ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. The
business and operations of Win Gaming Media, Inc., or the Company, we, us, or
our, are subject to substantial risks, which increase the uncertainty inherent
in the forward-looking statements contained in this Quarterly Report on Form
10-Q. Forward-looking statements include our statements regarding our goals,
beliefs, strategies, objectives, plans, including product and service
developments, future financial conditions, results or projections or current
expectations. For example, when we discuss our funding and growth plans and
opportunities, including our expectation that our cash, together with our
Netplay TV plc, or Netplay, shares, should be sufficient to meet our anticipated
requirements for the next 12 months, or when we say that we expect to start
generating revenue from our binary options business in the second quarter of
2010, we are using a forward looking statement. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or
"continue," the negative of such terms, or other comparable terminology. These
statements are subject to known and unknown risks, uncertainties, assumptions
and other factors that may cause actual results to be materially different from
those contemplated by the forward-looking statements. Except as required by law,
we undertake no obligation to release publicly the result of any revision to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Further information on potential factors that could affect
our business is described in Part I, Item 1A, "Risk Factors" of our Annual
Report on Form 10-K for the fiscal year ended December 31, 2009. Readers are
also urged to carefully review and consider the various disclosures we have made
in this Quarterly Report on Form 10-Q.
OVERVIEW
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
You should read the following discussion of our financial condition and results
of operations together with the unaudited financial statements and the notes to
unaudited financial statements included elsewhere in this Quarterly Report on
Form 10-Q.
As of November 2009, we are now focused on offering worldwide online trading of
binary options. Formerly, we were engaged in the business of offering
technology, servicing the interactive gaming industry. Following the sale of our
entire gaming software assets and development activities during 2008 and 2009,
we are no longer a technology company and we now derive our income from revenue
sharing arrangements in the interactive gaming industry, through third parties.
Since March 23, 2010 we have been offering online trading of binary options
through our two newly organized fully-owned subsidiaries in Cyprus and in
Israel. Worldwide trading is being offered by Cyprus-based WGM Services Ltd., or
WGM, on www.globaloption.com, later to expand through localized activities in
leading markets around the world, while in Israel, the same services are
featured through B. Option Ltd., or B. Option, on www.options.co.il.
Specifically, we market our online binary options trading business towards
investors who are seeking to realize any profit from their investments within a
short period of time.
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RESULTS OF OPERATIONS FOR -THREE MONTHS ENDED MARCH 31, 2010 COMPARED TO THREE
MONTHS ENDED MARCH 31, 2009.
REVENUES AND COST OF REVENUES
The Company is entitled to royalties from revenue sharing arrangements upon
sublicensing of the Company's products to end-users. The Company recognizes
royalties from revenue sharing arrangements during the applicable period based
on reports obtained from its customers, on a monthly basis, during such
reporting period.
In the three months ended March 31, 2010 and March 31, 2009 we generated our
revenues from our revenue sharing arrangements with Lodgnet Interactive
Corporation, or Lodgnet, and Cablevision Systems Corporation, or Cablevision.
The total revenues for the three months ended March 31, 2010 decreased by 32% to
$21,664 from $31,947 for the three months ended March 31, 2009. The decrease is
attributable to decrease in revenues at Lodgnet and Cablevision. We have not
generated any revenues in the three months ended March 31, 2010 from our binary
options business which we launched in March 2010.
Cost of revenues for the three months ended March 31, 2010 decreased by 100% to
$0 from $159,761 for the three months ended March 31, 2009. The decrease is
attributable to the sale of certain gaming services, known as Challenge Jackpot,
to Netplay by Two Way Gaming Limited, or TWG, our affiliated company, in April
2009. As a result, we stopped providing support services to TWG.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the three months ended March 31, 2010
increased by 144% to $241,502 from $98,674 for the three months ended March 31,
2009. The increase in general and administrative expenses is primarily
attributable to the launching of our new business activity of binary options.
NET LOSS ATTRIBUTABLE TO THE COMPANY
Net loss attributable to the Company for the three months ended March 31, 2010
was $178,609 compared to a net loss of $292,691 for the three months ended March
31, 2009. Net loss per share from operations for both the three months ended
March 31, 2010 and March 31, 2009 was $0.01. The net loss for the three months
ended March 31, 2010 is primarily attributable to the costs of our new operation
in the binary option services, including hiring new employees. Our weighted
average number of shares of common stock used in computing basic and diluted net
loss per share for the three months ended March 31, 2010 and March 31, 2009 was
32,319,031.
SHARE IN PROFITS/LOSSES OF AFFILIATED COMPANY
Equity profits for the three months ended March 31, 2010 changed to a profit of
$45,789 compared to a loss of $28,183 for the three months ended March 31, 2009.
