As filed with the Securities and Exchange Commission on May 23, 2008
Registration No. 333-______
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
KRYPTIC ENTERTAINMENT INC.
(Name of small business issuer in its charter)
NEVADA 7372 83-0510954
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
Suite 208, 800 N. Rainbow Blvd.
Las Vegas, NV, 89107
Ph: 702.460.6392
Fax: 702.948.5001
(Address and telephone number of principal executive offices).
Nevada Agency and Trust
Suite 880, 50 West Liberty Street, Reno NV, USA 89501
Phone: (775) 322-0626
(Name, address and telephone number of agent for service)
COPIES OF ALL COMMUNICATIONS TO:
The O'Neal Law Firm, P.C.
14835 East Shea Boulevard
Suite 103, PMB 494
Fountain Hills, Arizona 85268
(480) 812-5058 (tel)
(888) 353-8842 (fax)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any securities being registered on this form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933. [X]
If this Form is filed to register additional securities for an Offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same Offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [ ]
If this Form is a post effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer [ ] Accelerated Filer [ ]
Non-accelerated Filer [ ] Smaller reporting company [X]
CALCULATION OF REGISTRATION FEE
======================================================================================================
Title of Each Class Proposed Maximum Proposed Maximum Amount of
of Securities To Be Amount To Be Offering Price Aggregate Offering Registration
Registered (1) Registered Per Share(2) Price Fee(2)
- ------------------------------------------------------------------------------------------------------
Common Stock 999,000 shares $0.05 per share $49,950.00 $1.97
======================================================================================================
(1) An indeterminate number of additional shares of common stock shall be
issuable pursuant to Rule 416 to prevent dilution resulting from stock
splits, stock dividends or similar transactions and in such an event the
number of shares registered shall automatically be increased to cover the
additional shares in accordance with Rule 416 under the Securities Act.
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c) under the Securities Act.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
SUBJECT TO COMPLETION
PROSPECTUS
KRYPTIC ENTERTAINMENT INC.
A NEVADA CORPORATION
999,000 SHARES OF
COMMON STOCK
This prospectus relates to 999,000 shares of common stock of Kryptic
Entertainment Inc., a Nevada corporation, which may be resold by selling
stockholders named in this prospectus. We have been advised by the selling
stockholders that they may offer to sell all or a portion of their shares of
common stock being offered in this prospectus from time to time. The selling
stockholders will sell their shares of our common stock at a price of $0.05 per
share until shares of our common stock are quoted on the OTC Bulletin Board, or
listed for trading or quoted on any other public market, and thereafter at
prevailing market prices or privately negotiated prices. Our common stock is
presently not traded on any market or securities exchange, and we have not
applied for listing or quotation on any public market. Further, there is no
assurance that our common stock will ever trade on any market or securities
exchange. We will not receive any proceeds from the resale of shares of common
stock by the selling stockholders. We will pay for all of the expenses related
to this offering.
OUR BUSINESS IS SUBJECT TO MANY RISKS AND AN INVESTMENT IN OUR COMMON STOCK WILL
ALSO INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD INVEST IN OUR COMMON STOCK ONLY
IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. YOU SHOULD CAREFULLY CONSIDER
THE VARIOUS RISK FACTORS DESCRIBED BEGINNING ON PAGE 4 BEFORE INVESTING IN OUR
COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL OR OFFER THESE SECURITIES UNTIL THIS
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
The date of this Prospectus is _____, 2008.
TABLE OF CONTENTS
Page No.
--------
Prospectus Summary and Risk Factors 3
Use of Proceeds 12
Determination of Offering Price 12
Dilution 12
Selling Security Holders 12
Plan of Distribution 13
Description of Securities 15
Interest of Named Experts and Counsel 15
Description of Business 16
Description of Property 24
Legal Proceedings 24
Market for Common Equity and Related Stockholder Matters 24
Plan of Operation 26
Changes in Disagreements with Accountants on Accounting
and Financial Disclosure 26
Directors, Executive Officers, Promoters and Control Persons 29
Executive Compensation 32
Security Ownership of Certain Beneficial Owners and Management 33
Certain Relationships and Related Transactions 33
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities 33
Reports to Security Holders 34
Financial Statements 34
2
PROSPECTUS SUMMARY AND RISK FACTORS
THE COMPANY
Kryptic Entertainment Inc. (referred to in this prospectus as "Kryptic", "us",
"we" and "our") was incorporated on October 11, 2007, in the State of Nevada.
Our principal executive offices are located Suite 208, 800 N. Rainbow Blvd, Las
Vegas NV, 89107. Our telephone number is (702) 460-6392. As of the date of this
prospectus, we are a development stage company with no revenue and limited
operations to date.
Our company's business is focused on the development and sale of internet based
interactive entertainment games for use by the general public. We are in the
early stages of developing our first game that we have named "Krypton Jam". To
date, we have only developed the overall storyline and initial renderings of our
game storyboard development, along the logo for our brand. We currently have no
revenues and no user subscriptions for our game. We anticipate that we will not
have a commercial product for at least 36 months, and currently estimate that we
will require in excess of $2.5-3 million in additional financing to complete
development and then subsequently launch our game.
We are planning to develop Krypton Jam as an engaging online game experience not
currently available in the interactive video gaming industry. It is being
designed to be a multiplayer online game that will blend the characteristics of
fantasy and sports in an engaging and intense environment. We are focusing on
online internet based gaming because users can use their own PC's and broadband
internet connections without the need for additional hardware requirements such
as a Play Station or Xbox, without Our website can then be used as the primary
method to distribute our game and any other key components.
Since incorporation, we have not made any significant purchases or sale of
assets, nor have we been involved in any mergers, acquisitions or
consolidations. Kryptic has never declared bankruptcy, has never been in
receivership, and has never been involved in any legal action or proceedings.
NUMBER OF SHARES BEING OFFERED
This prospectus covers the resale by the selling stockholders named in this
prospectus of up to 999,000 shares of our common stock. The offered shares were
acquired by the selling stockholders in private placement transactions, which
were exempt from the registration requirements of the Securities Act of 1933.
The selling stockholders will sell their shares of our common stock at a maximum
of $0.05 per share until our common stock is quoted on the OTC Bulletin Board,
or listed for trading or quotation on any other public market, and thereafter at
prevailing market prices or privately negotiated prices. Our common stock is
presently not traded on any market or securities exchange and we have not
applied for listing or quotation on any public market. Further, there is no
assurance that our common stock will ever trade on any market or securities
exchange. Please see the Plan of Distribution section at page 13 of this
prospectus for a detailed explanation of how the common shares may be sold.
NUMBER OF SHARES OUTSTANDING
There were 5,499,000 shares of our common stock issued and outstanding at May
21, 2008.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of our
common stock being offered for sale by the selling stockholders. We will incur
all costs associated with this registration statement and prospectus.
SUMMARY OF FINANCIAL INFORMATION
The summarized consolidated financial data presented below is derived from and
should be read in conjunction with our audited financial statements from October
11, 2007 (date of inception) to March 31, 2008 including the notes to those
financial statements which are included elsewhere in this prospectus along with
the section entitled "Plan of Operation" beginning on page 26 of this
prospectus.
3
As at March 31, 2008
--------------------
Current Assets $54,260
Current Liabilities 1,500
Shareholders' Equity $57,135
From October 11, 2007 to
March 31, 2008
--------------
Revenue $ --
Net Loss $(1,815)
We have just commenced our operations and are currently without revenue. Our
company has no employees at the present time. As of March 31, 2008 accumulated
deficit was $ (1,815). We anticipate that we will operate in a deficit position,
and will continue to sustain net losses for the foreseeable future.
RISK FACTORS
The securities offered hereby are highly speculative and should be purchased
only by persons who can afford to lose their entire investment in Kryptic. Each
prospective investor should carefully consider the following risk factors, as
well as all other information set forth elsewhere in this prospectus, before
purchasing any of the shares of our common stock.
WE HAVE NO OPERATING HISTORY AND HAVE MAINTAINED LOSSES SINCE INCEPTION, WHICH
WE EXPECT TO CONTINUE INTO THE FUTURE.
We were incorporated on October 11, 2007, and have very limited operations. We
have not realized any revenues to date. Our proposed video game product is under
development and is not ready for commercial sale. We have no operating history
at all upon which an evaluation of our future success or failure can be made.
Our net loss from inception to March 31, 2008 is $ (1,815). Based upon our
proposed plans, we expect to incur operating losses in future periods. This will
happen because there are substantial costs and expenses associated with the
development, marketing and distribution of our product. We may fail to generate
revenues in the future. If we cannot attract a significant number of
subscribers, we will not be able to generate any significant revenues or income.
Failure to generate revenues will cause us to go out of business because we will
not have the money to pay our ongoing expenses.
In particular, additional capital may be required in the event that:
- the actual expenditures required to be made are at or above the higher
range of our estimated expenditures;
- we incur unexpected costs in completing the development of our product
or encounter any unexpected difficulties;
- we incur delays and additional expenses related to the development of
our product or a commercial market for our product;
- we are unable to create a substantial market for our products; or
- we incur any significant unanticipated expenses.
The occurrence of any of the aforementioned events could adversely affect our
ability to meet our business plans and achieve a profitable level of operations.
4
IF WE ARE UNABLE TO OBTAIN THE NECESSARY FINANCING TO IMPLEMENT OUR BUSINESS
PLAN WE WILL NOT HAVE THE MONEY TO PAY OUR ONGOING EXPENSES AND WE MAY GO OUT OF
BUSINESS.
Because we have not generated any revenue from our business, and we are at least
36 months away from being in a position to generate revenues, we will need to
raise significant, additional funds for the future development of our business
and to respond to unanticipated requirements or expenses. Our current cash
balances will be extinguished within the next 12 months provided we do not have
any unanticipated expenses. Our ability to successfully develop our product and
to eventually produce and sell it to generate operating revenues also depends on
our ability to obtain the necessary financing to implement our business plan.
Given that we have no operating history, no revenues and only losses to date, we
may not be able to achieve this goal, and if this occurs we will not be able to
pay our development and marketing costs and we may go out of business. We may
need to issue additional equity securities in the future to raise the necessary
funds. We do not currently have any arrangements for additional financing and we
can provide no assurance to investors we will be able to find such financing if
further funding is required. Obtaining additional financing would be subject to
a number of factors, including investor acceptance of our planned video game and
our business model. The issuance of additional equity securities by us would
result in a significant dilution in the equity interests of our current
stockholders. The resale of shares by our existing shareholders pursuant to this
prospectus may result in significant downward pressure on the price of our
common stock and cause negative impact on our ability to sell additional equity
securities. Obtaining loans will increase our liabilities and future cash
commitments, and there can be no assurance that we will even have sufficient
funds to repay our future indebtedness or that we will not default on our future
debts if we were able to even obtain loans.
There can be no assurance that capital will continue to be available if
necessary to meet future funding needs or, if the capital is available, that it
will be on terms acceptable to us. If we are unable to obtain financing in the
amounts and on terms deemed acceptable to us, we may be forced to scale back or
cease operations, which might result in the loss of some or all of your
investment in our common stock.
IF OUR ESTIMATES RELATED TO EXPENDITURES ARE ERRONEOUS OUR BUSINESS WILL FAIL
AND YOU WILL LOSE YOUR ENTIRE INVESTMENT.
Our success is dependent in part upon the accuracy of our management's estimates
of expenditures, which are currently budgeted at $48,000 for the next 12 months
and we currently estimate that we need an additional $2.5-3 million to complete
the development our game for commercial use (See "Description of Business and
Plan of Operation".) If such estimates are erroneous or inaccurate we may not be
able to carry out our business plan, which could, in a worst-case scenario,
result in the failure of our business and you losing your entire investment.
OUR BUSINESS MODEL MAY NOT BE SUFFICIENT TO ENSURE OUR SUCCESS IN OUR INTENDED
MARKET
Our survival is currently dependent upon the success of our efforts to gain
market acceptance of one online video game that will ultimately represent a
small sector in our targeted industry when it is completed. Should our target
market not be as responsive to subscribe to our game as we anticipate, we may
not have in place alternate products or services that we can offer to ensure our
survival.
While many new products such at one that we are planning are regularly
introduced, only a relatively small number of "hit" titles account for a
significant portion of net revenue in our industry. Our product may not be a
"hit", or competitors may develop titles that imitate or compete with our "hit"
title, and take sales away from us or reduce our ability to command profitable
revenue streams for our game. Hit products published by our competitors may take
a larger share of consumer spending than we anticipate, which could cause our
game revenues to fall below our expectations. If our competitors develop more
successful products or offer competitive products at lower price, our revenue,
margins, and profitability will decline.
PRODUCT DEVELOPMENT SCHEDULES ARE LONG AND FREQUENTLY UNPREDICTABLE, AND WE MAY
EXPERIENCE DELAYS IN INTRODUCING OUR PRODUCT, WHICH MAY ADVERSELY AFFECT OUR
REVENUES.
The development cycle for products such as that we are planning is long. We
currently believe that the cycle for Krypton Jam will take at least 36 months.
In addition, the creative process inherent in video game development makes the
length of the development cycle difficult to predict. As a result we may
5
experience delays in introducing our product. If an unanticipated delay affects
the release of our online video game, we may not achieve anticipated revenues.
Revenues will also be adversely affected if the game is delayed until after an
important selling season or if market interest in the subject matter of our game
declines from what we believe it is at present. A delay in introducing a new
video game could also require us to spend more development resources to complete
the game, which would increase our costs and lower our margins, or cause us to
experience losses.
TECHNOLOGY CHANGES RAPIDLY IN OUR BUSINESS AND IF WE FAIL TO ANTICIPATE OR
SUCCESSFULLY IMPLEMENT NEW TECHNOLOGIES OR THE MANNER IN WHICH PEOPLE PLAY OUR
GAME, THE QUALITY, TIMELINESS AND COMPETITIVENESS OF OUR PRODUCTS AND SERVICES
WILL SUFFER.
Rapid technology changes in our industry require us to anticipate, sometimes
years in advance, which technologies we must implement and take advantage of in
order to make our products and services competitive in the market. Therefore, we
must start our product development with a range of technical development goals
that we hope to be able to achieve. We may not be able to achieve these goals,
or our competition may be able to achieve them more quickly and effectively than
we can. In either case, our products and services may be technologically
inferior to our competitors', less appealing to consumers, or both. If we cannot
achieve our technology goals within the original development schedule of our
products and services, then we may delay their release until these technology
goals can be achieved, which may delay or reduce revenue and increase our
development expenses. Alternatively, we may increase the resources employed in
research and development in an attempt to accelerate our development of new
technologies, either to preserve our product or service launch schedule or to
keep up with our competition, which would increase our development expenses. Any
such failure to adapt to, and appropriately allocate resources among, emerging
technologies would harm our competitive position, reduce our market share and
significantly increase the time we take to bring our product to market.
WE WILL BE DEPENDENT ON THIRD PARTIES TO DEVELOP OUR PLAYABLE DEMO AND OUR
ONLINE VIDEO GAME. ANY INCREASE IN THE AMOUNTS WE HAVE TO PAY TO HAVE OUR GAME
DEVELOPED OR ANY DELAY OR INTERRUPTION IN PRODUCTION WOULD NEGATIVELY AFFECT
BOTH OUR ABILITY TO MAKE A TIMELY INTRODUCTION, GENERATE REVENUES AND OUR
RESULTS OF OPERATIONS.
