UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2010
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________to__________________.
Commission File No. 333-157281
SWEET SPOT GAMES, INC.
NEVADA
26-2909561
-----------------------------------
--------------------------------
(State or other jurisdiction of
(IRS Employer Identification No.)
incorporation or organization)
2840 HIGHWAY 95 ALT. S, SUITE 7
SILVER SPRINGS, NV 89429
-----------------------------------------
(Address of principal executive offices)
(519) 872-2539
--------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.
[X] YES [ ] NO
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.
[ ] YES [X] NO
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APPLICABLE TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
[X] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: March 31, 2010: 30,110,000
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
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Table of Contents
10-Q - Sweet Spot Games, Inc.
FORM 10-Q
PART I
FINANCIAL STATEMENTS
4
MANAGEMENT'S DISCUSSION
AND ANALYSIS OR PLAN OF OPERATION
11
QUANTITATIVE AND QUALITATIVE
15
PART II
EXHIBITS
15
SIGNATURES
16
EX-1 (EXHIBIT 31.1)
17
EX-2 (EXHIBIT 32.1)
19
Sweet Spot Games, Inc. |
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|
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(A Development Stage Company) |
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Unaudited Condensed Income Statements |
|
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| For the Three Months Ended March 31, | ||
|
| 2010 |
| 2009 |
|
|
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|
|
Revenue |
|
|
|
|
Sales |
| $ 10,000 |
| $ 13,325 |
|
|
|
|
|
Operating expenses |
|
|
|
|
Advertising and promotion |
| 384 |
| - |
Bank and other interest charges |
| 195 |
| 143 |
Consulting expense |
| - |
| - |
Depreciation and amortization |
| 271 |
| - |
Fees and dues |
| 14,515 |
| - |
Legal and professional fees |
| 11,665 |
| 500 |
Management fee |
| 8,950 |
| - |
Office expense |
| 668 |
| 690 |
Travel and meals |
| 8,309 |
| 7,114 |
Website |
| 806 |
| 3,208 |
Total operating expenses |
| 45,763 |
| 11,655 |
|
|
|
|
|
Other expenses |
|
|
|
|
Loss on foreign exchange |
| 162 |
| - |
|
|
|
|
|
Net income (loss) |
| $ (35,925) |
| $ 1,670 |
|
|
|
|
|
Weighted average number of shares outstanding |
| 30,110,000 |
| 29,950,000 |
|
|
|
|
|
Income (loss) per share |
| $ (0.00) |
| $ 0.00 |
|
|
|
|
|
* The accompanying notes to the unaudited condensed financial statements are an integral part of these statements. | ||||
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Page 6
Sweet Spot Games, Inc. |
|
|
|
|
|
(A Development Stage Company) |
|
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|
|
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Unaudited Condensed Statements of Cash Flows |
|
|
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| |
|
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|
| For the Nine Months Ended March 31, |
| Inception to | ||
| 2010 |
| 2009 |
| March 31, 2010 |
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
Net loss | $ (110,086) |
| $ (46,424) |
| $ (803,490) |
Adjustments to reconcile net loss to |
|
|
|
|
|
cash used in operating activities |
|
|
|
|
|
Depreciation and amortization | 813 |
| 391 |
| 4,513 |
Common stock issued for services performed | - |
| - |
| 600,000 |
Loss on software development | 22,133 |
| - |
| 22,133 |
Loss on foreign exchange | 2,894 |
| - |
| 2,894 |
Changes in assets and liabilities |
|
|
|
|
|
Accounts payable | 6,800 |
| 500 |
| 7,400 |
Accrued expenses | (558) |
| - |
| - |
|
|
|
|
|
|
Net cash used in operating activities | (78,004) |
| (45,533) |
| (166,550) |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Cash purchases of property and equipment | - |
| (3,253) |
| (3,253) |
Cash paid for software development costs | (12,000) |
| (24,949) |
| (36,949) |
|
|
|
|
|
|
Net cash used in investing activities | (12,000) |
| (28,202) |
| (40,202) |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
Additional paid in capital | 101,105 |
| 89,550 |
| 235,655 |
Syndication fees | (635) |
| - |
| (635) |
Net cash provided by financing activities | 100,470 |
| 89,550 |
| 235,020 |
|
|
|
|
|
|
Net increase in cash | 10,466 |
| 15,815 |
| 28,268 |
|
|
|
|
|
|
Cash at beginning of period | 17,802 |
| 399 |
| - |
|
|
|
|
|
|
Cash at end of year | $ 28,268 |
| $ 16,214 |
| $ 28,268 |
|
|
|
|
|
|
* The accompanying notes to the unaudited condensed financial statements are an integral part of these statements. | |||||
NOTES TO THE UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1.
