UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended December 31, 2009
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission File No. 333-157281
SWEET SPOT GAMES, INC.
NEVADA 26-2909561
------------------------------ ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2840 HIGHWAY 95 ALT. S, SUITE 7
SILVER SPRINGS, NV 89429
-----------------------------------------
(Address of principal executive offices)
(519) 872-2539
--------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X] YES [ ] NO
Indicate by check mark whether the registrant is a shell company as defined in
Rule 12b-2 of the Exchange Act.
[X] YES [ ] NO
APPLICABLE TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. [x ] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: September 30, 2009:
30,110,000
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
Table of Contents
10-Q - Sweet Spot Games, Inc.
FORM 10-Q
PART I
ORGANIZATION AND OPERATIONS 4
FINANCIAL STATEMENTS 8
MANAGEMENT'S DISCUSSION 13
AND ANALYSIS OR PLAN OF OPERATION
QUANTITATIVE AND QUALITATIVE 18
DISCLOSURES ABOUT MARKET RISK
CONTROLS AND PROCEDURES 19
PART II
EXHIBITS 22
SIGNATURES 22
EX-1 (EXHIBIT 31.1)
EX-2 (EXHIBIT 32.1)
1. ORGANIZATION AND OPERATIONS
NATURE OF OPERATIONS
Sweet Spot Games, Inc. (the "Company") was organized in Nevada on June 2, 2008.
The Company is a development stage company and currently has no operations.
The Company is a developer of online, multiplayer skill based games.
The Company develops games in a three dimensional environment allowing users
from around the globe to compete in an environment that very closely resembles
the graphic quality of console based systems.
The Company's mandate is to continue producing highly attractive and
interactive online multiplayer skill-based games that revolutionize the
environment in which online gaming applications exist today.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed financial statements of the Company have
been prepared in accordance with the rules and regulations of the Securities
and Exchange Commission (the "SEC") including the instructions to Form 10-Q and
Regulation S-X. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles in the United State of America ("US GAAP") have been condensed or
omitted from these statements pursuant to such rules and regulation and,
accordingly, they do not include all the information and notes necessary for
comprehensive financial statements and should be read in conjunction with our
audited financial statements for the year ended June 30, 2009, included on form
S-1/A.
In the opinion of management of the Company, all adjustments, which are of a
normal recurring nature, necessary for a fair statement of the results for the
three-month periods have been made. Results for the interim period presented
are not necessarily indicative of the results expected for the entire fiscal
year.
BASIS OF ACCOUNTING
The Company's policy is to prepare its financial statements in conformity with
generally accepted accounting principles in the United States of America and
have been consistently applied in the preparation of the financial statements
on a going concern basis, which assumes the realization of assets and the
discharge of liabilities in the normal course of operations for the foreseeable
future. The Company maintains it financial records on an accrual method of
accounting.
The Company's ability to continue as a going concern is dependent upon the
continued ability to obtain financing to repay its current obligations and fund
working capital until it is able to achieve profitable operations. The Company
will seek to obtain capital from equity financing through private placements.
Management hopes to realize sufficient sales in future years to achieve
profitable operations. There can be no assurance that the Company will be able
to raise sufficient debt or equity capital on satisfactory terms. If
management is unsuccessful in obtaining financing or achieving profitable
operations, the Company may be required to cease operations. The outcome of
these matters cannot be predicted at this time. These financial statements do
not give effect to any adjustments which could be necessary should the Company
be unable to continue as a going concern and, therefore, be required to realize
its assets and discharge its liabilities in other than the normal course of
business and at amounts differing from those reflected in the financial
statements.
4
SOFTWARE DEVELOPMENT COSTS
In March 2000, the Emerging Issues Task Force, known as "EITF," reached a
consensus on ASC 350, Accounting for Website Development Costs. Under ASC 350,
accounting for website development costs depends on the stage in which costs
are incurred. During planning the website, all costs are expensed as incurred.
During developing the applications and infrastructure, costs may be incurred to
acquire or develop both hardware and software needed to operate the site. All
software costs should be accounted for under ASC 350. Under ASC 350, certain
software development costs are capitalized and amortized over the estimated
useful life of the website. Graphics are a component of software and their
initial development costs should be accounted for under ASC 350. After the
launch of the website, graphics charges should be expensed as incurred, except
for website enhancements, which should be capitalized. All costs of operating
the site should be expensed as incurred.