We are planning to use third parties to develop Krypton Jam. We will have less
control over third parties because we cannot control their personnel, schedule
or resources. Any of these factors could cause a game not to meet our quality
standards or expectations, or not to be completed on time or at all. If this
happens, we could lose anticipated revenues, or our entire investment in Krypton
Jam.
IF WE ARE UNABLE TO COMPLETE THE DEVELOPMENT OF OUR ONINE VIDEO GAME WE WILL NOT
BE ABLE TO GENERATE REVENUES AND YOU WILL LOSE YOUR INVESTMENT.
We have not completed development of Krypton Jam program and we have no revenues
from the sale or use of our online video game. The success of our proposed
business will depend on the completion and the acceptance of our game by the
general public. Achieving such acceptance will require significant marketing
investment. Our game, once developed and tested, may not be accepted by our
customers at sufficient levels to support our operations and build our business.
If Krypton Jam is not accepted at sufficient levels, our business will fail.
OUR ONLINE VIDEO GAME, WHEN DEVELOPED, MAY CONTAIN DEFECTS THAT WILL MAKE IT
MORE DIFFICULT FOR US TO ESTABLISH AND MAINTAIN CUSTOMERS.
Despite testing during development, Krypton Jam may contain undetected design
faults and software errors, or "bugs," that are discovered only after it has
been played by customers. Any such default or error could cause delays in
delivering our product or require design modifications. These could adversely
affect our competitive position and cause us to lose potential customers or
opportunities. In addition, Krypton Jam has yet to gain acceptance in the
market, and any delays or defects would likely have a more detrimental impact on
our business than if we were a more established company.
WE CURRENTLY HAVE NO PROTECTION BY ANY TRADEMARKS, PATENTS AND/OR OTHER
INTELLECTUAL PROPERTY REGISTRATIONS. IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS, OUR PROPOSED BUSINESS WILL FAIL.
We have not applied for any trademark, patent or other intellectual property
registration with any governmental agency for our name or for our software
product. At present we are planning to enter into non-disclosure agreements with
employees to protect our technology. Despite our precautions taken to protect
6
our proposed software programs, unauthorized parties may attempt in the future
to reverse engineer, copy or obtain and use our video game. If they are
successful we could lose our technology or they could develop similar programs,
which could create more competition for us and even cause our proposed business
operations to fail.
WE DEPEND TO A SIGNIFICANT EXTENT ON CERTAIN KEY PERSONNEL, THE LOSS OF ANY OF
WHOM MAY MATERIALLY AND ADVERSELY AFFECT OUR COMPANY.
Currently, we have only two employees and they are also our officers and
directors. We depend entirely on Mr. Lagourgue and Mr. Qiang for all of our
operations. The loss of either person will have a substantial negative effect on
our company and may cause our business to fail. Neither of our officers and
directors has been compensated for their services since our incorporation, and
it is highly unlikely that they will receive any compensation unless and until
we generate substantial revenues. There is intense competition for skilled
personnel and there can be no assurance that we will be able to attract and
retain qualified personnel on acceptable terms. The loss of either Mr. Lagourgue
or Mr. Qiang's services could prevent us from completing the development of our
product and developing revenues. In the event of the loss of services of such
personnel, no assurance can be given that we will be able to obtain the services
of adequate replacement personnel.
We do not have any employment agreements or maintain key person life insurance
policies on our officers and directors. We do not anticipate entering into
employment agreements with them or acquiring key man insurance in the
foreseeable future.
WE HAVE LIMITED BUSINESS, SALES AND MARKETING EXPERIENCE IN OUR INDUSTRY.
We have not completed the development of our product and have yet to generate
revenues. Our officers and directors have no prior online video game marketing
or selling industry experience. While we have plans for marketing and sales,
there can be no assurance that such efforts will be successful. There can be no
assurance that our video game will gain wide acceptance in its target market or
that we will be able to effectively market our product.
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AGAINST OUR COMPETITORS.
The interactive entertainment video game and software industry is intensely
competitive and new interactive entertainment software products and platforms
are regularly introduced. Our competitors vary in size from small companies with
limited resources to very large corporations with significantly greater
financial, marketing, and product development resources than we have. We would
be considered one of the smallest with no commercial products at present. Due to
their greater resources, our competitors can spend more money and time on
developing and testing products, undertake more extensive marketing campaigns,
adopt more aggressive pricing policies, and pay more to third-party software
developers than we can. In addition, competitors with larger product lines and
popular titles typically have greater leverage with retailers, distributors, and
other customers who may be willing to promote titles with less consumer appeal
in return for access to such competitor's most popular titles. We believe that
the main competitive factors in the interactive entertainment software industry
include: product features and playability; brand name recognition; compatibility
of products with popular platforms; access to distribution channels; quality of
products; ease of use; price; marketing support; and quality of customer
service.
We will be competing with Microsoft, Nintendo and Sony, who publish software for
their respective systems. We also compete with numerous companies licensed by
the platform manufacturers to develop or publish software products for use with
their respective systems. These competitors include Activision, Atari, Capcom,
Electronic Arts, Konami, Namco, SCi Entertainment, Sega, Take-Two Interactive
Software, THQ, Ubisoft Entertainment and Vivendi Universal Games, among others.
We face additional competition from the entry of new companies into our market,
including large diversified entertainment companies. We believe that large
diversified entertainment, cable and telecommunications companies, in addition
to large software companies, are increasing their focus on the interactive
entertainment software market, which will likely result in consolidation and
greater competition.
Our current and potential competitors in the online games market segment include
major media companies, traditional video game publishing companies, and
companies that specialize in online games. Competitors in the short session
games segment include MSN, Popcap, Real, AOL and Yahoo!. In the mid and long
session MMOG online game segment, which our product is planned for, our
competitors include Electronic Arts, Jagex, Midway, NC Soft, Ankama Games, Sony
and Vivendi. Hits have captured a significant percentage of overall subscribers
7
and this trend is expected to continue. Blizzard Entertainment, a division of
Vivendi is the largest competitor in the MMOG market segment with its Wizard of
Warcraft game. As of April 2008, it has approximately 10,000,000 subscribers or
over 62% of the total subscriber market (1), compared to second place Jagex's
Runescape with 1.2 million subscribers.
The barriers to entry in the internet based interactive entertainment industry,
in which we are planning to operate, are also much lower because there are no
publishing agreements with or royalties to be paid to the hardware
manufacturers.
If we are unable to compete successfully, we could lose sales and market share.
We also could experience difficulty hiring and retaining qualified software
developers and other employees. Any of these consequences would significantly
harm our business, results of operations and financial condition. There can be
no assurance that we will be able to effectively compete with our competitors or
that their present and future offerings would render our product obsolete or
noncompetitive. This intense competition may have a material adverse effect on
our results of operations and financial condition and prevent us from achieving
profitable sales levels of our product.
FUTURE REGULATION OF THE INTERNET AND PRODUCT CONTENT COULD RESTRICT OUR
BUSINESS, PREVENT US FROM OFFERING SERVICE OR INCREASE OUR COST OF DOING
BUSINESS.
At present there are few laws, regulations or rulings that specifically address
access to or commerce on the Internet. We are unable to predict the impact, if
any, that future legislation, legal decisions or regulations concerning the
Internet may have on our business, financial condition, and results of
operations. Regulation may be targeted towards, among other things, assessing
access or settlement charges, imposing taxes related to internet communications,
restricting content, imposing tariffs or regulations based on encryption
concerns or the characteristics and quality of products and services, any of
which could restrict our business or increase our cost of doing business. The
increasing growth and popularity of the Internet and related services heighten
the risk that governments or other legislative bodies will seek to regulate the
service, which could have a material adverse effect on our business, financial
condition and operating results.
Legislation is continually being introduced that may affect both the content of
our product and its distribution. In the United States, the federal and several
state governments are continually considering content restrictions on products
such as our proposed product, as well as restrictions on distribution of such
products. For example, recent legislation has been adopted in several states,
and could be proposed at the federal level, that prohibits the sale of certain
games (e.g., violent games or those with "M (Mature)" or "AO (Adults Only)"
ratings) to minors. Any one or more of these factors could harm our business by
limiting the products we are able to offer to our customers, by limiting the
size of the potential market for our products, and by requiring costly
additional differentiation between products for different territories to address
varying regulations.
OUR OFFICERS AND DIRECTORS ARE ENGAGED IN OTHER ACTIVITIES AND MAY NOT DEVOTE
SUFFICIENT TIME TO OUR AFFAIRS, WHICH MAY AFFECT OUR ABILITY TO CONDUCT
OPERATIONS AND GENERATE REVENUES.
The persons serving as our officers and directors have existing responsibilities
and have additional responsibilities to provide management and services to other
entities. Mr. LaGourgue, our President and director, is also an independent
consultant to the oil and gas industry in Alberta, Canada. We expect Mr.
LaGourgue to spend approximately 30 hours a week on the business of our company
and up to 40 hours in 10-12 months from the date hereof. Mr. Qiang, our
Secretary Treasurer and one of our directors, is also a Senior Designer &
Project Manager for VDZ International in Beijing, China. We expect Mr. Qiang to
spend approximately 25 hours a week on the business of our company. As a result,
demands for the time and attention from our directors and officers from our
company and other entities may conflict from time to time. Because we rely
primarily on our directors and officers to maintain our business contacts and to
promote our product, their limited devotion of time and attention to our
business may hurt the operation of our business.
OUR INDEPENDENT AUDITORS' REPORT STATES THAT THERE IS A SUBSTANTIAL DOUBT THAT
WE WILL BE ABLE TO CONTINUE AS A GOING CONCERN.
Our independent auditors, Moore and Associates, Chartered, state in their audit
report, dated May 6, 2008 and included with this prospectus, that since we are a
development stage company, have no established source of revenue and are
dependent on our ability to raise capital from shareholders or other sources to
sustain operations, there is a substantial doubt that we will be able to
continue as a going concern.
8
This qualification clearly highlights that we will, in all likelihood, continue
to incur expenses without significant revenues into the foreseeable future until
our product gains significant popularity. Our only source of funds to date has
been the sale of our common stock. Because we cannot assure anyone at this stage
that we will be able to generate enough interest in our product or that we will
be able to generate any significant revenues or income, the identification of
new sources equity financing is significantly more difficult, and if we are
successful in closing on any new financing, existing investors will experience
substantially more dilution. The ability to obtain debt financing is also
severely impacted, and likely not even feasible, given that we do not have
revenues or profits to pay interest or repay principal.
As a result, if we are unable to obtain additional financing at this stage in
our operations, our business will fail and you may lose some or all of your
investment in our common stock.
INVESTORS WILL HAVE LITTLE VOICE REGARDING THE MANAGEMENT OF KRYPTIC DUE TO THE
LARGE OWNERSHIP POSITION HELD BY OUR EXISTING MANAGEMENT AND THUS IT WOULD BE
DIFFICULT FOR NEW INVESTORS TO MAKE CHANGES IN OUR OPERATIONS OR MANAGEMENT, AND
THEREFORE, SHAREHOLDERS WOULD BE SUBJECT TO DECISIONS MADE BY MANAGEMENT AND THE
MAJORITY SHAREHOLDERS, INCLUDING THE ELECTION OF DIRECTORS.
Officers and directors directly own 4,500,000 shares of the total of 5,499,000
issued and outstanding shares of Kryptic's common stock and are in a position to
continue to control Kryptic. Of these 5,499,000 shares, Mr. LaGourgue, our
President, owns 3,000,000 shares and Mr. Qiang, our Secretary Treasurer and CFO
owns 1,500,000 shares. Collectively they own 81.83% of our total outstanding
common shares. Such control may be risky to the investor because our company's
operations are dependent on a very few people who could lack ability, or
interest in pursuing our operations. In such event, our business may fail and
you may lose your entire investment. Moreover, investors will not be able to
effect a change in the company's board of directors, business or management.
RISKS ASSOCIATED WITH OUR COMMON STOCK
DIFFICULTY FOR KRYPTIC STOCKHOLDERS TO RESELL THEIR STOCK DUE TO A LACK OF
PUBLIC TRADING MARKET
There is presently no public trading market for our common stock, we have not
applied for a trading symbol or quotation, and it is unlikely that an active
public trading market can be established or sustained in the foreseeable future.
We intend to seek out a market maker to apply to have our common stock quoted on
the OTC Bulletin Board upon effectiveness of this Form S-1. However, there can
be no assurance that Kryptic's shares will be quoted on the OTC Bulletin Board.
Until there is an established trading market, holders of our common stock may
find it difficult to sell their stock or to obtain accurate quotations for the
price of the common stock. If a market for our common stock does develop, our
stock price may be volatile.
BROKER-DEALERS MAY BE DISCOURAGED FROM EFFECTING TRANSACTIONS IN OUR SHARES
BECAUSE THEY ARE CONSIDERED PENNY STOCKS AND ARE SUBJECT TO THE PENNY STOCK
RULES.
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934
impose sales practice and disclosure requirements on NASD broker-dealers who
make a market in "penny stocks". A penny stock generally includes any non-Nasdaq
equity security that has a market price of less than $5.00 per share. Our shares
currently are not traded on Nasdaq nor on any other exchange nor are they quoted
on the OTC/Bulletin Board or "OTC/BB". Following the date that the registration
statement, in which this prospectus is included, becomes effective we hope to
find a broker-dealer to act as a market maker for our stock and file on our
behalf with the NASD an application on Form 15c(2)(11) for approval for our
shares to be quoted on the OTC/BB. As of the date of this prospectus, we have
not attempted to find a market maker to file such application for us. If we are
successful in finding such a market maker and successful in applying for
quotation on the OTC/BB, it is very likely that our stock will be considered a
"penny stock". In that case, purchases and sales of our shares will be generally
facilitated by NASD broker-dealers who act as market makers for our shares. The
additional sales practice and disclosure requirements imposed upon
broker-dealers 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 our shares in the secondary market.
Under the penny stock regulations, a broker-dealer selling penny stock to anyone
other than an established customer or "accredited investor" (generally, an
individual with net worth in excess of $1,000,000 or an annual income exceeding
9
$200,000, or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the purchaser's
written consent to the transaction prior to sale, unless the broker-dealer or
the transaction is otherwise exempt.
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 Commission 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.
WE INTEND TO BECOME SUBJECT TO THE PERIODIC REPORTING REQUIREMENTS OF THE
SECURITIES EXCHANGE ACT OF 1934, WHICH WILL REQUIRE US TO INCUR AUDIT FEES AND
LEGAL FEES IN CONNECTION WITH THE PREPARATION OF SUCH REPORTS. THESE ADDITIONAL
COSTS WILL NEGATIVELY AFFECT OUR ABILITY TO EARN A PROFIT.