Organization and Operations
Nature of Operations
Sweet Spot Games, Inc. (the “Company”) was organized in Nevada on June 2, 2008. The Company is a development stage company and currently has no operations. The Company is a developer of online, multiplayer skill based games.
The Company develops games in a three dimensional environment allowing users from around the globe to compete in an environment that very closely resembles the graphic quality of console based systems.
The Company’s mandate is to continue producing highly attractive and interactive online multiplayer skill-based games that revolutionize the environment in which online gaming applications exist today.
2.
Summary of Significant Accounting Policies
General
The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United State of America (“US GAAP”) have been condensed or omitted from these statements pursuant to such rules and regulation and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements for the year ended June 30, 2009, included on form S-1/A.
In the opinion of management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three-month periods have been made. Results for the interim period presented are not necessarily indicative of the results expected for the entire fiscal year.
Software Development Costs
In March 2000, the Emerging Issues Task Force, known as "EITF," reached a consensus on ASC 350, Accounting for Website Development Costs. Under ASC 350, accounting for website development costs depends on the stage in which costs are incurred.
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During planning the website, all costs are expensed as incurred.
During developing the applications and infrastructure, costs may be
incurred to acquire or develop both hardware and software needed to operate the site. All software costs should be accounted for under ASC 350. Under ASC 350, certain software development costs are capitalized and amortized over the estimated useful life of the website. Graphics are a component of software and their initial development costs should be accounted for under ASC 350. After the launch of the website, graphics charges should be expensed as incurred, except for website enhancements, which should be capitalized. All costs of operating the site should be expensed as incurred.
Revenue Recognition
The Company will recognize sales revenue at the time of delivery when ownership has transferred to the customer, when evidence of a payment arrangement exists and the sales proceeds are determinable and collectible. After the customer has accessed the website and answered the questions necessary to execute the forms and documents for participation, the customer is required to pay for the services. Once paid the Company immediately completes the actual filing forms and documents and files them electronically, if possible, or overnights them to the appropriate state. At that point, we recognize the revenue from the transaction.
Loss Per Share
Basic loss per share has been calculated using the weighted average number of common shares issued and outstanding during the year.
Research and Development Costs
Research is planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service or a new process or technique or in bringing about a significant improvement to an existing product or process. Development is the translation of research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process whether intended for sale or use. It includes the conceptual formulation, design, and testing of product alternatives, and operation of pilot plants. It does not include routine or periodic alterations to existing products, production lines, manufacturing processes, and other on-going operations even though those alterations may represent improvements and it does not include market research or market testing activities. All research and develop ment costs have been expensed as incurred in accordance with ASC 730.
3.
Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board (“FASB”) amended accounting guidance relating to the consolidation of variable
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interest entities to eliminate the quantitative approach previously
required for determining the primary beneficiary of a variable interest entity. The amended guidance instead requires a reporting entity to qualitatively assess the determination of the primary beneficiary of a variable interest entity based on whether the reporting entity has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and has the obligation to absorb losses or the right to receive benefits of the variable interest entity that could potentially be significant to the variable interest entity. The amended guidance requires ongoing reassessments of whether the reporting entity is the primary beneficiary of a variable interest entity. The Company does not expect the standard to have a material impact on the condensed financial statements.
In January 2010, the FASB amended accounting guidance relating to accounting for transfers of financial assets to eliminate the exceptions for qualifying special purpose entities from the consolidation guidance and the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred assets. The recognition and measurement provisions of the amended guidance were required to be applied prospectively. Additionally, beginning January 1, 2010, the concept of a qualifying special-purpose entity is no longer relevant for accounting purposes. The Company does not expect the standard to have a material impact on the condensed financial statements.
