in ownership of equity securities of the Registrant with the Securities and Exchange Commission. Officers, directors and greater-than 10% shareholders are required by the Securities and Exchange Commission regulation to furnish the registrant with copies of all Section 16(a) forms that they file.
 

 

 
- 34 -





Compensation.

The following table sets forth compensation awarded to, earned by or paid to our Chief Executive Officer and the four other most highly compensated executive officers for the years ended December 31, 2010 and 2009 (collectively, the “Named Executive Officers”).

SUMMARY COMPENSATION TABLE
             
Non-Qualified
   
           
Non-Equity
Deferred
   
Name & Principal
     
Stock
Option
Incentive Plan
Compensation
All Other
 
Position
Year
Salary
Bonus
Awards
Awards
Compensation
Earnings
Compensation
Total
Neil Chandran
2011
$23,700
0
0
0
0
0
0
0
 
2010
0
0
0
0
0
0
0
0
Guy Robert
2011
60,000
0
0
0
0
0
0
0
 
2010
0
0
0
0
0
0
0
0
Raj Ponniah
2011
38,559
0
0
0
0
0
0
0
 
2010
0
0
0
0
0
0
0
0

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2011
OPTION AWARDS
STOCK AWARDS
Name
Number of Securities Underlying Unexercised Options
(#)
Exercisable
Number of Securities Underlying Unexercised Options
(#)
Unexercisable
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)
Option Exercise Price
($)
Option Expiration Date
Number of Shares or Units of Stock That Have Not Vested
(#)
Market Value of Shares or Units of Stock That Have Not Vested
($)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
Neil Chandran
  0
  0
  0
  0
  0
  0
  0
  0
  0
Guy Robert
  0
  0
  0
  0
  0
  0
  0
  0
  0
Raj Ponniah
  0
  0
  0
  0
  0
  0
  0
  0
  0

 
 

 
 
- 35 -




 
Employment Contracts

We do not have an employment contract with any executive officer.

We have made no Long Term Compensation payouts.

Director Compensation

DIRECTOR COMPENSATION
 
Name
Fees
Earned or
Paid in
Cash
Stock
Awards
Option
Awards
Non-Equity
Incentive
Plan
Compensation
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
All
Other
Compensation
Total
 
Guy Robert
 0
 0
 0
 0
 0
 0
 0
 
Neil Chandran
 0
 0
 0
 0
 0
 0
 0
 
Raj Ponniah
 0  0  0  0  0  0  0  

Our directors do not receive compensation for their attendance at meetings of the board of directors.

All of our officers and/or directors will continue to be active in other companies. All officers and directors have retained the right to conduct their own independent business interests.

It is possible that situations may arise in the future where the personal interests of the officers and directors may conflict with our interests. Such conflicts could include determining what portion of their working time will be spent on our business and what portion on other business interest. To the best ability and in the best judgment of our officers and directors, any conflicts of interest between us and the personal interests of our officers and directors will be resolved in a fair manner which will protect our interests. Any transactions between us and entities affiliated with our officers and directors will be on terms which are fair and equitable to us. Our Board of Directors intends to continually review all corporate opportunities to further attempt to safeguard against conflicts of interest between their business interests and our interests.

We have no intention of merging with or acquiring an affiliate, associated person or business opportunity from any affiliate or any client of any such person.


 
 

 
 
- 36 -




 

The following table and the notes thereto set forth information, as of March 15, 2011 (except as otherwise set forth herein), concerning beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of common stock by: (i) each director of the Company, (ii) each executive officer (iii) all executive officers and directors as a group, and (iv) each holder of 5% or more of the Company’s outstanding shares of common stock.


Name and Address of Beneficial Owner(1)
 
Number of Shares of
common stock
Beneficially Owned(2)
   
Percentage of
common stock
Outstanding(3)
Chandran Media Holdings Inc.
 