Following the effective date of the registration statement in which this
prospectus is included, we will be required to file periodic reports with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934 and the rules and regulations thereunder. In order to comply with such
requirements, our independent registered auditors will have to review our
financial statements on a quarterly basis and audit our financial statements on
an annual basis. Moreover, our legal counsel will have to review and assist in
the preparation of such reports. The costs charged by these professionals for
such services cannot be accurately predicted at this time because factors such
as the number and type of transactions that we engage in and the complexity of
our reports cannot be determined at this time and will have a major affect on
the amount of time to be spent by our auditors and attorneys. However, the
incurrence of such costs will obviously be an expense to our operations and thus
have a negative effect on our ability to meet our overhead requirements and earn
a profit.
INVESTORS THAT NEED TO RELY ON DIVIDEND INCOME OR LIQUIDITY SHOULD NOT PURCHASE
SHARES OF OUR COMMON STOCK.
We have not declared or paid any dividends on our common stock since our
inception, and we do not anticipate paying any such dividends for the
foreseeable future. Investors that need to rely on dividend income should not
invest in our common stock, as any income would only come from any rise in the
market price of our common stock, which is uncertain and unpredictable.
Investors that require liquidity should also not invest in our common stock.
There is no established trading market and should one develop, it will likely be
volatile and subject to minimal trading volumes.
BECAUSE WE CAN ISSUE ADDITIONAL SHARES OF COMMON STOCK, PURCHASERS OF OUR COMMON
STOCK MAY INCUR IMMEDIATE DILUTION AND MAY EXPERIENCE FURTHER DILUTION.
We are authorized to issue up to 75,000,000 shares of common stock. At present,
there are 5,499,000 common shares issued and outstanding. Our Board of Directors
has the authority to cause us to issue additional shares of common stock without
consent of any of our stockholders. Consequently, the stockholders may
experience more dilution in their ownership of Kryptic in the future.
SINCE OUR OFFICERS AND DIRECTORS OWN A SIGNIFICANT PERCENTAGE OF OUR ISSUED AND
OUTSTANDING COMMON STOCK, ANY FUTURE SALES OF THEIR SHARES MAY RESULT IN A
DECREASE IN THE PRICE OF OUR COMMON STOCK AND THE VALUE OF OUR STOCKHOLDER'S
INVESTMENT
Our officers and directors, currently own 4,500,000 shares of the total of
5,499,000 issued and outstanding shares of our common stock. Collectively they
own 81.83% of our total outstanding common shares. These shares are currently
restricted from trading and Rule 144, these shares will only be available for
resale to the public after April 11, 2008 for Mr. Lagourgue and May 24, 2008 for
Mr. Qiang if:
* We are no longer a shell company as defined under section 12b-2 of the
Exchange Act. A "shell company" is defined as a company with no or
nominal operations, and with no or nominal assets or assets consisting
solely of cash and cash equivalents.
* We have filed all Exchange Act reports required for the past 12
months; and
* If applicable, at least one year has elapsed from the time that we
file current Form 10 information on Form 8-K changing our status from
a shell company to an entity that is not a shell company.
10
At present we are considered to be a shell company under the Exchange Act. If we
meet the requirements at any date subsequent to April 11, 2008 and May 24, 2008
in the future, our officers and directors would be entitled to sell within any
three month period a number of shares that does not exceed the greater of: 1% of
the number of shares of our common stock then outstanding which, in this case,
will currently equate to approximately 54,900 shares in aggregate; or the
average weekly trading volume of Kryptic Entertainment common stock during the
four calendar weeks, preceding the filing of a notice on Form 144 with respect
to the sale for sales exceeding 5,000 shares or an aggregate sale price in
excess of $50,000. If fewer shares at lesser value are sold, no Form 144 is
required.
The possibility of future sales of significant amounts of shares held by them
could decrease the market price of our common stock if the marketplace does not
orderly adjust to the increase in shares in the market. In such case, the value
of your investment in us will decrease.
OTHER RISKS
ALL OF OUR ASSETS AND OUR OFFICERS AND DIRECTORS ARE LOCATED IN CANADA AND
CHINA. THIS MAY CAUSE ANY ATTEMPTS TO ENFORCE LIABILITIES UNDER THE U.S.
SECURITIES AND BANKRUPTCY LAWS TO BE VERY DIFFICULT.
Currently, all of our assets and each of our officers and directors are located
in Canada and China and this is likely to remain so for at least the next 12
months. Therefore, any investor that attempts to enforce against the company or
against any of our officers and directors liabilities that accrue under U.S.
securities laws or bankruptcy laws will face the difficulty of complying with
local laws in these countries, with regards to enforcement of foreign judgments.
This could make it impracticable or uneconomic to enforce such liabilities.
FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements, which relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may", "should", "expects",
"plans", "anticipates", "believes", "estimates", "predicts", "potential" or
"continue" or the negative of these terms or other comparable terminology. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
"Risk Factors" on pages 4-11 that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
While these forward-looking statements, and any assumptions upon which they are
based, are made in good faith and reflect our current judgment regarding the
direction of our business, actual results will almost always vary, sometimes
materially, from any estimates, predictions, projections, assumptions or other
future performance suggested herein. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results. The safe harbor for forward-looking statements provided in the Private
Securities Litigation Reform Act of 1995 does not apply to the offering made in
this prospectus.
SECURITIES AND EXCHANGE COMMISSION'S PUBLIC REFERENCE
Any member of the public may read and copy any materials filed by us with the
Securities and Exchange Commission (the "SEC") at the SEC's Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation
of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet website (http://www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
THE OFFERING
This prospectus covers the resale by certain selling stockholders of 999,000
shares of common stock, which were issued pursuant to a private placement
offering made by Kryptic pursuant to Regulation S promulgated under the
Securities Act.
11
USE OF PROCEEDS
The shares of common stock offered hereby are being registered for the account
of the selling stockholders identified in this prospectus. All proceeds from the
sale of the common stock will go to the respective selling stockholders. We will
not receive any proceeds from the resale of the common stock by the selling
stockholders.
DETERMINATION OF OFFERING PRICE
The selling stockholders may sell their shares of our common stock at a price of
$0.05 per share until shares of our common stock are quoted on the OTC Bulletin
Board, and thereafter at prevailing market prices or privately negotiated
prices. There can be no assurance that we will be able to obtain an OTCBB
listing. The offering price of $0.05 per share is based on the last sales price
of our common stock under our private placement, which we closed on march 15,
2008, and does not have any relationship to any established criteria of value,
such as book value or earnings per share. Additionally, because we have no
significant operating history and have not generated any material revenues to
date, the price of our common stock is not based on past earnings, nor is the
price of our common stock indicative of the current market value of the assets
owned by us. No valuation or appraisal has been prepared for our business and
potential business expansion. Our common stock is presently not traded on any
market or securities exchange and we have not applied for listing or quotation
on any public market.
DILUTION
Since all of the shares being registered are already issued and outstanding, no
dilution will result from this offering.
SELLING SECURITY HOLDERS
All of the shares of common stock issued are being offered by the selling
stockholders listed in the table below. None of the selling stockholders are
broker-dealers or affiliated with broker-dealers. We issued the shares of common
stock in a private placement transaction exempt from registration under the
Securities Act pursuant to Regulation S.
The selling stockholders may offer and sell, from time to time, any or all of
the common stock issued. Because the selling stockholders may offer all or only
some portion of the 999,000 shares of common stock to be registered, no estimate
can be given as to the amount or percentage of these shares of common stock that
will be held by the selling stockholders upon termination of the offering.
The following table sets forth certain information regarding the beneficial
ownership of shares of common stock by the selling stockholders as of May 21,
2008 and the number of shares of common stock covered by this prospectus. The
number of shares in the table represents an estimate of the number of shares of
common stock to be offered by the selling stockholders.
Number of Shares Owned
by Selling Stockholder After
Name of Selling Common Total Shares to Offering and Percent of Total
Stockholder and Position, Shares owned be Registered Issued and Outstanding (1)
Office or Material by the Selling Pursuant to # of % of
Relationship with Kryptic Stockholder (2) this Offering Shares Class
- ------------------------- --------------- ------------- ------ -----
Yan Chunlin 26,000 26,000 -- --
Fang Yonggang 33,000 33,000 -- --
Chu Zhijiang 30,000 30,000 -- --
Chu Huimin 26,000 26,000 -- --
Leng Chuanliang 25,000 25,000 -- --
Duan Xuguang 30,000 30,000 -- --
Li Ke 26,000 26,000 -- --
Wang Enlin 33,000 33,000 -- --
12
Hu Jufeng 28,000 28,000 -- --
Li Xiuying 24,000 24,000 -- --
Liu Xia 26,000 26,000 -- --
Li Xuyang 30,000 30,000 -- --
Song Shaoyang 25,000 25,000 -- --
Tian Hongwei 32,000 32,000 -- --
Liu Shuyou 26,000 26,000 -- --
Sun Qiaoyun 30,000 30,000 -- --
Tan Xiaojing 25,000 25,000 -- --
Wang Xiandong 34,000 34,000 -- --
Xi Kaihua 21,000 21,000 -- --
Wang Zuopeng 30,000 30,000 -- --
Yin Hang 32,000 32,000 -- --
Zhang Dawei 25,000 25,000 -- --
Jiang Lili 24,000 24,000 -- --
Sun Haoxiang 28,000 28,000 -- --
Zhang Xuesong 27,000 27,000 -- --
Yang Yan 33,000 33,000 -- --
Liu Lijian 30,000 30,000 -- --
Wang Dewen 21,000 21,000 -- --
Yang Ningning 22,000 22,000 -- --
Zhang Xiaoxiao 24,000 24,000 -- --
Zhang Pan 23,000 23,000 -- --
Yang Fan 22,000 22,000 -- --
Liu Chen 22,000 22,000 -- --
Qiu Qiang 22,000 22,000 -- --
Lu Rongrong 21,000 21,000 -- --
Gui Hua 21,000 21,000 -- --
Wang Xiaojie 21,000 21,000 -- --
Yao Guiling 21,000 21,000 -- --
TOTAL 999,000 999,000
- ----------
1) Assumes all of the shares of common stock offered are sold. Based on
5,499,000 common shares issued and outstanding on May 21, 2008.
(2) Beneficial ownership is determined in accordance with SEC rules and
generally includes voting or investment power with respect to securities.
Shares of common stock subject to options, warrants and convertible
preferred stock currently exercisable or convertible, or exercisable or
convertible within sixty (60) days, are counted as outstanding for
computing the percentage of the person holding such options or warrants but
are not counted as outstanding for computing the percentage of any other
person. There are currently no shares subject to options, warrants or
preferred stock.
There are no family relationships between any of the above noted stockholders
and either of our Officers and Directors.
We may require the selling security holder to suspend the sales of the
securities offered by this prospectus upon the occurrence of any event that
makes any statement in this prospectus or the related registration statement
untrue in any material respect or that requires the changing of statements in
these documents in order to make statements in those documents not misleading.
PLAN OF DISTRIBUTION
The selling stockholders may, from time to time, sell all or a portion of the
shares of our common stock in one or more of the following methods described
below. Our common stock is not currently listed on any national exchange or
electronic quotation system. There is currently no market for our securities and
13
a market may never develop. Because there is currently no public market for our
common stock, the selling stockholders will sell their shares of our common
stock at a price of $0.05 per share until shares of our common stock are quoted
on the OTC Bulletin Board, and thereafter at prevailing market prices or
privately negotiated prices. There can be no assurance that we will be able to
obtain an OTCBB listing. The shares of common stock may be sold by the selling
stockholders by one or more of the following methods, without limitation:
(a) block trades in which the broker or dealer so engaged will attempt to
sell the shares of common stock as agent but may position and resell a
portion of the block as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resale by the broker
or dealer for its account pursuant to this prospectus;
(c) an exchange distribution in accordance with the rules of the exchange;
(d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; (e) privately negotiated transactions; (f)
a combination of any aforementioned methods of sale; and (g) any other
method permitted pursuant to applicable law, including compliance with
SEC's Rule 144.
In the event of the transfer by any selling stockholder of his or her shares to
any pledgee, donee or other transferee, we will amend this prospectus and the
registration statement of which this prospectus forms a part by the filing of a
post-effective amendment in order to have the pledgee, donee or other transferee
in place of the selling stockholder who has transferred his or her shares.
In effecting sales, brokers and dealers engaged by the selling stockholders may
arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from the selling stockholders or, if any of the
broker-dealers act as an agent for the purchaser of such shares, from the
purchaser in amounts to be negotiated which are not expected to exceed those
customary in the types of transactions involved. Broker-dealers may agree with
the selling stockholders to sell a specified number of the shares of common
stock at a stipulated price per share. Such an agreement may also require the
broker-dealer to purchase as principal any unsold shares of common stock at the
price required to fulfill the broker-dealer commitment to the selling
stockholders if such broker-dealer is unable to sell the shares on behalf of the
selling stockholders. Broker-dealers who acquire shares of common stock as
principal may thereafter resell the shares of common stock from time to time in
transactions which may involve block transactions and sales to and through other
broker-dealers, including transactions of the nature described above. Such sales
by a broker-dealer could be at prices and on terms then prevailing at the time
of sale, at prices related to the then-current market price or in negotiated
transactions. In connection with such resales, the broker-dealer may pay to or
receive from the purchasers of the shares, commissions as described above.
The selling stockholders and any broker-dealers or agents that participate with
the selling stockholders in the sale of the shares of common stock may be deemed
to be "underwriters" within the meaning of the Securities Act in connection with
these sales. In that event, any commissions received by the broker-dealers or
agents and any profit on the resale of the shares of common stock purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act.
From time to time, the selling stockholders may pledge their shares of common
stock pursuant to the margin provisions of their customer agreements with their
brokers. Upon a default by a selling stockholder, the broker may offer and sell
the pledged shares of common stock from time to time. Upon a sale of the shares
of common stock, the selling stockholders intend to comply with the prospectus
delivery requirements, under the Securities Act, by delivering a prospectus to
each purchaser in the transaction. We intend to file any amendments or other
necessary documents in compliance with the Securities Act which may be required
in the event any selling stockholder defaults under any customer agreement with
brokers.
To the extent required under the Securities Act, a post effective amendment to
this registration statement will be filed, disclosing, the name of any
broker-dealers, the number of shares of common stock involved, the price at
which the common stock is to be sold, the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable, that such
broker-dealers did not conduct any investigation to verify the information set
out in this prospectus and other facts material to the transaction. In addition,
a post-effective amendment to this Registration Statement will be filed to
include any additional or changed material information with respect to the plan
of distribution not previously disclosed herein.
14
We and the selling stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations under it, including, without
limitation, Rule 10b-5 and, insofar as the selling stockholders are distribution
participants and we, under certain circumstances, may be a distribution
participant, under Regulation M.
The anti-manipulation provisions of Regulation M under the Securities Exchange
Act of 1934 will apply to purchases and sales of shares of common stock by the
selling stockholders, and there are restrictions on market-making activities by
persons engaged in the distribution of the shares. Under Regulation M, a selling
stockholder or its agents may not bid for, purchase, or attempt to induce any
person to bid for or purchase, shares of our common stock while they are
distributing shares covered by this prospectus. Accordingly, the selling
stockholder is not permitted to cover short sales by purchasing shares while the
distribution it taking place. We will advise the selling stockholders that if a
particular offer of common stock is to be made on terms materially different
from the information set forth in this Plan of Distribution, then a
post-effective amendment to the accompanying registration statement must be
filed with the SEC. All of the foregoing may affect the marketability of the
common stock.