4.
Related Party Transactions
The Company incurred compensation and payroll tax expense in the amount of $5,000 and $5,558, which was paid to a relative of the Company’s President for the nine months ended March 31, 2010 and the year ended June 30, 2009, respectively.
5. Going Concern
The Company’s ability to continue as a going concern is dependent upon the continued ability to obtain financing to repay its current obligations and fund working capital until it is able to achieve profitable operations. The Company will seek to obtain capital from equity financing through private placements. Management hopes to realize sufficient sales in future years to achieve profitable operations. There can be no assurance that the Company will be able to raise sufficient debt or equity capital on satisfactory terms. If management is unsuccessful in obtaining financing or achieving profitable operations, the Company may be required to cease operations. The
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outcome of these matters cannot be predicted at this time. These financial statements do not give effect to any adjustments which could
be necessary should the Company be unable to continue as a going
concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts differing from those reflected in the financial statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Forward Looking Statements
We make certain forward-looking statements in this report. Statements that are not historical facts included in this Form 10-Q are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause actual results to differ from projected results. Such statements address activities, events or developments that the Company expects, believes, projects, intends or anticipates will or may occur, including such ;matters as future capital, debt restructuring, pending legal proceedings, business strategies, expansion and growth of the Company's operations, and cash flow. Factors that could cause actual results to differ materially ("Cautionary Disclosures") are described throughout this Form 10-Q. Cautionary Disclosures include, among others: general economic conditions, the strength and financial resources of the Company's competitors, environmental and governmental regulation, labor relations, availability and cost of employees, material an d equipment, regulatory developments and compliance, fluctuations in currency exchange rates and legal proceedings. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings), demand for our services, and other statements of our plans, beliefs, or expectations, including the statements contained under the captions "Risk Factors,&quo t; "Management's Discussion and Analysis or Plan of Operation," "Description of Business," as well as captions elsewhere in this document, are forward-looking statements. In some cases these statements are identifiable through the use of words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "project," "target," "can," "could," "may," "should," "will," "would," and similar expressions. We intend such forward-looking statements to be covered by & nbsp;the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and in Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All written and oral forward-looking statements attributable to the Company are expressly qualified in their entirety by the Cautionary Disclosures. The Company disclaims any obligation to update or revise any forward-looking statement to reflect events or circumstances occurring hereafter or to reflect the occurrence of anticipated or unanticipated events.
The nature of our business makes predicting the future trends of our revenues, expenses, and net income difficult. Thus, our ability to predict results or the actual effect of our future plans or strategies is inherently uncertain. The risks and uncertainties involved in our business could affect the matters referred to in any forward-looking statements and it is possible that our actual results may differ materially from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ from those in the forward-looking statements include, without limitation, the factors discussed in the section entitled " Risk Factors" and the following:
- the effect of political, economic, and market conditions and
geopolitical events;
- legislative and regulatory changes that affect our business;
- the availability of funds and working capital;
- the actions and initiatives of current and potential competitors;
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- investor sentiment; and
- our reputation.
We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by any forward-looking statements.
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto as filed with the SEC and other financial information contained elsewhere in this Form 10-Q.
Overview
Sweet Spot Games, Inc. (the “Company”) is currently a developmental stage company that has limited revenues.
The company expects to launch its first fully developed online multiplayer game, “Jockey” early in 2010. The game is an online horse racing simulator which allows users worldwide to connect through the Internet, download the software and become virtual jockeys.
The “pay to play” aspect of the game and advertising are the two methods that the company will use to generate revenue. The payment from each participant is broken down into four categories that will allow users to be able to choose the intensity of their bet on each race. They will have the ability to setup an online account with an online payment processing company and will be able to withdraw and deposit funds in real-time. Payment will be categorized into $2, $5, $10 and $20 dollar rooms. Once a room is filled with the necessary 8 players the race will commence. There will be multiple rooms for each category. The company will take a 25% cut from each race, leaving the remaining 75% to be distributed among the top three finishers.
