RESULTS OF OPERATIONS FOR SIX AND THREE MONTHS ENDED JUNE 30, 2010 COMPARED TO
SIX AND THREE MONTHS ENDED JUNE 30, 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 six and three months ended June 30, 2010 and June 30, 2009, we generated
our revenues from our revenue sharing arrangements with Lodgnet Interactive
Corporation, or Lodgnet, Cablevision Systems Corporation, or Cablevision, and
Netplay TV plc, or Netplay. The total revenues for the six months ended June 30,
2010 decreased by 19% to $48,534 from $59,734 for the six months ended June 30,
2009. The total revenues for the three months ended June 30, 2010 decreased by
3% to $26,870 from $27,787 for the three months ended June 30, 2009. The
decrease is attributable to decrease in revenues at Lodgnet and Cablevision
during the first quarter of 2010. We have not generated any revenues in the six
and three months ended June 30, 2010 from our binary options business which we
launched in March 2010.
Cost of revenues for the six months ended June 30, 2010 decreased by 45% to
$146,169 from $265,957 for the six months ended June 30, 2009. Cost of revenues
for the three months ended June 30, 2010 decreased by 10% to $95,758 from
$106,196 for the three months ended June 30, 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, offset by the
launching of our new business of binary options including salaries and social
benefits for our new employees. TWG filed for dissolution in 2010 and no longer
provides services.
General and administrative expenses reported for the three months ended March
31, 2010, totaling $50,411, were reclassified as cost of revenues for the six
months ended June 30, 2010.
SELLING AND MARKETING
Selling and marketing expenses for the six and three months ended June 30, 2010
increased to $99,123 compared to $0 for the six and three months ended June 30,
2009. The increase in selling and marketing expenses is attributable to
marketing expenses of our online trading of binary options sites, including
online advertisement and sponsorships.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the six months ended June 30, 2010
increased by 42% to $371,582 from $261,792 for the six months ended June 30,
2009. General and administrative expenses for the three months ended June 30,
2010 increased by 11% to $180,491 from $163,118 for the three months ended June
30, 2009. The increase in general and administrative expenses is primarily
attributable to the launching of our new business activity of binary options.
SHARE IN PROFITS/LOSSES OF AFFILIATED COMPANY
Share in profits for the six months ended June 30, 2010 changed to a profit of
$45,789 compared to a loss of $114,046 for the six months ended June 30, 2009.
Share in losses for the three months ended June 30, 2010 was $0 compared to a
loss of $85,863 for the three months ended June 30, 2009. While in 2009 we
recorded our share in losses of TWG, our affiliated company, 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. We recorded this amount as share in
profits during the first quarter of 2010.
NET LOSS/INCOME ATTRIBUTABLE TO THE COMPANY
Net loss attributable to the Company for the six months ended June 30, 2010 was
$530,406 compared to a net income of $1,002,976 for the six months ended June
30, 2009. Net loss attributable to the Company for the three months ended June
30, 2010 was $351,797 compared to a net income of $1,295,667 for the three
months ended June 30, 2009. Net loss per share attributable to the Company for
six months ended June 30, 2010 was $0.02 compared to a net income per share of
$0.03 for the six months ended June 30, 2009. Net loss per share attributable to
the Company for three months ended June 30, 2010 was $0.01 compared to a net
income per share of $0.04 for the three months ended June 30, 2009. The net loss
for the six and three months ended June 30, 2010 is primarily attributable to
the increasing cost of our new operation in the binary options business. The net
income attributable to the Company for the six and three months ended June 30,
2009 is primarily attributable to the Netplay transfer agreement in which we
received 4,266,666 Netplay shares valued at $1.5 million. Our weighted average
number of shares of common stock used in computing basic and diluted net loss
per share for the six and three months ended June 30, 2010 and June 30, 2009 was
32,319,031.
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LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2010, our total current assets were $737,997 and our total
current liabilities were $114,921. On June 30, 2010, we had an accumulated
deficit of $16,527,065. We currently finance our operations through the sale of
marketable securities of Netplay and revenues from sharing arrangements. During
the first half of 2010 we sold 1,000,000 shares of Netplay for a total amount of
$347,061. As of June 30, 2010 we held 1,966,666 shares of Netplay. The fair
value of these shares was $507,385. The fair value of these shares is subject to
fluctuation of Netplay's stock price and foreign currency rate. We had working
capital of $623,076 on June 30, 2010 compared with a working capital of
$1,199,905 and $1,441,118 on March 31, 2010 and December 31, 2009, respectively.
Cash and cash equivalents on June 30, 2010 were $146,696, a decrease of $206,104
from the $352,800 reported on December 31, 2009. The decrease in cash is
primarily attributable to our cost of operation offset by the sale of 1,000,000
shares of Netplay during the first quarter of 2010.
Operating activities used cash of $544,746 in the six months ended June 30,
2010. Cash used by operating activities in the six months ended June 30, 2010
resulted from a $22,152 decrease in accrued expenses and other liabilities, a
$12,015 increase in other accounts receivable and, primarily, from the cost of
our operations including the employment of eight new employees and marketing
expenses to promote our new binary options business.
Investing activity provided in the six months ended June 30, 2010 amounted to
$335,118 and resulted from the selling of marketable securities in the amount of
$347,061, offset by $57,732 for the purchase of property and equipment.
Financing activities provided cash of $3,524 in the six months ended June 30,
2010 which is due to a short-term bank credit.
OFF-BALANCE SHEET ARRANGEMENTS
According to the Services and License Agreement, or 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 28, 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 third 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 June 30, 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 disclosure
controls.
The ineffectiveness of disclosure controls and procedures as of June 30, 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 second 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 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: July 21, 2010 By: /s/ Shimon Citron
-----------------
Shimon Citron
Chief Executive Officer
By: /s/ Shlomi Zedkia
-----------------
Shlomi Zedkia
Chief Financial Officer
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