All expenses of the registration statement including, but not limited to, legal,
accounting, printing and mailing fees are and will be borne by us. Any
commissions, discounts or other fees payable to brokers or dealers in connection
with any sale of the shares of common stock will be borne by the selling
stockholders, the purchasers participating in such transaction, or both.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Routh Stock Transfer,
Suite 1000, West Plano Parkway, Plano, Texas, USA 75093. Their phone number is
(972) 381-2782 and their fax number is (972) 381-2783.
DESCRIPTION OF SECURITIES
We are authorized to issue 75,000,000 shares of common stock with a par value of
$0.001. We are not authorized to issue shares of preferred stock. As at May 21,
2008 we had 5,499,000 common shares outstanding. There are no warrants, options
or convertible securities outstanding. Upon liquidation, dissolution or winding
up of the corporation, the holders of common stock are entitled to share ratably
in all net assets available for distribution to stockholders after payment to
creditors. The common stock is not convertible or redeemable and has no
preemptive, subscription or conversion rights. There are no conversion,
redemption, sinking fund or similar provisions regarding the common stock. Each
outstanding share of common stock is entitled to one vote on all matters
submitted to a vote of stockholders. There are no cumulative voting rights.
Each stockholder is entitled to receive the dividends as may be declared by our
board of directors out of funds legally available for dividends and, in the
event of liquidation, to share pro rata in any distribution of our assets after
payment of liabilities. Our board of directors is not obligated to declare a
dividend. Any future dividends will be subject to the discretion of our board of
directors and will depend upon, among other things, future earnings, the
operating and financial condition of our company, its capital requirements,
general business conditions and other pertinent factors. It is not anticipated
that dividends will be paid in the foreseeable future.
There are no provisions in our articles of incorporation or our bylaws that
would delay, defer or prevent a change in control of our company.
INTEREST OF NAMED EXPERTS AND COUNSEL
Kryptic has not hired or retained any experts or counsel on a contingent basis,
who would receive a direct or indirect interest in our company, or who is, or
was, a promoter, underwriter, voting trustee, director, officer or employee, of
Kryptic.
Moore and Associates, Chartered have audited our financial statements for the
period ended March 31, 2008 and presented its audit report dated May 6, 2008
regarding such audit which is included with this prospectus with Moore's consent
as experts in accounting and auditing.
15
The O'Neal Law Firm, P.C., whose offices are located at 14835 East Shea
Boulevard, Suite 103, PMB 494, Fountain Hills, Arizona 85268, has issued an
opinion on the validity of the shares offered by this prospectus, which has been
filed as an Exhibit to this prospectus with the consent of the O'Neal Law Firm,
P.C.
DESCRIPTION OF BUSINESS
BUSINESS OF ISSUER
Kryptic was incorporated on October 11, 2007 in the State of Nevada. We are a
development stage company that only recently commenced with its business
operations and we currently have no revenue and no significant assets. We have
never declared bankruptcy, have never been in receivership, and have never been
involved in any legal action or proceedings. Since becoming incorporated, we
have not made any significant purchase or sale of assets, nor have we been
involved in any mergers, acquisitions or consolidations. We are not a blank
check registrant as that term is defined in Rule 419(a)(2) of Regulation C of
the Securities Act of 1933, since we have a specific business plan or purpose.
Neither Kryptic, nor its officers, directors, promoters or affiliates, has had
preliminary contact or discussions with, nor do we have any present plans,
proposals, arrangements or understandings with any representatives of the owners
of any business or company regarding the possibility of an acquisition or
merger.
PRINCIPAL PRODUCTS AND SERVICES
Our company's business is focused on the development and sale of internet based
interactive entertainment games for use by the general public. We are in the
early stages of developing our first game that we have named "Krypton Jam". We
currently have no revenues and no user subscriptions for our game. We anticipate
that we will not have a commercial product for at least 36 months, and currently
estimate that we will require in excess of $2.5-3 million in additional
financing to complete development and then subsequently launch our game.
We also must complete 3 major development milestones prior to having our game
available for commercial sale and use. First, we are planning to complete a DVD
based video trailer over the next 10 months of our operations. The objective is
to provide a visually engaging and dynamic representation through motion
graphics and special effects to illustrate the key components and processes of
the Krypton Jam game. The trailer will contain summary representations of our
proposed game, characters and realm development that we can use for
presentations to the industry and financial community. It will also serve to
give us valuable feedback on our concept from our own website viewers. We
believe we have sufficient funding for our first year operations and completion
of this task. We will then need to secure the additional financing to develop a
playable demonstration model, and then the commercial game over the following
minimum 26 month period.
Krypton Jam is planned to provide an engaging online game experience not
currently available in the interactive video gaming industry. It is being
designed to be a massive multiplayer online game ("MMOG") that will blend the
characteristics of fantasy and sports in an engaging and intense environment. We
are also designing our game for multiplayer online action to capitalize on the
interactive and social elements of gaming. MMOG games involve role playing and
multiple players participating simultaneously. Players are represented by a
pre-configured avatar, which is controlled by the player. Typical activities
involve exploration of a three-dimensional landscape, encountering other
characters, communicating, competition and team play. They are recognized for
their peculiar combination of "escapist fantasy" and "social realism" in
settings and the building of relationships, status and solidarity. The player
group meets through in-game communication systems, and devise strategies for how
they will complete the challenge.
We believe Krypton Jam will provide the user with an experience of true team
play, combining fast-paced fantasy quest style adventure and sports action,
without the extreme violence and death typical of most currently available
games. Our genre was designed to support positive messages and resolution of
conflict through team work. The ultimate goal of the game is winning the title
of "Master of the Kryptic Realms" by competing in quests and against various
creatures on the basketball court. Each character within Krypton Jam will have
its own strengths and weaknesses, abilities and magic. A diversified team will
be required for any given competitor to win. Each court will have different
attributes and obstacles to challenge or assist the players. As the tournament
progresses, the challenges and geography of the courts will become increasingly
complex. The quests will allow players to obtain new powers that are not
initially accessible when creating their characters, giving advantages to those
16
characters that succeed on both the court and on daring quests. We are also
planning to add new characters, environments, story-line twists and secrets on a
regular basis to keep the game fresh for the players, and interactive social
chat rooms to avoid the downfalls of many previous on-line multi-player games,
which typically become redundant and stale for the users over time.
We are focusing on online internet based gaming because users can use their own
PC's and broadband internet connections without the need for additional hardware
requirements such as a Play Station or Xbox. We can also then develop our game
for commercial use without having to align ourselves with one of these hardware
suppliers or designing our game to fit their particular standards. The internet
is also better suited to role playing games because gamers can connect online
with multiple people from multiple geographic regions in the world. For example,
a user in Texas can play online against a team of youth anywhere else in the
country or the world.
To date, we have only developed the overall storyline and initial renderings of
our game storyboard development, including the creative elements associated with
characters, game movements, realms, quest environments, and social chat rooms
for players engaging outside of game play, along the logo for our brand.
When we complete the development and production of Kypton Jam, we plan to
initially focus our marketing efforts in the United States. Our website
www.krypticentertainment.com and www.kryptonjam.com is complete and will
ultimately be used as the primary method to distribute our game and any other
key components. We are initially planning to generate user revenues through
monthly subscriptions, which is now the current industry pricing standard. The
game will be priced for mass market use so that everyone with an interest in
interactive online gaming can subscribe to the program. We plan to target youth
between the ages of 14 and 25 years of age, and believe our game will appeal to
both genders. This demographic is currently fueling significant interest in
fantasy entertainment and the increasing sales of sports-based video games (such
as NBA Live 2008, NBA Street Homecourt, and NCAA March Madness 2007). We believe
that our high-action, team play approach may also capture the interest of
pre-teens and older children. This may be further enforced by parents looking
for engaging entertainment for their children, without the violence that has
become so commonplace in mainstream games.
These planned distribution and revenue models may undergo significant revisions,
as we get closer to launching our commercial game. At this stage in our
development, there can be no assurance that we will be successful in generating
revenues from our game, or that users will be receptive to playing Krypton Jam.
THE MARKET
We consider our proposed business to be part of the overall entertainment
industry. At the most fundamental level, our product, when completed, will
compete with other forms of entertainment for the leisure time and discretionary
spending of consumers.
Video games achieved wide popularity in the early 1980's with the introduction
of the Atari and other home game systems. Since their introduction, video games
have increasingly become mainstream entertainment choice for both children and
adults. New generations of console game systems, improved graphics and expanded
artificial intelligence capabilities of the new platforms have significantly
enhanced game play and enabled rapid significant industry growth. With
continuing growth in broadband Internet subscribers, together with better
networking technology and multimedia encoding techniques, it is becoming
increasingly feasible to provide the same if not better quality entertainment
through the Internet than was previously seen, heard and/or felt only through
other more conventional distribution mediums such as game consoles.
Video games are played by a large majority of the general American population.
Despite general conceptions that game players are generally children and teens,
the Entertainment Software Association (www.esa.com) found that current user
demographics, which directly apply to our proposed business, show that:
* Sixty-seven percent of American households play computer and video
games.
* The average game PLAYER is 35 years old and has been playing games for
12 years.
* Thirty-five percent of American parents say they play computer and
video games. Further, 80 percent of gamer parents say they play video
games with their kids. Sixty-six percent feel that playing games has
brought their families closer together.
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* Forty-nine percent of game players say they play online internet based
games one or more hours per week, which is up from 31 percent in 2002.
Fifty six percent of online game players are male and 44 percent are
female.
On January 6, 2008 the Consumer Electronics Association announced at the annual
Las Vegas Consumer Electronics Show that overall U.S. industry sales are
projected to reach $17.9 billion in 2008, up 13 percent from an estimated $15.8
billion in 2007. They estimated that the global video game industry likely
approached $40 billion in revenue in 2007. Demand for related software is
expected to jump, as game owners beef up their libraries of new titles.
"Software in 2007 had phenomenal growth, riding the wave of hugely successful
title launches. In fact, the focus for 2008 will be in the software category,
where CEA estimates a 26 percent increase in sales over 2007," said CEA
spokeswoman Jennifer Bemisderfer. Software sales are expected to rise to $11.5
billion in 2008, up from $9.1 billion in 2007.
Total US software sales include revenues generated from online games and the
highly successful massive multiplayer online games ("MMOG") segment, which we
are planning to develop. According to a 2006 PricewaterhouseCoopers report,
U.S., online games should see the biggest gains through 2011. PwC predicts the
online segment will expand from an estimated $1.1 billion market in 2006 to $2.7
billion in 2011. A March 2007 Screen Digest report found that while 87 percent
of MMOG revenue is generated through subscriptions, new business models that
rely on virtual item sales and in-game advertising are on the rise. New business
models and new customers that aren't traditional gamers will be a continuing
trend through 2011. MMOGchart.com has published data showing average yearly
growth in total MMOG subscriptions since 2004 is 17.3%.
Strategy Analytics found that global online games market generated $3.8 billion
in 2006 and projects that the market will grow with a compound annual growth
rate of approximately 25% in the 2007-2011 forecast period to reach $ 11.8
billion, or approximately one-third of the total games software market by 2011.
"The main driver for sustained growth in the online games market will be the
continued uptake of broadband services around the world", adds David Mercer,
Principal Analyst at Strategy Analytics. "Additionally, the very lucrative
revenue opportunity in both the massively multiplayer segment and the electronic
sell through market will continue to attract new entrants into the online games
market." (www.strategyanalytics.net/default.aspx?mod=PressReleaseViewer&a0=3569)
According to the Entertainment Software Association (http://www.theesa.com) 2007
report on Sales, Demographics and Usage Data, MMOG related games comprise
approximately 28% of the online internet based games universe. The remainder is
puzzles, board games and shockwave mini games that generally short session games
played by one individual and very short in duration. MMOG games generally host
several to many simultaneous players organized into teams involving longer term
action or quests. We consider our proposed game falling into this category
because it involves a sports team play based basketball game.
According to MMOGchart.com, as of April 2008, 94.2% of the MMOG of the market
falls into the genre category of fantasy role playing, 3.7% in sci-fi role
playing (including superheroes), 0.2% in combat simulation / FPS, and 1.9% in
the social / other category. Highly successful and "hit" MMOG games, such as
World of WarCraft, are very carefully designed to take full advantage of the
respective genre and demographic market characteristics. In order to maintain
player interest in the game (and thereby preserve revenue streams), MMOG
producers regularly introduce new features, such as special challenges or
quests, or new areas of the environment to explore. Most new features merely
provide an additional - optional - diversionary task for players. Others can
cause significant changes to the game. For example, the producers of World of
Warcraft introduced an "illness", obtained by being splattered with infected
blood when killing a particular creature.
We believe MMOG games will continue to experience significant growth and
represent the next watershed in electronic games for the following reasons:
* The games offer regular content updates with changing story lines
through downloads and flexible architecture, keeping the game dynamic
and fresh for players
* The games extend the realism of game play, by offering cutting edge
technology, which makes the player feel they are actually part of the
environment
* The games create new opportunities to foster competition and mutual
aid, by engaging mutual friends or players in a `combat', team or
support situation
* The games present a compelling new social environment, and an
opportunity to meet new friends and share similar mind frames,
existence, and survival techniques.
* The games offer an attractive new and recurring revenue source for
game companies, as evidenced by the top performers who attain many
subscribers in their compelling games (see "Competition and
Competitive Strategy" below)
COMPETITION AND COMPETITIVE STRATEGY
We do not yet have a commercial product available for sale. When complete,
Kyrpton Jam will be competing in the entertainment industry for the leisure time
and discretionary spending of consumers with all other forms of entertainment
media. Our competitors vary in size and cost structure from very small companies
with limited resources to very large, diversified corporations with greater
financial and marketing resources than ours. We are considered the smallest as
we do not currently have a commercial product yet available for sale or use. We
compete with venture capital funded start-ups, traditional independent video
game publishers, hardware and software manufacturers, casual entertainment
websites, social networking websites, mobile games developers, foreign games
developers and large publicly held media companies.
Our competitors with greater resources are able to spend more time and money on
concept and focus testing, game development, product testing and marketing. Our
business is driven by hit titles, which will require us to invest significantly
in production and in marketing. It is also characterized by the continuous
introduction of innovative new titles and the development of new technologies.
Competition is also based on product quality and features, timing of product
releases, brand-name recognition, quality of in-game content, access to
distribution channels, effectiveness of marketing and price. In addition,
regardless of our competitor's financial resources or size, our success depends
on our ability to successfully execute our competitive strategies.
We will be competing with large multi national public companies such as
Microsoft, Nintendo and Sony, who develop and mass market their own proprietary
hardware platforms for a large variety of games and publish software for their
respective systems. Each of these competitors also has the financial resources
to withstand significant price competition and to implement extensive
advertising campaigns, particularly for prime-time television spots. We also
will compete with numerous companies licensed by these platform manufacturers to
develop or publish software products for use with their respective systems.