The game itself allows users to control the horse and easily manoeuvre camera angles which will enable them to view 360 degrees from their current position, similar to real life. Jockey has also built-in collision detection that slows down the horse if the rider happens to bump into another horse or if they hit a barrier. Each user will be allowed to use 10 lashes that speed up the horse by 15%. Steering and the timing of the lashes will be determining factors in the race. The bottom of each users’ screen displays the elapsed time, current position on the track, placement and speed in km/h.
The Company has the ability to develop gaming applications in a true 3D environment featuring skill-based multi-player connectivity and a “pay-for-play” payment platform. The Company has chosen the approach of marketing its applications to existing online portals that have the ability to host and feature the applications to their existing audience. This strategy allows the Company to focus on using its current resources on developing an extensive portfolio of online gaming applications rather than marketing the games independently.
Plan of Operations
To date the Company has financed its operations exclusively from private placements. Until the Company begins to generate revenues, it expects to continue to rely on raising capital through the sale of its common stock to third parties. The Company has no other sources of capital and there can be no guarantee that the Company will be able to meet its obligations or obtain sufficient capital to complete its plan of operations for the next twelve (12) months. There is no assurance that our officers can or will provide such funds when the need arises.
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The Company was organized in Nevada on June 2, 2008. The Company is a development stage company
and currently has limited operations. The Company is a developer of online multiplayer skill-based “pay-for-play” gaming applications.
The Company has the ability to develop gaming applications in a true 3D environment featuring multi-player connectivity and a “pay-for-play” payment platform. The Company has chosen the approach of marketing its applications to existing online gaming portals that have the ability to host and feature the applications to their existing audience. This strategy allows the company to focus on using its current resources on developing an extensive portfolio of online gaming applications rather than marketing the games independently.
“Jockey” is expected to be an online multi-player skill-based horse racing simulator that allows users from around the world to connect and compete amongst each other in a true 3D environment for real-money. Upon completion, the Company intends to license the “Jockey” game on a “white-label” revenue-sharing basis to existing online portals that already have a significant amount of traffic and are looking to expand their offering within the gaming market. To date we have received no royalties or revenues from the “Jockey” game. The Company hopes to position itself as a leader in the development of multi-player skill-based gaming applications for the online and mobile application market.
The game itself allows users to control the horse and easily manoeuvre camera angles which will enable them to view 360 degrees from their current position, similar to real life. Jockey has also built-in collision detection that slow down the horse if the rider happens to bump into another horse or if they hit a barrier. Each user will be allowed to use 10 lashes that speed up the horse by 15%. Steering and the timing of the lashes will be determining factors in the race. The bottom of each users’ screen displays the elapsed time, current position on the track, placement and speed in km/h.
The revenue making aspect of the company is generated by a “pay to play” model. Users pay a specified amount depending on which game room they enter. They are allowed to spend $2, $5, $10 and $20. Once a room is filled with 8 players the race begins. The top three finishers split 75% of the pot while the house takes a cut of 25%.
We believe the online gaming portal community exceeds 1,200 major players throughout the global landscape. Our approach from the onset was to specialize in our niche in becoming a developer of online multi-player skill-based games and in turn license these applications on a white-label revenue-sharing basis.
Our approach in marketing our gaming applications includes the initial generation of an extensive database that will contain the contact information of each online gaming portal that exceeds certain minimum specifications in terms of membership size, geographic scope, licensing retention and jurisdiction and daily traffic volumes. Once we have narrowed down our contact list with portals that we determine would benefit most from incorporating our applications, an initial call will be placed into each company to determine who has the role of Director of Marketing or Business Development. Once determining our point of contact, an initial package will be sent out containing information on Sweet Spot Games, Inc. and a proposed Partnership Plan.
Our initial goal is to establish the core gaming infrastructure that will facilitate the licensing mechanism to our partner network. Our approach in licensing our applications included a “black box” local installation and a monetary audit tool that monitors the cash flow of “pay-for-play” revenue from our specific applications installed on the partner portal.
Our secondary goal is to initiate our marketing initiatives and focus exclusively on generating solid relationships with large online gaming portals. Our partnership agreements will be structured on a revenue sharing model. Our system is currently structured to conduct a bi-weekly cash-flow audit and will generate a report that will show what revenues have been generated and what percentage of “net” revenue is owed to our affiliate.