During the first quarter of 2010 we filed for the dissolution of TWG and
received $45,789 for our portion in the remaining assets of TWG.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2010, our total current assets were $1,305,188 and our total
current liabilities were $105,283. On March 31, 2010, we had an accumulated
deficit of $16,175,268. We currently finance our operations through the sale of
marketable securities of Netplay and revenues from sharing arrangements. During
the first quarter of 2010 we sold 1,000,000 shares of Netplay for a total amount
of $347,061. As of March 31, 2010 we held 1,966,666 shares of Netplay for sale
as marketable securities. The fair value of these shares was $746,171. The fair
value of these shares is subject to fluctuation of Netplay's stock price and
foreign currency rate. We had working capital of $1,199,905 on March 31, 2010
compared with a working capital of $1,441,118 on December 31, 2009. Cash and
cash equivalents on March 31, 2010 were $491,722, an increase of $138,922 from
the $352,800 reported on December 31, 2009. The increase in cash is primarily
attributable to the said sale of 1,000,000 shares of Netplay during the first
quarter of 2010 offset by our cost of operations.
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Operating activities used cash of $217,323 in the three months ended March 31,
2010. Cash used by operating activities in the three months ended March 31, 2010
resulted primarily from a $26,158 decrease in accrued expenses and other
liabilities and the cost of our operations including the employment of five new
employees.
Investing activity provided in the three months ended March 31, 2010 amounted to
$354,864 and resulted from the selling of marketable securities in the amount of
$347,061 offset by $37,986 for the purchase of property and equipment.
Financing activities provided cash of $1,381 in the three months ended March 31,
2010 which is due to short-term bank credit.
OFF-BALANCE SHEET ARRANGEMENTS
According to the Services and License Agreement (the "License Agreement") with
ParagonEX Limited, or Paragon EX, two of our subsidiaries, WGM and B. Option,
are obligated together to invest, in marketing activity of the binary options
sites, a total amount of $500,000 during the first 8 months from the go live
date of March 23, 2010; otherwise a fee of $50,000 is owed to ParagonEX jointly
by WGM and B. Option. In addition, if B. Option and WGM collectively generate
revenues lower than $250,000 per month, B. Option and WGM would be obligated to
pay to ParagonEX a 12% per month processing fee calculated from B. Option's and
WGM's collective profits. For more information on the License Agreement or our
off-balance sheet arrangement with ParagonEX, please see "Item 1. Business -
Recent Developments" of our Annual Report on Form 10-K for the year ended
December 31, 2009.
OUTLOOK
We expect that our current cash, together with our Netplay shares should be
sufficient to meet our anticipated requirements for the next 12 months. Our
efforts are devoted to the recent launch of our binary options business, which
is expected to generate revenue starting from the second quarter of 2010, and to
leverage our wholly owned subsidiary, Gaming Ventures Plc, that is registered
with the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, or the Exchange Act, by either an outright sale or by
incorporating new activities which will generate revenues. There is no assurance
that our efforts will be successful.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
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ITEM 4T. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this Quarterly Report on Form 10-Q, we
carried out an evaluation, under the supervision and with the participation of
our management, our Chief Executive Officer and our Chief Financial Officer, of
the effectiveness of our disclosure controls and procedures as defined in Rule
13a-15(e) of the Exchange Act. These disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure. Based on that evaluation and the material weakness
described below, our management concluded that we did not maintain effective
disclosure controls and procedures as of March 31, 2010. Our management has
identified control deficiencies regarding a lack of segregation of duties, an
insufficient qualification and training of employees, and a need for a stronger
internal control environment. Our management believes that these deficiencies,
which in the aggregate constitute a material weakness, are due to the small size
of our staff, which makes it challenging to maintain adequate controls.
The ineffectiveness of disclosure controls and procedures as of March 31, 2010
continued in large part from several significant changes in the Company's
executive officers, and personnel cutbacks. Although we continue to strive to
provide improved disclosure controls and procedures in the future, in the
interim, these changes have caused control deficiencies, which in the aggregate
resulted in a material weakness.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There has been no change in our internal control over financial reporting during
the first quarter of 2010 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On February 25, 2010, we issued options to purchase 500,000 shares of our common
stock, at an exercise price per share of $0.595, to a consultant of the Company
in recognition of eight years of service to us. The options are exercisable at
any time from the issuance date until August 19, 2014, and were issued pursuant
to an exemption under Regulation S under the Securities Act of 1933, as amended,
or the Act, and/or Section 4(2) of the Act.
ITEM 6. EXHIBITS.
* 31.1 Rule 13a-14(a) Certification of Principal Executive Officer.
* 31.2 Rule 13a-14(a) Certification of Principal Financial Officer.
** 32.1 Certification of Principal Executive Officer Pursuant to
18 U.S.C. Section 1350.
** 32.2 Certification of Principal Financial Officer Pursuant to
18 U.S.C. Section 1350.
- ----------
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized:
WIN GAMING MEDIA, INC.
Dated: May 3, 2010 By: /s/ Shimon Citron
-----------------
Shimon Citron
Chief Executive Officer
By: /s/ Shlomi Zedkia
-----------------
Shlomi Zedkia
Chief Financial Officer
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