These competitors include Activision, Atari, Capcom, Electronic Arts, Konami,
Namco, SCi Entertainment, Sega, Take-Two Interactive Software, THQ, Ubisoft
Entertainment and Universal Games, among others. We face additional competition
from the entry of new companies into our market, including large diversified
entertainment companies that have begun to develop games based upon their own
highly recognizable brands, and, as a result, stand to become more direct
competitors. Disney Interactive Studios recently expanded its internal software
game publishing efforts and Viacom has expanded its efforts in interactive
entertainment software publishing.
ONLINE GAMES AND MMOG'S
Our direct competition in the MMOG online games market segment is also highly
competitive and characterized by frequent product introductions, new business
models and new platforms. The barriers to entry in the online games segment are
significantly less onerous, due to the lack of the requirement for a specific
hardware platform. The game player's personal computer and a high speed internet
connection serve as the platform. As the proportion of households with a
broadband connection increases, we expect new competitors to enter the market
and existing competitors to allocate more resources toward developing online
games. As a result, we expect competition in the online games market segment to
intensify.
Our current and potential competitors in the online games market segment include
major media companies, traditional video game publishing companies, and
companies that specialize in online games. Competitors in the short session
games segment include MSN, Popcap, Real, AOL and Yahoo!. In the mid and long
session MMOG online game segment, which our product is planned for, our
competitors include Electronic Arts, Jagex, Midway, NC Soft, Ankama Games, Sony
and Vivendi. Hits have captured a significant percentage of overall subscribers
and this trend is expected to continue. Blizzard Entertainment, a division of
Vivendi is the largest competitor in the MMOG market segment with its Wizard of
Warcraft game. As of April 2008, it has approximately 10,000,000 subscribers or
over 62% of the total subscriber market (1), compared to second place Jagex's
Runescape with 1.2 million subscribers.
The five biggest direct competitor online games known to us as of the date
hereof are:
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04/2008
Number Market
Game Name Characteristics Pricing Subscribers(1) Share(1)
- --------- --------------- ------- -------------- --------
World of Warcraft Unique user experiences, Subscription based play, 10 million 62%
(www.worldofwarcraft.com) user and respective teams options include month to month
Blizzard Entertainment can play at their own pace pkg ($14.99 per month); 3
(division of Vivendi) month plan ($13.99 per month);
6month plan ($12.99 per month)
Runescape Ability to develop skills Monthly subscription as low 1.2 million 7.5%
www.runescape.com with mini games / villains as $5 USD per month
Jagex Ltd. added to each quest
Lineage/Lineage II Offers range of games so $14 - $15 monthly fee 2.1 million 12.9%
www.lineage.com you are not limited to
www.lineage2.com specific game play
Ncsoft, Inc.
Final Fantasy Fantasy world play combining $12.95 per month 500,000 3.1%
www.playonline.com magic, swords, monsters, where
Square Enix Co. Ltd. players compete individually or
within team environment
Dofus Challenging game play compels $13.95 per month 450,000 2.8%
www.dofus.com players to enter different
Ankama Games universes and worlds of fantasy
- ----------
(1) Source:MMOGchart.com study version 23.0 released April 2008
KEY SUCCESS FACTORS
In order for our company and our game to be successful we must play close
attention to all of our direct and indirect competitors. We plan on carefully
investigating the competition and their respective games on a regular basis, and
carefully analyze the positive and negative elements of their games, pricing,
and possible threats to us. If we fail to do so, our business will likely fail.
For game development to be successful, we must either build our own or contract
with a development team that is comprised of a creative, experienced group of
game designers and programmers that can set Krypton Jam apart from its potential
competition, with expertise in state of the art design and implementation
skills. Our research to-date suggests that Krypton Jam's fantasy/sports
environment represents an emerging genre. Many of these industry leaders noted
herein currently do not offer the unique game experience that we plan to
provide. Furthermore, the industry is now saturated with violence and unhealthy
characteristics. We believe the attributes of Krypton Jam will promote teamwork,
fast-paced sports/team play action and visual intensity without violence.
In order for our game to be a success, it also must offer:
* Differentiated & Dynamic Quality Content - Krypton Jam is planned to
offer a visual experience like no other. Attention to detail will be
essential to ensure that the characters and environment look on par if
not superior to other games of its caliber. At the same time, the game
must continue to develop a story that is extremely interesting to its
players. The content will be dynamic with twists in the story and game
that will keep players engaged. This will become more important as
additional competitors enter the market with similar games.
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* Empowering - The target audience must feel that they have a `say' in
what happens to the characters in the game, giving the player the
illusion and pleasure of taking action without having to deal with the
responsibility and repercussions of such actions. We plan on setting
up chat rooms on the Krypton Jam web site that will encourage the
audience to talk about their experiences and share thoughts on the
game, thus capturing their loyalty and making the site a part of their
daily lives so the characters become "real" to them.
* Entertaining - The target audience needs to be drawn to the
experience, and made to forget about the reality around them while
they focus on the new cyber-world that Krypton Jam presents to them.
The experience needs to be commanding so that it becomes a topic of
conversation among the consumers' friends and colleagues.
* Customer Focused - We plan to provide content updates to Krypton Jam
to provide an ongoing captive experience for the user and ensure that
they leave the game happy, keen to relate their entertainment
experience to all their friends and anxious to log-on to enjoy the
next competition, hopefully bringing friends to share the experience.
Customer complaints or suggestions will be dealt with to the best of
our ability to ensure customer satisfaction, thus encouraging positive
word of mouth recommendations of our product.
Because of our small size and lack of revenues relative to our competition,
Krypton Jam must be priced competitively when it is completed. In order for the
game and company to be successful, we will first need to alert our target market
about Krypton Jam among the vast selection of other titles in the market. This
will require significant advertising or a partnership with a distributor that
believes in the potential in the game and has the creative marketing clout to
draw attention to the game.
SALES STRATEGY
We are still in the planning and formulation stages with respect to the
development and commercialization of our product. We are at least 36 months away
from being in a position to generate revenues from our game.
We plan on pricing Krypton Jam competitively on a monthly subscription basis
when it is ready for sale. Even though average pricing for online games
currently ranges between $5-20 /per game/per month, we believe prices and
subscription rates will decline in the future due to increasing competition, so
we will likely receive less when our game is ready to play commercially. We are
designing the game and our website so that users can download the game software
directly from the website. Our website will also include capabilities to accept
and account for user subscriptions. We also plan on offering no charge trial
period to entice users and using advertising targeted to our target market to
attract subscribers.
In addition to our corporate information and other standard sections contained
on our company website at www.krypticentertainment.com, we plan to use our site
as a major `hub' for our game storyline, character development, new character
releases, current game trends, new game capabilities and concepts. In the future
when we commercialize the game, we also plan to include an online `community'
aspect, where forums, news rooms and `chats' will be available for players and
prospects to discuss the game, share stories and playing techniques. By creating
a `community' aspect around www.krypticentertainment.com our site will become
known as a place to look not only for upcoming events, tours, and
promotions/contests, but also a domain for people to share strategy and
techniques and exchange ideas.
DISTRIBUTION OF PRODUCTS OR SERVICES
We are planning to distribute our game online over the internet. We do not
anticipate any other form of distribution at this time. Player access to the
game will be downloaded from the Kryptic Jam game servers, which we will either
own or lease. The actual game software will be kept on servers, and will we will
charge players for access.
This business model is rapidly becoming the distribution method of choice for
smaller gaming companies, due to the proliferation of residential broadband
penetration, inexpensive computer software and graphics packages, and loyal
online gamers seeking fresh content. Online, internet based platforms reduces
significant costs associated with setting up and maintaining conventional
distribution channels such as retail sales. Under conventional channels, revenue
20
streams for the producing game title company are also reduced by significant
margins or markups given to the wholesaler and retail distributors. Retail
distributors generally also insist on implementation of their own sales programs
with little or no input from the producer, particularly small produces such as
our company. Online distribution directly to the game player also allows for
significantly greater flexibility in managing sequels and/or second additions,
without the permission of wholesale or retail partners or distribution channel
agreements.
SOURCES AND AVAILABILITY OF PRODUCTS AND SUPPLIES
There are no constraints on the sources or availability of products and supplies
related to our business. We are planning to hire third party contractors to
complete the development of the storyline for the DVD based game trailer,
playable demo and actual game platform. The trailer will contain summary
representations of our proposed game, characters and realm development that we
can use for presentations to the industry and financial community. It will also
serve to give us valuable feedback on our concept from our own website viewers.
This trailer will consist of characters, game elements, realm & quest
environments, and the social chat room aspects associated with MMOG cultures.
These elements will be edited successfully into the storyline with voice-over
audio enhancements.
We have already identified several suitable firms to develop the DVD Trailer,
which will also supply all of their own computer hardware and development
software. They were evaluated on their expertise in developing products in a
specific category such as our planned game, and we will enter into a contract
that will specify milestones, work requirements and cost. We will also ensure
that we retain all rights to publish and/or distribute sequels, conversions,
enhancements, and add-ons to the product initially being produced by the third
party developer. We estimate the DVD trailer development will be completed over
the next 10 months. This includes the creation of pre and post-production
elements including the storyline, graphic storyboard, character
sketches/development, realm environments and final editing and rendering for the
DVD. We have not yet entered into any contracts for these services.
The next milestone is development of the playable demo. Our officers and
directors plan to commence with several phases of this development within the
next 10-12 months (See "Plan of Operation"). The development and completion of
the playable demo is anticipated to take 12 months. The most important initial
aspect of playable demo phase is selection of a suitable back-end game engine. A
cost-effective and robust game engine will be critical to the success of the
playable demo to ensure it meets the complexities of our title in-game graphics,
and character/realm/quest complexities associated with a sports-based fantasy
game.
Game engines are the core software component of our online game, providing the
underlying technologies to run the Kypton Jam game on multiple desktop operating
systems such as Linux, Mac OS X, and Microdoft Windows. The core functionality
typically provided by a game engine includes a rendering engine ("renderer") for
graphics, a physics engine and collision detection, sound, scripting, animation,
artificial intelligence, networking, streaming, memory management, threading,
and a scene graph. COLLISION DETECTION involves algorithms for checking for
collision, i.e. intersection, of two given solids. A PHYSICS ENGINE is a
computer program that simulates physics models, using variables such as mass,
velocity, friction and wind resistance. It can simulate and predict effects
under different conditions that would approximate what happens in real life or
in a fantasy world. The scene graph is a structure that arranges the logical and
spatial representation of a graphical scene. Each application is highly
important as it relates to the other, and to the overall game engine itself to
ensure realistic player interaction. The process of game development will be
largely determined by the correct decision in purchasing an exceptional engine
for our title. Examples of a few game engine companies researched to-date
include: Heroengine.com, Gamebryo.com, Realmcrafter.com. A more comprehensive
and in depth game engine research is required prior to engaging any company
offering such a service.
Subsequent to the completion of the playable demo, the development and
production of our actual game is highly dependent on the third party we
ultimately choose, and it must include an experienced group of creative,
production, and technical professionals. Our officers and directors will be
responsible for the entire development and production process including the
supervision and coordination of internal and external resources. The third party
development team will assemble the necessary creative elements to complete our
game using, where appropriate, outside programmers, artists, animators,
scriptwriters, musicians and songwriters, sound effects and special effects
experts, and sound and video studios. The software contractors that we choose
must be highly experienced with:
21
- Internet and website software design and applications
- Platform, Application, and User-Written Architecture Software
- The use of PhP, CURL, Maya 3D programming languages
- CGI, PowerBuilder, XVT, MS Visual C++, Xt Intrinsics, Xlib, UIM/X, MS
Windows (3.1), SYBASE, Transact-SQL, Excelerator
- Coding, Compilation, Documentation, Integration, Software Testing
enablers.
- The use of MySQL and ER (Entity Relationship) Modelling database
programming language
We currently do not anticipate any supply or manpower availability constraints
with respect to identifying and choosing any of the contractors we require.
Because we are at least 20 months away from starting the development of the
actual game, any significant change in these circumstances could materially
impact our ability to complete the game, our cash requirements and our
operations.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
We plan on selling our products and services directly to end use consumers over
the internet. Our intended offering is also priced for mass market consumption.
Therefore, we do not anticipate dependence on one or a few major customers into
the foreseeable future.
PATENT, TRADEMARK, LICENSE & FRANCHISE RESTRICTIONS AND CONTRACTUAL OBLIGATIONS
& CONCESSIONS
We currently do not own any intellectual property have not obtained any
copyrights, patents or trademarks in respect of any intellectual property.
Interactive entertainment software is susceptible to piracy and unauthorized
copying. Our primary protection against unauthorized use, duplication and
distribution of our products is copyright and trademark protection of our game
and any related elements and enforcement to protect these interests. As we get
closer to developing our game, we plan to copyright and trademark the following:
* Trademarks associated with elements of the game, such as the game
logo;
* Trademarks under which the game is marketed;
* the copyrights for the game software, including the game's audiovisual
elements
We do not anticipate copyrighting or trademarking any assets over the next 12
months. We plan to register copyrights and trademarks in countries where we sell
our game. We may seek other protection over these assets if we have the cash
resources to do so. .
We have not entered into any franchise agreements or other contracts that have
given, or could give rise to obligations or concessions.
EXISTING OR PROBABLE GOVERNMENT REGULATIONS
There are no existing government regulations, nor are we aware of any
regulations being contemplated, that would adversely affect our ability to
operate.
USE OF THE INTERNET FOR SALES OF OUR PRODUCTS
Due to the increasing popularity and use of the Internet, it is possible that a
number of laws and regulations may be adopted with respect to the Internet
generally, covering issues such as user privacy, pricing, and characteristics
and quality of products and services. Similarly, the growth and development of
the market for Internet commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on those companies conducting
business over the Internet. The adoption of any such laws or regulations may
decrease the growth of commerce over the Internet, increase our cost of doing
business or otherwise have a harmful effect on our business.
To date, governmental regulations have not materially restricted the use or
expansion of the Internet. However, the legal and regulatory environment that
pertains to the Internet is uncertain and may change. New laws may cover issues
that include:
22
* sales and other taxes;
* user privacy;
* pricing controls;
* characteristics and quality of products and services;
* consumer protection;
* libel and defamation;
* copyright, trademark and patent infringement; and
* other claims based on the nature and content of Internet materials.
These new laws may impact our ability to market our product and services in
accordance with our business plan.
Legislation is also continually being introduced that may affect both the
content of video games and their distribution. In the United States, the federal
and several state governments are continually considering content restrictions.
Recent legislation has been adopted in several states, and could be proposed at
the federal level, that prohibits the sale of certain games (e.g., violent games
or those with "M (Mature)" or "AO (Adults Only)" ratings) to minors. Any one or
more of these factors could harm our business by limiting the products we are
able to offer to our subscribers, by limiting the size of the potential market
for our products, and by requiring costly additional differentiation between
products for different territories to address varying regulations.
RESEARCH AND DEVELOPMENT ACTIVITIES AND COSTS
We do not anticipate conducting any software development activities related to
Krypton Jam over the next 12 months. Our plan of operations for the next 12
months is to complete development of the DVD trailer, raise financing for the
playable demo and prepare to start with the development of the playable demo.
Software development activities are planned to follow in the second year of our
operations, provided we are successful in attracting suitable financing.