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We are aware that each application that we launch within our partner network retains a “life-cycle”. The community of users that participate in playing these applications are on the constant look-out for the next
best “app”. Our mandate includes the constant development of gaming applications that will facilitate the
constant demand. Expanding and retaining our development team is top-priority.
During the period ending March 31, 2010, the Company received its clearance letter from FINRA.
In addition, the Company continued its development efforts to complete the Cribwars online multi-player gaming application. The Company generated an additional $10,000 in revenue from this contract and expects that its 50% ownership in the application will yield follow-on revenue in the later part of 2010.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. Overall, we had a net loss of $110, 086 for the nine months ended March 31, 2010. During the nine months ended March 31, 2009, we had net cash used in operating activities of $(78,004), net cash used in investing activities of $(12,000), and net cash provided by financing activities of $100,470. At the end of the three-month period, our cash balance was $28,268.
CASH FLOWS FROM OPERATING ACTIVITIES. Net cash used in operating activities of $(78,004) for the nine months ended March 31, 2010 was primarily attributable to the net loss from operations. The adjustments to reconcile the net loss to net cash included depreciation and amortization expense of $813 , loss on software development of $22,133, loss on foreign exchange of $2,894, accounts payable of $6,800 and accrued expenses of $(558).
CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing activities of $(12,000) for the nine months ended March 31, 2010 was entirely attributable to the $12,000 from cash spent on software development costs.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash of $100,470 provided by financing activities in the nine months ended March 31, 2010 was due to additional paid in capital of $101,105 with syndication fees of $(635).
FINANCING. We ended March 31, 2010 with $28,268 of cash and cash equivalents on our balance sheet. The cash at the beginning of the period was $17,802, and the net increase in cash was $10,466.
INTERNAL SOURCES OF LIQUIDITY. There is no assurance that funds from our operations, if and when they commence, will meet the requirements of our daily operations in the future. In the event thatfunds from our operations are insufficient to meet our operating requirements, we will need to seek other sources of financing to maintain liquidity.
EXTERNAL SOURCES OF LIQUIDITY. We intend to pursue all potential financing options in 2010 as we look to secure additional funds to both stabilize and grow our business operations and begin extraction. Our management will review any financing options at their disposal and will judge each potential source of funds on its individual merits. We cannot assure you that we will be able to secure additional funds from debt or equity financing, as and when we need to or if we can, that the terms of such financing will be favorable to us or our existing shareholders.
INFLATION. Our management believes that inflation has not had a material effect on our results of operations, and does not expect that it will in fiscal year 2010.
OFF-BALANCE SHEET ARRANGEMENTS. We do not have any off-balance sheet arrangements.
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RESULTS OF OPERATIONS.
Comparison of the three months ended March 31, 2010, to the three months ended March 31, 2009:
Operating Expense
The Company recorded an operating loss of $(35,925) for the three months ended March 31, 2010 compared to operating income of $1,670 for the three months ended March 31, 2009. Legal and professional fees were $(11,665) for the three months ended March 31, 2010, as compared to $500 in the same period of 2009. Depreciation and amortization were $271 for the three months ended March 31, 2010. Expenses were added for the three months ended December 31, 2010 for advertising and promotion, totaling $384 for fees and dues, totaling $14,515, and a management fee, totaling $8,950. Also, the travel and meals expense increased from $7,114 in the three months ended March 31, 2009 to $8,309 for the same period of 2010. The website development expense decreased from $3,208 to $806 for those same respective periods.
Other Income (Expense)
Foreign exchange expense increased to $162 for the three months ended March 31, 2010, compared to no expenses for foreign exchange in the same period of 2009.
Net Loss
The net loss for the three months ended March 31, 2010 was $(35,925) as compared to net income of $1,670 for the three months ended March 31, 2009.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
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EXHIBITS
(a) Exhibits required to be filed by Item 601 of Regulation S-B:
31.1 Certification of Chief Executive Officer and Chief Financial Officer Under Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SWEET SPOT GAMES, INC.
March 10, 2010
/s/ GREGORY GALANIS, President
---------------------------
GREGORY GALANIS,
President and Chief Executive Officer
(Principal Executive Officer and Principal Financial and
Accounting Officer)
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