165,000,000
     
92.92
%
Neil Chandran, President, CEO, CFO (voting power only)
 
165,000,000
     
92.92
%
Raj Ponniah, COO, Secretary and Director
 
2,000,000
     
1.1263
%
Guy M. Robert(4), Chief Development Officer and Director
 
95,000
     
.01
%
Michael Segal
 
2,513
     
.01
%
Ranulf Jose Goss
 
9,325
     
.01
%
Sudhir Shah
 
25,000
     
.01
%
Diamond Star Exports Ltd.(5)
 
62,500
     
.01
%
Mindzye Consulting Pte. Ltd.
 
2,500
     
.01
%
Jeffrey Friedland(6)
 
9,689
     
.01
%
Jessey Njau, Director of Internet Technology
 
1,000,000
     
0.5631
%
Owen Cran, Comptroller
 
1,000,000
     
0.5631
%
Paul Vastakis, Manager
 
500,000
     
0.28155
%
Officers and Directors as a group
  169,595,000       95.51 %
__________________
(1). Unless otherwise stated above, the address of beneficial owner is c/o Sungame Corporation, 3091 West Tompkins Avenue, Las Vegas, Nevada 89103.
(2). Beneficial ownership of each person is shown as calculated in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, which includes all securities that the person, directly, or indirectly through an contract, arrangement, understanding, relationship or otherwise has or shares voting power which includes the power to vote or direct the voting of a security, or investment power, which includes the power to dispose, or direct the disposition of such security.
(3). Based on 177,575,014 shares of common stock outstanding as of December 31, 2011.
(4). Guy Robert is the beneficiary of 62,500 shares indirectly through Adversor, Inc., as president thereof.
(5). Shah holds the voting and dispositive powers for Diamond Star Exports, Ltd.
(6). Freidland holds the voting power and dispositive powers over 9,689 shares of our common stock through the following entities; Philadelphia New York Investors, Global Investment Advisers, LLC, China America Holdings, Strategic Technology Advisors, LLC, VAC Edwards, LLC, Wall Street Global Research, LLC, and Western Technology Investors,  LLC.

Other than the stock transactions discussed below, we have not entered into any transaction nor are there any proposed transactions in which any of our founders, directors, executive officers, shareholders or any members of the immediate family of any of the foregoing had or is to have a direct or indirect material interest.

On Wednesday, 3 November 2010, Michael Segal resigned from SGMZ’s Board of Directors. Mr. Segal’s resignation came from a difference of opinion with the other Directors of the business model of Freevi, Inc. and SGMZ future in respect with the merger. Mr. Segal was the Secretary and Treasurer of SGMZ, but was not on any committees of the Board of Directors and was not an Officer of SGMZ.


 
- 37 -




In October 2008, Diamond Star Export, Ltd. and Adversor, Inc., greater than 10% shareholders of our Company, entered into Lock Up Agreements with us whereby they agreed to that, until the earlier of: (1) 90 days after the shareholder's stock has been registered under an effective Registration Statement with the SEC, (2) the second anniversary of the date of the agreement or  (3) 90 days after Change in Control (as defined in the Securities Exchange Act of 1934), that they will not make or cause any sale more than 5% of shares outstanding per quarter, irrespective of whether their shares are subsequently registered. In exchange each received $100.

In October 2008, Mr. Ranulf Goss, our director, entered into a Lock-Up Agreement with us whereby they agreed to that, until the earlier of: (1) 90 days after the shareholder's stock has been registered under an effective Registration Statement with the SEC, (2) the second anniversary of the date of the agreement or (3) 90 days after Change in Control (as defined in the Securities Exchange Act of 1934), that they will not make or cause any sale more than 5% of shares outstanding per quarter, irrespective of whether their shares are subsequently registered. In exchange he received $100.

In March 2009, per the Security Purchase Agreement (dated October 2008), with Mindzeye Consulting Pte, Ltd., we received cash of $125,000 in exchange for 125,000 shares of restricted common stock. The shares were sold at a price of $0.25 per share.

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. We have treated such amounts as capital contributions and as such have increased Additional Paid in Capital by $107,109.