COMPLIANCE WITH ENVIRONMENTAL LAWS
We are not aware of any environmental laws that have been enacted, nor are we
aware of any such laws being contemplated for the future, that address issues
specific to our business.
FACILITIES
We rent executive office facilities located at Suite 208, 800 N. Rainbow Blvd
Las Vegas, NV, 89107. This is a shared office facility, which offers office
space and secretarial and administrative services for $150 monthly. We may
cancel upon 30 days written notice. This location will serve as our primary
executive offices for the foreseeable future. Mr. Lagourgue and Mr. Qiang also
work from their respective residences in Canada and China at no charge to our
company. We plan on contracting all of our software development activities with
third parties for at least the next 12 months so we have no requirement for
additional facilities for these operations.
EMPLOYEES
Kryptic has no employees at the present time. Our officers and directors, are
responsible for all planning, developing and operational duties, and will
continue to do so throughout the early stages of our growth. We do not expect to
hire any employees within the first year of operation. We have no intention of
hiring employees until we have sufficient financing for the completion of our
playable demo. Our officers and directors are planning to do whatever work is
required until our business reaches this milestone. Human resource planning will
be part of an ongoing process that will include regular evaluation of our
operations and revenue realization.
Over the next 12 months, Mr. John Lagourgue will be primarily responsible for:
- General management of our company's operations
- Creation of the storyline DVD content required for storyboard
implementation for the DVD trailer
- Ensuring the game development plan is on budget and on schedule
- Hiring and management of contractors for development and completion of
the DVD trailer
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- Researching and identifying the most effective game engine for our
playable demo and full game
- Management and direction of financing activities
Mr. Shan Qiang will be responsible for:
- Preparing and updating our website
- Financing activities
- Daily administration and bookkeeping activities
- Researching and identifying the most effective game engine for our
playable demo and full game
- Identify, interview and select software developers for playable demo
stage
- Researching all technical variables of Game Engine relating to
software programming
- Developing programming schedule for playable demo
- Implementation of the game engine into software platform.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements
DESCRIPTION OF PROPERTY
We do not own any property, real or otherwise. We rent executive office
facilities located at Suite 208, 800 N. Rainbow Blvd, Las Vegas, NV, 89107. This
is a shared office facility, which offers office space and secretarial and
administrative services for $150 monthly. We may cancel upon 30 days written
notice. This location will serve as our primary executive offices for the
foreseeable future. Mr. Lagourgue and Mr. Qiang also work from their respective
residences in Canada and China at no charge to our company. We plan on
contracting all of our software development activities with third parties for at
least the next 12 months so we have no requirement for additional facilities for
these operations. We have also contracted to maintain and host web server space
for our website with a third party hosting business at minimal cost.
We believe our current premises are adequate for our current operations and we
do not anticipate that we will require any additional premises in the
foreseeable future.
We do not have any investments or interests in any real estate. Our company does
not invest in real estate mortgages, nor does it invest in securities of, or
interests in, persons primarily engaged in real estate activities.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings, nor are we aware of any
governmental authority contemplating any legal proceeding against us.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Currently there is no public trading market for our stock, and we have not
applied to have our common stock listed. We intend to seek out a market maker to
apply to have our common stock quoted on the OTC Bulletin Board upon
effectiveness of this Form S-1. No trading symbol has yet been assigned.
24
RULES GOVERNING LOW-PRICE STOCKS THAT MAY AFFECT OUR SHAREHOLDERS' ABILITY TO
RESELL SHARES OF OUR COMMON STOCK
Our stock currently is not traded on any stock exchange or quoted on any stock
quotation system. Upon the registration statement in which this prospectus is
included becoming effective, we will seek out a market maker to apply for
quotation of our common stock on the NASD's 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
may 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 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 our 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.
HOLDERS
As of the filing of this prospectus, we have 40 shareholders of record of
Kryptic common stock. We are registering 999,000 shares of our common stock held
by 38 non-affiliated investors under the Securities Act of 1933 for sale by the
selling securities holders named in this prospectus. This does not include the
4,500,000 shares held by our Officers and Directors.
RULE 144 SHARES.
3,000,000 and 1,500,000 shares of the common stock will be available for resale
to the public after April 11, 2008 and May 24, 2008 respectively in accordance
with Rule 144 of the Act. As of the date of this prospectus, persons who are our
Officers and Directors (affiliates) hold all of the 4,500,000 shares. These
shares are currently restricted from trading under Rule 144 will only be
available for resale to the public if:
* We are no longer a shell company as defined under section 12b-2 of the
Exchange Act. A "shell company" is defined as a company with no or
nominal operations, and with no or nominal assets or assets consisting
solely of cash and cash equivalents.
* We have filed all Exchange Act reports required for the past 12
months; and
* If applicable, at least one year has elapsed from the time that we
file current Form 10 information on Form 8-K changing our status from
a shell company to an entity that is not a shell company.
At present, we are considered to be a shell company under the regulations. If we
meet the requirements at any date subsequent to the dates noted herein in the
future, our officers and directors would be entitled to sell within any three
month period a number of shares that does not exceed the greater of: 1% of the
number of shares of our common stock then outstanding which, in this case, will
currently equate to approximately 54,900 shares in aggregate; or the average
weekly trading volume of Kryptic common stock during the four calendar weeks,
preceding the filing of a notice on Form 144 with respect to the sale for sales
exceeding 5,000 shares or an aggregate sale price in excess of $50,000. If fewer
shares at lesser value are sold, no Form 144 is required.
25
DIVIDENDS
As of the filing of this prospectus, we have not paid any dividends to our
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 Nevada
Revised Statutes, however, do prohibit us from declaring dividends where, after
giving effect to the distribution of the dividend: Kryptic would not be able to
pay its debts as they become due in the usual course of business; or its 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.
DIFFICULTY TO RESELL KRYPTIC STOCK, AS THE COMPANY HAS NO EXPECTATIONS TO PAY
CASH DIVIDENDS IN THE NEAR FUTURE
The holders of our common stock are entitled to receive dividends when, and if,
declared by the board of directors. We will not be paying cash dividends in the
foreseeable future, but instead we will be retaining any and all earnings to
finance the growth of our business. To date, we have not paid cash dividends on
our common stock. This lack of an ongoing return on investment may make it
difficult to sell our common stock and if the stock is sold the seller may be
forced to sell the stock at a loss.
PLAN OF OPERATION
We are a development stage company with very limited operations to date, no
revenue, very limited financial backing and few assets. Our plan of operations
over the next 12 months is to gain support for our concept and raise sufficient
suitable financing to commence with the development of our playable demo for our
Krypton Jam online MMOG game. In order to achieve our plan, we have established
the following goals over the next 12 months:
* Create and execute a DVD trailer which illustrates our game concept
within 10 Months
* Upload our trailer on our company website after completion
* Secure additional suitable financing to continue into the next phase
our game development (ie:Playable Demo)
* Research & select of most effective game engine for Krypton Jam
requirements
* Upon selection of game engine, interview programming specialists who
have experience with specific coding languages to develop and support
the game engine
Our business objectives are:
* Complete our game, achieve ongoing profitability and create value for
our stockholders and our subscribers.
* Become a well-recognized brand & entertaining game destination for
online gamers
* Develop a leadership role over time in pioneering mixed-genre massive
multiplayer online games.
During the first stages of our company's growth, our officers and directors will
provide most of the labor required to execute our business plan at no charge.
Since we intend to operate with very limited administrative support, the
officers and directors will continue to be responsible for administering the
company for at least the first year of operations. Management has no intention
at this time to hire additional employees during the first year of operations.
Due to limited financial resources, each of the management team will dedicate
between 25-30 hours per week, to ensure all operations are executed.
ACTIVITIES TO DATE
Prior to the date hereof, we have secured shared office space for $150 monthly
for our executive offices, and created a brand logo for our business. In
February 2008 we launched our website, which is accessible at
www.krypticentertainment.com or www.kryptonjam.com. The website architecture is
in tablular format and has been designed to allow easy navigation for our users.
The cost was $4,500 and included editing written content, structure layout,
uploading graphics, beta test on all tabs and an investor submission form.
Our Officers and Directors estimate they spent approximately 180 hours on
research and execution of a Krypton Jam game development plan. This plan
includes a detailed overview related to storyline, in-game character and realm
26
development, game engine timeline, and unique game features. The plan was
developed to provide an internal road map for the overall game development plan
and a clear direction for the next steps of engaging a creative development firm
for the creation of the DVD trailer.
EXPENDITURES
The following chart provides an overview of our budgeted expenditures using our
existing cash resources, by significant area of activity for each quarter, over
the next 12 months. We are currently in the first month of this plan.
12 Month
Q1 Q2 Q3 Q4 Total
------- ------- ------- ------- -------
Legal/accounting $ 1,500 $ 1,500 $ 1,500 $ 3,500 $ 8,000
Transfer agent 1,500 -- -- -- 1,500
Office rental 450 450 450 450 1,800
Office expenses & miscellaneous 1,000 1,000 1,000 1,000 4,000
Storyline development 3,500 3,500
Storyboard development 1,000 1,000
Creation of realm descriptions and sketches 7,500 7,500
Character development 5,000 5,000
DVD trailer production 9,000 9,000
------- ------- ------- ------- -------
TOTAL $ 8,950 $10,450 $ 7,950 $13,950 $41,300
======= ======= ======= ======= =======
These expenditures are described in detail by quarter in "Milestones".
MILESTONES
Q1 (MAY - JULY, 2008)
We are planning the following game development tasks:
* Obtain quotes from companies to produce our DVD trailer, based on our
budget, timeline and creative expectations.
* Work with the successful contractor to complete a detailed storyline
based on our Krypton Jam Business & Game Development Plan, which has
already developed by our officers and directors. We are budgeting
$3,500 of this process. The outcome will encompass a detailed
storyline, completed game elements, our unique game features,
stylistic in-game movement patterns, game development strategy, market
analysis, and competition. It will also detail how the game player
will interact with the game, the fantasty realms a player would expect
to encounter, character feature sets, and the circumstances of why
special character powers are deployed in the game.
* On completion of the storyline, create a story board identifying each
of the actions to be included in each frame of Storyline. This story
board is a series of sketches showing each shot of the DVD Trailer,
with dialogue and scene number notations. This is used to plot the
sequence of the DVD. This will be completed by end of July at a
budgeted cost of $1,000.
Q2 (AUGUST - OCTOBER 2008)
Our development activities during this quarter are focused on realm descriptions
and sketches. These activities include:
* Identification of suitable Krypton Jam realm descriptions with our
selected DVD Trailer Company. We plan to develop five major Kryptic
realm descriptions, which will include detailed sketches of each
realm. Sketches will include an overall introduction, landscape,
terrain and climate features.
27
* The process/outlines of sketch schematics includes:
* Thumbnail Sketches: These are created first to confirm stylistic
direction between our company and the contractor. Two Kryptic
realms will be thumbnail sketched first before moving on to more
detailed sketching phase for all the realms
* Kryptic Realm Sketches: Once we have reached agreement on
stylistic attributes through creation of the thumbnail sketches,
we will then work with the contractor to develop detailed
sketches of all 5 Kryptic realms incorporating textures, shapes
and overall scale. This stage does not include character
development.
* Kryptic Realm Illustrations: Full Color schemes will be created
and approved based on the sketches, for all Kryptic realms,
incorporating both wide angle and close up views. These two
angles will ultimately be showcased on the DVD Trailer.
We are budgeting $7,500 for creation, modifications and approval of all realm
descriptions and sketches, which we are planning to complete in the second
quarter.
Q3 (NOVEMBER 2008 - JANUARY 2009)
During the third quarter, we plan on to focus character development, which will
encompass all in-game & character features. We will work closely with a creative
development firm, which we will have to select. The major milestones that we
expect to complete are:
* Pre-production game analysis and elements. This includes Krypton Jam
unique in-game features, quests, character spells & player abilities,
in-game socials and virtual chat rooms, virtual merchandising
identification. Our officers and directors will be directly
responsible for this phase.
* Phase 1 character development. This work will be performed primarily
by a yet to be selected creative firm. They will be responsible for
developing five character descriptions, including character
introduction, look, strengths, weaknesses, special effects/abilities.
They will then create two stylistic thumbnail sketch versions for our
company.
* Phase 2 will include detailed character sketches, which will
incorporate textures, shapes, scale, and color schemes for the
characters: Four views will be developed for each character, ie:
front, back, side, top.
We are budgeting $5,000 for the third party costs for the creative development
firm.
Q4 (FEBRUARY - APRIL 2009)
We plan to produce the DVD Trailer by February 2009. The objective is to provide
a visually engaging and dynamic representation through motion graphics and
special effects to illustrate the key components and processes of the Krypton
Jam game. We also believe the trailer will give us the equivalent of a beta and
editing analysis of our proposed game, characters and realm development through
critique by industry members, the financial community and our own website
viewers. The process includes:
* apply our character and realm illustrations to a stimulating and
interesting visual presentation
* describe the storyline with voice-overs in conjunction with the
sketched visuals
* describe the technical and organizational aspects of the planned
Krypton Jam game through organizational charts, and still images
* sound design and post-production optics with voiceovers. This step
will require the selection of a "voice", preferably someone with radio
or announcement experience. The audio file will then be uploaded into
post-production editing suite, and timed accordingly with the
character and realm movements in order that the audio (voice)
storyline is accurately timed with the visual DVD. This is achieved
with our creative development firm.
We are budgeting $9,000 for the production and completion of DVD Trailer. This
will include all final renderings, and the upload to our Kryptic website.
During the 4th quarter, Mr. Qiang is planning to complete the following
preliminary activities related to the development of the playable demo:
28
* Write job descriptions for software programmers/concept
developers/graphics specialist, 3D animators, tools designer,
production specialist, artificial intelligence specialist and editors
for playable demo stage.
* Begin technical research on software elements within game engine -
including all source codes and rendering parameters to ensure smooth
in-game visuals for Game Title.
* Develop preliminary plan for playable demo modeling, lighting,
texturizing, and interfacing.
* Confirm all realms and characters considered for playable demo. Modify
realm/character attributes if required.
On completion of the DVD trailer, both of our Officers and Directors will focus
their efforts on securing suitable additional financing to complete our playable
demo. We currently estimate that we will require $750,000 for completion of this
milestone. During the 4th quarter we plan to:
* Identify and present to financial/investment contacts
* Create a "press package" including our trailer, Director Bio's,
financing requirements and plan and the Kryton Jam Overview.
* Upload the DVD trailer to our website, ensure website server is
updated with increased bandwidth to manage streaming video (DVD)
content for potential investors and/or future subscribers.
* Create an "online community" button on company website for gaming
enthusiasts to post their comments, and insights on our trailer and
game concept.
LIQUIDITY AND CASH RESOURCES
As previously noted, we have raised $9,000 from the sale of stock to our
officers and directors and $49,950 through a private placement to 38
non-affiliated investors. We used $190 of cash to March 31, 2008 for our
incorporation and operating expenses, and $4,500 for our website. At March 31,
2008 we had $54,260 in cash and $52,760 in net working capital. As of the date
hereof, we have approximately $47,500 in cash, of which we anticipate needing
approximately $6,302 for the yet unpaid expenses associated with this
Registration Statement (See ITEM 25 "Other Expenses if Issuance and
Distribution"). Our budgeted expenditures for the next twelve months, which
includes the production of the DVD trailer, are $41,300.
Because we have not generated any revenue from our business, and we are at least
36 months away from being in a position to generate revenues, we will need to
raise significant, additional funds for the future development of our business
and to respond to unanticipated requirements or expenses. Our current cash
balances will be extinguished within the next 12 months provided we do not have
any unanticipated expenses. We do not currently have any arrangements for
financing and we can provide no assurance to investors we will be able to find
such financing. There can be no assurance that additional financing will be
available to us, or on terms that are acceptable. Consequently, we may not be
able to proceed with our intended business plans or complete the development and
commercialization of Krypton Jam.
There are no plans or expectations to purchase or sell any significant equipment
in the first year of operations.
CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
There have been no changes in and/or disagreements with Moore & Associates,
Chartered on accounting and financial disclosure matters.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
All directors of our company hold office until the next annual meeting of the
stockholders or until their successors have been elected and qualified. The
officers of our company are appointed by our board of directors and hold office
until their death, resignation or removal from office. Our directors and
executive officers, their ages, positions held, and duration as such, are as
follows:
29
Position Held Date First Elected
Name with the Company Age or Appointed
---- ---------------- --- ------------
John Lagourgue President, CEO and Director 38 October 11, 2007
Shan Qiang Secretary Treasurer, CFO 39 October 30, 2007
and Director
BUSINESS EXPERIENCE
The following is a brief account of the education and business experience of
each director and executive officer during at least the past five years,
indicating each person's business experience, principal occupation during the
period, and the name and principal business of the organization by which he was
employed.
MR. JOHN LAGOURGUE, PRESIDENT, CEO, MEMBER OF THE BOARD OF DIRECTORS
Mr. John Lagourgue has been serving as our President and a member of our Board
of Directors since October 11, 2007. The term of his office is for one year and
is renewable on an annual basis.
From August 2003 to the present Mr. Lagourgue has been self employed, providing
contract consulting services to oil and gas service companies located in
Alberta, British Columbia, and Saskatchewan, Canada. He specializes in sourcing
and selling tubular products. From February 2003 to June 2003 he acted as the
Project Liaison for Project San Francisco (Rwanda), Zambia UAB HIV Research for
the University of Alabama. He was the liaison between two HIV and Behavioral
Research sites that offered couples' voluntary counseling and testing, family
planning, and a Phase I AIDS vaccine clinical trial. He was responsible for
managing, training, and data tracking of successful client recruitment rates for
the teams, financial and logistical administration, new site construction plans
and oversight, and operational relationships with Ministry of Health officials
and various funding agencies.
From December 2000 to February 2003 he was the National Account Manager for EMC
Corporation in McLean, Virginia. He was one of a team of four Account Managers
supporting American Online, which at the time was EMC's largest client with
annual revenues exceeding $50 million for EMC's storage hardware, software, and
services. He was responsible for sales quotas, new client prospecting, demand
creation, presenting lease and financial proposals, presenting technical and
financial benefits to win new business, and management of implementation of new
systems. He managed a technical team of over 30 engineers across the U.S.A. for
AOL's multiple data centers, and created and implemented integration plans
according to customer specifications. He also managed the turnaround of a
division of EMC supporting AOL's Streaming Services division (supports CNN, AOL
Music, Warner Bros. These streaming services included online delivery of music
channels, advertisements, video on demand, movie trailers, and other content to
subscribers.
He received a BA Finance with Honors from the University of Hawaii, Manoa in
1993.
He is currently devoting approximately 30 hours a week of his time to our
company, and is planning to devote 40 hours per week if necessary during the
next 12 months of operation.
He is not an officer or director of any reporting company that files annual,
quarterly, or periodic reports with the United States Securities and Exchange
Commission.
MR. SHAN QIANG, SECRETARY TREASURER, CFO, MEMBER OF THE BOARD OF DIRECTORS
Mr. Qiang has been serving as our Secretary, CFO and a member of our Board of
Directors since October 30, 2007. The term of his office is for one year and is
renewable on an annual basis.
He is the currently the Senior Designer & Project Manager for VDZ International
in Beijing, China. He has acted in this position since June 2004. He is
responsible for all computer drafting, 3D rendering, design proposals and
government submissions for the company. From February 2000 to April 2004 he was
the Project Manager, for Digital Xtong Industrial in Beijing, China. He was
responsible for managing for multiplayer PlayStation games, including game play
implementation and design using proprietary software tools. His responsibilities
included management of the lead designers and programmers and overseeing game
30
play functionality under tight deadlines. He also planned, designed, modeled and
textured demonstration models. From January 1997 to December 1999 he acted as a
game play consultant for Gai Nyen Dynasty Games, in Hong Kong, China. He created
software modules to manage script content and implemented design tools to aid
the scripting team. He developed written tutorials for communicating in-game
standards and toolset specific for the game engine team. He also designed the
core game play mechanics, laid out and implemented all game levels, and managed
all in game assets.
He is fluent in Java, C/C++, Visual Basic, LUA, Unreal Script, NWN Script, Maya
Embedded Language, Lingo, python, HTML, PHP, JSP, XML, WML, ASP, JavaScript
programming languages for Windows, Linux, Apple operating system platforms. He
is also fluent with many off the shelf and proprietary graphic, automation and
audio software tools.
He received a Bachelor Degree of Architecture in 1992 from the JinLin Institute
of Architectural Engineering in the JiLin Province of China.
Mr. Qiang is currently devoting approximately 25 hours a week of his time to
Kryptic, and is planning to continue to do so during the next 12 months of
operation.
He is not an officer or director of any reporting company that files annual,
quarterly, or periodic reports with the United States Securities and Exchange
Commission.
COMMITTEES OF THE BOARD
We do not have an audit or compensation committee at this time.
FAMILY RELATIONSHIPS
There are no family relationships between our officers and directors.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Our directors, executive officers and control persons have not been involved in
any of the following events during the past five years:
1. any bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the bankruptcy
or within two years prior to that time; 2. any conviction in a criminal
proceeding or being subject to a pending criminal proceeding (excluding traffic
violations and other minor offenses); 3. being subject to any order, judgment,
or decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business,
securities or banking activities; or 4. being found by a court of competent
jurisdiction (in a civil action), the Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or vacated.
CONFLICT OF INTEREST
None of our officers or directors are subject to a conflict of interest.
31
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation paid by
us to our officers from our date of incorporation on October 11, 2007 to March
31, 2008, our first completed fiscal year end.
SUMMARY COMPENSATION TABLE
Change in
Pension
Value &
Non-Equity Nonqualified
Incentive Deferred All
Name and Plan Compen- Other
Principal Stock Option Compen- sation Compen-
Position Year Salary($) Bonus($) Awards($) Awards($) sation($) Earnings($) sation($) Totals($)
- ------------ ---- --------- -------- --------- --------- --------- ----------- --------- ---------
John Lagourgue 2007 0 0 0 0 0 0 0 0
President & CEO
Shan Qiang 2007 0 0 0 0 0 0 0 0
Secretary, Treasurer, CFO
Since our date of incorporation to the date of this prospectus, our executive
officers have not received and are not accruing any compensation. The officers
anticipate that they will not receive, accrue, earn, be paid or awarded any
compensation during the first year of operations. We have not entered into any
employment agreement or consulting agreement with our directors and executive
officers.
The following table sets forth information with respect to compensation paid by
us to our directors from our date of incorporation on October 11, 2007 to March
31, 2008, our first completed fiscal year end.
DIRECTOR COMPENSATION TABLE
Change in
Pension
Fees Value and
Earned Non-Equity Nonqualified All
or Incentive Deferred Other
Paid in Stock Option Plan Compensation Compen-
Name Cash($) Awards($) Awards($) Compensation($) Earnings($) sation($) Total($)
---- ------- --------- --------- --------------- ----------- --------- --------
John Lagourgue 0 0 0 0 0 0 0
Shan Qiang 0 0 0 0 0 0 0
All compensation received by the officers and directors has been disclosed.
OPTION/SAR GRANTS
There are no stock option, retirement, pension, or profit sharing plans for the
benefit of our officers and directors.
32
LONG-TERM INCENTIVE PLAN AWARDS
We do not have any long-term incentive plans.
DIRECTORS COMPENSATION
We have no formal plan for compensating our directors for their services in
their capacity as directors. Directors are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at meetings of our board of directors. The board of directors may
award special remuneration to any director undertaking any special services on
behalf of Kryptic other than services ordinarily required of a director. Since
inception to the date hereof, no director received and/or accrued any
compensation for his or her services as a director, including committee
participation and/or special assignments.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following is a table detailing the current shareholders of Kryptic owning 5%
or more of the common stock, and shares owned by our directors and officers as
of May 21, 2008:
Amount and
Nature of Percent
Title of Beneficial of
Class Name and Address of Beneficial Owner Ownership Class(2)
----- ------------------------------------ --------- --------
Common John Lagourgue 3,000,000 54.55%
201, 2307 - 14 Street SW
Calgary, AB, Canada T2T 3T5
Common Shan Qiang
No 21, Xikanghutong, Chaoyang District 1,500,000 27.28%
Changchun City, China 130021
Common Directors and officers as a group of two(1) 4,500,000 81.83%
- ----------
1. Represents beneficial ownership
2. Based on the total of 5,499,000 outstanding common shares as of the date
hereof
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than the stock transactions discussed below, we have not entered into any
transaction nor are there any proposed transactions in which any director,
executive officer, shareholder of Kryptic or any member of the immediate family
of any of the foregoing had or is to have a direct or indirect material
interest.
Our Officers and Directors estimate they spent approximately 180 hours on
research and execution of a Krypton Jam game development plan. They provided
these services free of charge. This plan includes a detailed overview related to
storyline, in-game character and realm development, game engine timeline, and
unique game features. The plan was developed to provide an internal road map for
the overall game development plan and a clear direction for the next steps of
engaging a creative development firm for the creation of the DVD trailer.
On October 11, 2007 Mr. John Lagourgue purchased 3,000,000 shares of our common
stock for $0.002 per share, or for an aggregate of $6,000.00. On November 24,
2007 Mr. Shan Qiang purchased 1,500,000 shares of our common stock for $0.002
per share, or for an aggregate of $3,000.00.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITY LIABILITIES
The Nevada General Corporation Law requires Kryptic to indemnify officers and
directors for any expenses incurred by any officer or director in connection
with any actions or proceedings, whether civil, criminal, administrative, or
investigative, brought against such officer or director because of his or her
33
status as an officer or director, to the extent that the director or officer has
been successful on the merits or otherwise in defense of the action or
proceeding. The Nevada General Corporation Law permits a corporation to
indemnify an officer or director, even in the absence of an agreement to do so,
for expenses incurred in connection with any action or proceeding if such
officer or director acted in good faith and in a manner in which he or she
reasonably believed to be in or not opposed to the best interests of the Company
and such indemnification is authorized by the stockholders, by a quorum of
disinterested directors, by independent legal counsel in a written opinion
authorized by a majority vote of a quorum of directors consisting of
disinterested directors, or by independent legal counsel in a written opinion if
a quorum of disinterested directors cannot be obtained.
The Nevada General Corporation Law prohibits indemnification of a director or
officer if a final adjudication establishes that the officer's or director's
acts or omissions involved intentional misconduct, fraud, or a knowing violation
of the law and were material to the cause of action. Despite the foregoing
limitations on indemnification, the Nevada General Corporation Law may permit an
officer or director to apply to the court for approval of indemnification even
if the officer or director is adjudged to have committed intentional misconduct,
fraud, or a knowing violation of the law.
The Nevada General Corporation Law also provides that indemnification of
directors is not permitted for the unlawful payment of distributions, except for
those directors registering their dissent to the payment of the distribution.
According to Article VII of our bylaws, we are authorized to indemnify its
directors to the fullest extent authorized under Nevada Law subject to certain
specified limitations.
Insofar as indemnification for liabilities arising under the Securities Act may
be provided to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, we have been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
REPORTS TO SECURITY HOLDERS
We will voluntarily make available to securities holders an annual report,
including audited financials, on Form 10-KSB. We are not currently a fully
reporting company, but upon effectiveness of this registration statement, we
will be required to file reports with the SEC pursuant to the Securities
Exchange Act of 1934; such as quarterly reports on Form 10-QSB and current
reports on Form 8-K.
The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The
public may obtain information about the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC at www.sec.gov.
FINANCIAL STATEMENTS
The audited financial statements of Kryptic appear below on pages F-1 through
F-10.
34
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Kryptic Entertainment Inc.
(A Development Stage Company)
We have audited the accompanying balance sheet of Kryptic Entertainment Inc. (A
Development Stage Company) as of March 31, 2008, and the related statements of
operations, stockholders' equity and cash flows for the period ended March 31,
2008 and since inception on October 11, 2007 through March 31, 2008. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kryptic Entertainment Inc. (A
Development Stage Company) as of March 31, 2008, and the related statements of
operations, stockholders' equity and cash flows for the period ended March 31,
2008 and since inception on October 11, 2007 through March 31, 2008, 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 net losses for the period from inception
to March 31, 2008 of $1,815, which raises substantial doubt about its ability to
continue as a going concern. Management's plans concerning 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.
/s/ Moore & Associates, Chartered
- -----------------------------------------
Moore & Associates Chartered
Las Vegas, Nevada
May 6, 2008
2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146
(702) 253-7499 Fax (702) 253-7501
F-1
KRYPTIC ENTERTAINMENT INC.
(A Development Stage Company)
BALANCE SHEET
March 31,
2008
--------
ASSETS
Current assets
Cash and bank accounts $ 54,260
--------
Total current assets 54,260
Website, net of accumulated amortization (Note 7) 4,375
--------
Total assets $ 58,635
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 1,500
--------
Total liabilities 1,500
--------
Stockholders' equity (Note 4,5)
Authorized:
75,000,000 common shares
Par value $0.001
Issued and outstanding:
5,499,000 common shares 5,499
Additional paid-in capital 53,451
Deficit accumulated during the development stage (1,815)
--------
Total stockholders' equity 57,135
--------
Total liabilities and stockholders' equity $ 58,635
========
The accompanying notes are an integral part of these financial statements.
F-2
KRYPTIC ENTERTAINMENT INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Date of
Incorporation on
October 11, 2007 to
March 31,
2008
----------
REVENUE $ --
----------
OPERATING EXPENSES
Amortization 125
General & Administrative 1,070
Organization 620
----------
Loss before income taxes (1,815)
Provision for income taxes --
----------
Net loss $ (1,815)
==========
Basic and diluted loss per
Common share (1)
==========
Weighted average number
of common shares
outstanding (Note 4) 4,209,209
==========
- ----------
(1) less than $0.01
The accompanying notes are an integral part of these financial statements.