In October 2008, we issued 103,075 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 34,325 shares of our restricted common stock to our director, Mr. Goss, as payment for services totaling $137,300.  The shares were issued at a price of $0.10 per share.

During the year ended December 31, 2008, we entered into a Corporate Finance Advisory Services Agreement with Friedland Global Capital Markets, LLC ("Friedland"). The Agreement provides that we will pay a remaining total of $65,000 for services as set forth in the Agreement and $140,000 upon the commencement of the trading of our stock. These funds payable are non-interest bearing and due on demand.

In June 2008, we issued 22,500 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.

During the year ended December 31, 2008, Adversor advanced $107,109 to support operations. Adversor forgave the total $107,109 and the Company has treated it as capital contribution and an increase the Additional Paid In Capital.

During the year ended December 31, 2007, our majority shareholder, Adversor, Inc. (Adversor) advanced funds of $118,369 to us for operations. During the year ended December 31, 2008, we repaid $8,369 of the outstanding amount. At December 31, 2008, Adversor is owed $110,000. These funds are non-interest bearing and due on demand. During the nine months ended September 30, 2009, Adversor advanced funds of $7,470 to us for operations. At September 30, 2009, Adversor is owed $117,470.

 
 

 
 
- 38 -





Audit Fees

We were billed $9,220 for the fiscal year ended December 31, 2011 and $0 for the period from inception (October 21, 2010) to December 31, 2010 for professional services rendered by the principal accountant for the audit of our annual financial statements, the review of our quarterly financial statements, and other services performed in connection with our statutory and regulatory filings.

Audit Related Fees

There were $0 in audit related fees for the fiscal year ended December 31, 2011 and $0 in audit related fees for the period from inception (October 21, 2010) to December 31, 2010. Audit related fees include fees for assurance and related services rendered by the principal accountant related to the audit or review of our financial statements, not included in the foregoing paragraph.

Tax Fees

Tax fees were $750 for the fiscal year ended December 31, 2011 and $0 for the period from inception (October 21, 2010) to December 31, 2010.

All Other Fees

There were no other professional services rendered by our principal accountant during the last two fiscal years that were not included in the above paragraphs.

Preapproval Policy

Our Board of Directors’ current policy is to pre-approve all audit and non-audit services that are to be performed and fees to be charged by our independent auditor to assure that the provision of these services does not impair the independence of the auditor.  Our board pre-approved all audit and non-audit services rendered by our principal accountant in 2011 and 2010.
 
 
 
 
 
- 39 -


 
 
 

(a) Financial Statements and Schedules. The following financial statements and schedules for the Company as of December 31, 2011 are filed as part of this report.

(1)   Financial statements of the Company and its subsidiaries.

(2)   Financial Statement Schedules:

All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

(A) EXHIBITS.

The following Exhibits are incorporated herein by reference or are filed with this report as indicated below.

Exhibit No.
 
Description of Exhibits
3.01
 
Certificate of Incorporation (1)
3.01(a)
 
Certificate of Amendment of Certificate of Incorporation (2)
3.02
 
By-laws (1)
3.02(a)
 
Certificate of Amendment of Bylaws (3)
21.1
 
Subsidiaries (2)
31.1
 
32.1
 

(1) Incorporated by reference to our Registration Statement on Form S-1 filed with the SEC on May 1, 2009.
(2) Incorporated by reference to our Registration Statement on Form S-1/A filed with the SEC on August 7, 2009.
(3) Incorporated by reference to our Registration Statement on Form S-1/A filed with the SEC on January 19, 2010.

 
 

 

 
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In accordance with Section 13 or 15(d) 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, and Chief Financial Officer
Date:
      March 30, 2012
   
   
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
   
   
By:
 /s/ Guy Robert                                                                                             
Name:
      Guy Robert
Title:
      Chief Development Officer and Director
Date:
      March 30, 2012
   

By:
 /s/ Raj Ponniah                                                                                          
Name:
      Raj Ponniah
Title:
      Chief Operating Officer, Secretary and Director
Date:
      March 30, 2012
   
   
   

 
 
 
 

 

 
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