F-3
KRYPTIC ENTERTAINMENT INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Accumulated
Common Stock Additional During the Total
---------------------- Paid in Development Stockholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
Inception, October 11, 2007 -- $ -- $ -- $ -- $ --
Initial capitalization, sale of
common stock to Director on
October 11, 2007 3,000,000 3,000 3,000 6,000
Sale of common stock to Director
on November 24, 2007 1,500,000 1,500 1,500 3,000
Private placement closed March 15, 2008 999,000 999 48,951 49,950
Net loss for the period -- -- -- (1,815) (1,815)
--------- ------- -------- -------- --------
Balance March 31, 2008 5,499,000 $ 5,499 $ 53,451 $ (1,815) $ 57,135
========= ======= ======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-4
KRYPTIC ENTERTAINMENT INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Date of
Incorporation on
October 11, 2007 to
March 31,
2008
--------
OPERATING ACTIVITIES
Net loss for the period $ (1,815)
Adjustments To Reconcile Net Loss To Net Cash
Used In Operating Activities:
Amortization expense 125
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities 1,500
--------
Net cash used in operating activities (190)
--------
INVESTING ACTIVITIES
Website (4,500)
--------
Net cash used in investing activities (4,500)
--------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 58,950
--------
Net cash provided by financing activities 58,950
--------
Increase in cash during the period 54,260
Cash, beginning of the period --
--------
Cash, end of the period $ 54,260
========
Supplemental disclosure with respect to cash flows:
Cash paid for income taxes $ --
Cash paid for interest $ --
The accompanying notes are an integral part of these financial statements.
F-5
KRYPTIC ENTERTAINMENT INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
The Company was originally incorporated under the laws of the state of Nevada on
October 11, 2007. The Company has limited operations and in accordance with SFAS
#7, is considered a development stage company, and has had no revenues from
operations to date.
Initial operations have included organization, capital formation, target market
identification, and marketing plans. Management is planning to develop and then
market an internet based online video game to prospective users. See Note 5.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
The relevant accounting policies and procedures are listed below. The company
has adopted a March 31 year end.
ACCOUNTING BASIS
The basis is generally accepted accounting principles.
EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
specifies the computation, presentation and disclosure requirements for earnings
(loss) per share for entities with publicly held common stock. SFAS No. 128
supersedes the provisions of APB No. 15, and requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share. The Company has
adopted the provisions of SFAS No. 128 effective its inception.
The basic earnings (loss) per share is calculated by dividing the Company's net
income available to common shareholders by the weighted average number of common
shares during the year. The diluted earnings (loss) per share is calculated by
dividing the Company's net income (loss) available to common shareholders by the
diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted
number of shares adjusted as of the first of the year for any potentially
dilutive debt or equity.
The Company has not issued any options or warrants or similar securities since
inception.
F-6
KRYPTIC ENTERTAINMENT INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
NOTE 2. (continued)
DIVIDENDS
The Company has not yet adopted any policy regarding payment of dividends. No
dividends have been paid during the periods shown.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturity of three
months or less when purchased to be cash equivalents.
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. A deferred tax asset
or liability is recorded for all temporary differences between financial and tax
reporting and net operating loss carryforwards. Deferred tax expense (benefit)
results from the net change during the year of deferred tax assets and
liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion of all of the deferred
tax assets will be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of enactment.
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
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
F-7
KRYTIC ENTERTAINMENT INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
NOTE 2. (continued)
WEBSITE COSTS
Website costs consist of software development costs, which represent capitalized
costs of design, configuration, coding, installation and testing of the
Company's website up to its initial implementation. Upon implementation in March
2008, the asset is being amortized to expense over its estimated useful life of
three years using the straight-line method. Ongoing website post-implementation
costs of operation, including training and application maintenance, will be
charged to expense as incurred. See Note 7.
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the normal
course of business. The Company has net losses for the period from inception to
March 31, 2008 of $1,815. The Company intends to fund operations through sales
and equity financing arrangements, which may be insufficient to fund its capital
expenditures, working capital and other cash requirements through the next
fiscal year ending March 31, 2009.
The ability of the Company to emerge from the development stage is dependent
upon the Company's successful efforts to raise sufficient capital and then
attaining profitable operations. In response to these problems, management has
planned the following actions:
* The Company intends to complete and file a Registration Statement with
the SEC.
* Management intends to raise additional funds through public or private
placement offerings.
* Management is currently formulating plans to develop an internet based
online video game to generate sales. There can be no assurances,
however, that management's expectations of future sales will be
realized.
These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
F-8
KRYPTIC ENTERTAINMENT INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
NOTE 4. STOCKHOLDERS' EQUITY
AUTHORIZED
The Company is authorized to issue 75,000,000 shares of $0.001 par value common
stock. All common stock shares have equal voting rights, are non-assessable and
have one vote per share. Voting rights are not cumulative and, therefore, the
holders of more than 50% of the common stock could, if they choose to do so,
elect all of the directors of the Company.
ISSUED AND OUTSTANDING
On October 11, 2007 (inception), the Company issued 3,000,000 common shares to
its President and Director for cash of $6,000. See Note 5.
On November 24, 2007 the Company issued 1,500,000 common shares to its Secretary
Treasurer and Director for cash of $3,000. See Note 5.
On March 15, 2008, the Company closed a private placement for 999,000 common
shares at a price of $0.05 per share, or an aggregate of $49,950. The Company
accepted subscriptions from 38 offshore non-affiliated investors.
NOTE 5. RELATED PARTY TRANSACTIONS
The Company's neither owns nor leases any real or personal property. The
Company's Directors provides office space free of charge. The officers and
directors of the Company are involved in other business activities and may, in
the future, become involved in other business opportunities. If a specific
business opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
On October 11, 2007 and November 24, 2007, the Company issued 3,000,000 and
1,500,000 shares of its common stock respectively to its Directors for cash of
$9,000. See Note 4.
F-9
KRYPTIC ENTERTAINMENT INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
NOTE 6. INCOME TAXES
Net deferred tax assets are $nil. Realization of deferred tax assets is
dependent upon sufficient future taxable income during the period that
deductible temporary differences and carry-forwards are expected to be available
to reduce taxable income. As the achievement of required future taxable income
is uncertain, the Company recorded a 100% valuation allowance. Management
believes it is likely that any deferred tax assets will not be realized.
As of March 31, 2008, the Company has a net operating loss carry forward of
approximately $1,815, which will expire 20 years from the date the loss was
incurred.
NOTE 7. WEBSITE
Accumulated
Cost amortization Net book value
---- ------------ --------------
Website costs $4,500 $125 $4,375
Website costs are amortized on a straight line basis over 3 years, its estimated
useful life.
NOTE 8. OPERATING LEASES AND OTHER COMMITMENTS:
The Company currently has no operating lease commitments or any other
commitments.
F-10
DEALER PROSPECTUS DELIVERY OBLIGATION
Until 90 days from the effective date of this Registration Statement, all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealer's obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We have, or will expend fees in relation to this registration statement as
detailed below:
Expenditure Item Amount
---------------- ------
Attorney and preparation fees $ 6,000
Audit Fees 2,500
Transfer Agent Fees 1,000
SEC Registration 2
Other and Miscellaneous (1) 1,000
Edgarizing and Filing Fees (1) 800
-------
TOTAL $11,302
=======
- ----------
(1) Estimates
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our officers and directors are indemnified as provided by the Nevada Revised
Statutes and the bylaws.
Nevada corporation law provides that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, except an action by or in the right of the corporation, by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with the action, suit or proceeding if he acted in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Nevada corporation law also provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding, or in defense of any
claim, issue or matter therein, the corporation shall indemnify him against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection with the defense.
Our Articles of Incorporation authorize our company to indemnify our directors
and officers to the fullest extent permitted under Nevada law. Our Bylaws
require us to indemnify any present and former directors, officers, employees,
agents, partners, trustees and each person who serves in any such capacities at
our request against all costs, expenses, judgments, penalties, fines,
liabilities and all amounts paid in settlement reasonably incurred by such
persons in connection with any threatened, pending or completed action, action,
suit or proceeding brought against such person by reason of the fact that such
person was a director, officer, employee, agent, partner or trustees of our
company. We will only indemnify such persons if one of the groups set out below
determines that such person has conducted themself in good faith and that such
person:
- reasonably believed that their conduct was in or not opposed to our
company's best interests; or
- with respect to criminal proceedings had no reasonable cause to
believe their conduct was unlawful.
Our Bylaws also require us to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of our company to procure a judgment in our company's
favor by reason of the fact that such person is or was a director, trustee,
officer, employee or agent of our company or is or was serving at the request of
our company in any such capacities against all costs, expenses, judgments,
II-1
penalties, fines, liabilities and all amounts paid in settlement actually and
reasonably incurred by such person. We will only indemnify such persons if one
of the groups set out below determined that such persons have conducted
themselves in good faith and that such person reasonably believed that their
conduct was in or not opposed to our company's best interests. Unless a court
otherwise orders, we will not indemnify any such person if such person shall
have been adjudged to be liable for gross negligence or willful misconduct in
the performance of such person's duty to our company.
The determination to indemnify any such person must be made:
- by our stockholders;
- by our board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
- by independent legal counsel in a written opinion; or
- by court order.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of our company under
Nevada law or otherwise, our company has been advised that the opinion of the
Securities and Exchange Commission is that such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of our company under
Nevada law or otherwise, we have been advised the opinion of the Securities and
Exchange Commission is that such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event a claim for indemnification against such liabilities (other than payment
by us for expenses incurred or paid by a director, officer or controlling person
of our company in successful defense of any action, suit, or proceeding) is
asserted by a director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction, the question of whether such indemnification by it is
against public policy in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
We have sold securities within the past three years without registering the
securities under the Securities Act of 1933 on two separate occasions.
On October 11, 2007 Mr. John Lagourgue, our President and Director, purchased
3,000,000 shares of our common stock for $0.002 per share or an aggregate of
$6,000. On November 24, 2007 Mr. Shan Qiang, our Secretary Treasurer and
Director, purchased 1,500,000 shares of our common stock for $0.002 per share or
an aggregate of $3,000. No underwriters were used, and no commissions or other
remuneration was paid except to Kryptic. The securities were sold in an offshore
transaction relying on Rule 903 of Regulation S of the Securities Act of 1933.
Mr. Lagourgue and Mr. Qiang are not U.S. persons as that term is defined in
Regulation S. No directed selling efforts were made in the United States by
Kryptic, any distributor, any of their respective affiliates or any person
acting on behalf of any of the foregoing. We are subject to Category 3 of Rule
903 of Regulation S and accordingly we implemented the offering restrictions
required by Category 3 of Rule 903 of Regulation S by including a legend on all
offering materials and documents which stated that the shares have not been
registered under the Securities Act of 1933 and may not be offered or sold in
the United States or to US persons unless the shares are registered under the
Securities Act of 1933, or an exemption from the registration requirements of
the Securities Act of 1933 is available. The offering materials and documents
also contained a statement that hedging transactions involving the shares may
not be conducted unless in compliance with the Securities Act of 1933. The
shares continue to be subject to Rule 144 of the Securities Act of 1933.
On March 15, 2008 we accepted subscription agreements that sold 999,000 common
shares to the following 38 subscribers at an offering price of $0.05 per share
for gross offering proceeds of $49,950. This was an offshore transaction
pursuant to Regulation S of the Securities Act. The offering price for the
offshore transactions was established on an arbitrary basis. All of the
II-2
following persons are not U.S. persons, as the term is defined under Regulation
S and the sales of our common stock to the following person are made in offshore
transactions as the term is defined under Regulation S. No direct selling
efforts were made in the United States by Kryptic, any distributor, any of our
respective affiliates, or any person acting on behalf of any of the foregoing.
We are subject to Category 3 of Rule 903 of Regulation S and accordingly we
implemented the offering restrictions required by Category 3 of Rule 903 of
Regulation S by including a legend on all offering materials and documents which
stated that the shares have not been registered under the SECURITIES ACT OF 1933
and may not be offered or sold in the United States or to U.S. persons unless
the shares are registered under the SECURITIES ACT OF 1933, if an exemption from
registration requirements of the SECURITIES ACT OF 1933 is available. The
offering materials and documents also contained a statement that hedging
transactions involving the shares may not be conducted unless in compliance with
the SECURITIES ACT OF 1933.
Number of Shares
Name of Stockholder Subscribed
------------------- ----------
Yan Chunlin 26,000
Fang Yonggang 33,000
Chu Zhijiang 30,000
Chu Huimin 26,000
Leng Chuanliang 25,000
Duan Xuguang 30,000
Li Ke 26,000
Wang Enlin 33,000
Hu Jufeng 28,000
Li Xiuying 24,000
Liu Xia 26,000
Li Xuyang 30,000
Song Shaoyang 25,000
Tian Hongwei 32,000
Liu Shuyou 26,000
Sun Qiaoyun 30,000
Tan Xiaojing 25,000
Wang Xiandong 34,000
Xi Kaihua 21,000
Wang Zuopeng 30,000
Yin Hang 32,000
Zhang Dawei 25,000
Jiang Lili 24,000
Sun Haoxiang 28,000
Zhang Xuesong 27,000
Yang Yan 33,000
Liu Lijian 30,000
Wang Dewen 21,000
Yang Ningning 22,000
Zhang Xiaoxiao 24,000
Zhang Pan 23,000
Yang Fan 22,000
Liu Chen 22,000
Qiu Qiang 22,000
Lu Rongrong 21,000
Gui Hua 21,000
Wang Xiaojie 21,000
Yao Guiling 21,000
-------
TOTAL 999,000
=======
II-3
ITEM 16. EXHIBITS
Number Description
------ -----------
3.1 Articles of Incorporation.
3.2 Bylaws.
5.1 Consent and Opinion re: Legality.
23.1 Consent of Accountant
99.1 Form of subscription agreement used between our company and
the 38 non affiliated shareholders who purchased 999,000
common shares at $0.05 per share, as listed in ITEM 15.
ITEM 17. UNDERTAKINGS
We hereby undertake the following:
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement, or most recent
post-effective amendment, which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement
or any material change to such information in the registration
statement.
That, for the purpose of determining any liability under the Securities Act,
each post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered herein, and the Offering of such securities
at that time shall be deemed to be the initial bona fide Offering thereof.
To remove from registration by means of a post-effective amendment any of the
securities being registered hereby which remain unsold at the termination of the
Offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to the directors, officers and controlling persons pursuant to the
provisions above, or otherwise, Kryptic has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by us of expenses incurred or paid by one of the directors,
officers, or controlling persons in the successful defense of any action, suit
or proceeding, is asserted by one of the directors, officers, or controlling
persons in connection with the securities being registered, Kryptic will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the Securities
Act, and Kryptic will be governed by the final adjudication of such issue.
For determining liability under the Securities Act, to treat the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant under Rule 424(b) (1) or (4) or 497(h) under the Securities Act as
part of this Registration Statement as of the time the Commission declared it
effective.
II-4
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-1 and to this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Las Vegas, Nevada on May 21, 2008.
KRYPTIC ENTERTAINMENT INC.
/s/ John Lagourgue
- --------------------------------------
John Lagourgue
President, Principal Executive Officer
/s/ Shan Qiang
- --------------------------------------
Shan Qiang
Secretary/Treasurer, Principal Financial
Officer and Principal Accounting Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
/s/ John Lagourgue May 21, 2008
- --------------------------------------
John Lagourgue
Director
/s/ Shan Qiang May 21, 2008
- --------------------------------------
Shan Qiang
Director
II-5