REVENUE RECOGNITION
The Company will recognize sales revenue at the time of delivery when ownership
has transferred to the customer, when evidence of a payment arrangement exists
and the sales proceeds are determinable and collectible. After the customer
has accessed the website and answered the questions necessary to execute
the forms and documents for participation, the customer is required to pay
for the services with a credit card. The credit card charge is immediately
processed electronically. Once approved, the Company immediately completes the
actual filing forms and documents and files them electronically, if possible,
or overnights them to the appropriate state. At that point, we recognize the
revenue from the transaction.
LOSS PER SHARE
Basic loss per share has been calculated using the weighted average number of
common shares issued and outstanding during the year.
RESEARCH AND DEVELOPMENT COSTS
Research is planned search or critical investigation aimed at discovery of new
knowledge with the hope that such knowledge will be useful in developing a new
product or service or a new process or technique or in bringing about a
significant improvement to an existing product or process. Development is the
translation of research findings or other knowledge into a plan or design for a
new product or process or for a significant improvement to an existing product
or process whether intended for sale or use. It includes the conceptual
formulation, design, and testing of product alternatives, and operation of
pilot plants. It does not include routine or periodic alterations to existing
products, production lines, manufacturing processes, and other on-going
operations even though those alterations may represent improvements and it does
not include market research or market testing activities. All research and
development costs have been expensed as incurred in accordance with ASC 730.
5
2. ACCOUNTING PRONOUNCEMENTS
Effective for our interim financial statements as of September 30, 2009, the
Financial Accounting Standards Board ("FASB") Accounting Standards Codification
("ASC") became the primary source of authoritative accounting principles
recognized by the FASB to be applied in the preparation of financial statements
in accordance with GAAP. Rules and interpretations of the SEC are also sources
of authoritative GAAP for SEC registrants. The ASC supersedes all existing non-
SEC accounting and reporting standards but does not change GAAP. The adoption
of the ASC did not have a material impact on our consolidated financial
statements.
In March 2008, the FASB issued ASC No. 815, "Disclosures about Derivative
Instruments and Hedging Activities-an amendment of FASB Statement No. 133". ASC
No. 815 gives financial statement users better information about the reporting
entity's hedges by providing for qualitative disclosures about the objectives
and strategies for using derivatives, quantitative data about the fair value of
and gains and losses on derivative contracts, and details of credit-risk-
related contingent features in their hedged positions. FASC No. 815 is
effective for financial statements issued for fiscal years beginning after
November 15, 2008 and interim periods within those years. The Company does not
expect the adoption of FASC No. 815 to have a material effect on the condensed
financial statements.
In December 2007, the FASB released ASC 805 "Business Combinations". This
standard revises and enhances the guidance set forth in ASC 805 by establishing
a definition for the "acquirer," providing additional guidance on the
recognition of acquired contingencies and non-controlling interests, and
broadening the scope of the standard to include all transactions involving a
transfer in control, irrespective of the consideration involved in the
transfer. ASC 805 is effective for business combinations for which the
acquisition date occurs in a fiscal year beginning on or after December 15,
2008. Although the standard will not have any impact on the current condensed
financial statements, application of the new guidance could be significant to
the Company in the context of future merger and acquisition activity.
In December 2007, the FASB released ASC 810, "Non-Controlling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51". This statement
amends ARB 51 to establish accounting and reporting standards for the non-
controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a non-controlling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. ASC 810 is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. The Company does not expect the standard to have a material
impact on the condensed financial statements.
In April 2009, the FASB released ASC 820, "Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly." This position
provides additional guidance for estimating fair value in accordance with ASC
820, "Fair Value Measurements," when the volume and level of activity for the
asset or liability have significantly decreased as well as identifying
circumstances that indicate a transaction is not orderly. The Company does not
expect the standard to have a material impact on the condensed financial
statements.
6
In April 2009, the FASB released ASC 320 and FASC 958, "Recognition and
Presentation of Other-Than-Temporary Impairments," which is intended to provide
greater clarity to investors about the credit and noncredit component of an
other than temporary impairment charge ("OTTI") and to more effectively
communicate when an OTTI event has occurred. This FSP applies to debt
securities and requires that the total OTTI be presented in the consolidated
statement of income with an offset for the amount of impairment that is the
noncredit component recognized in other comprehensive income. Noncredit
component losses are to be recorded in other comprehensive income if an
investor can assess that it does not have the intent to sell the security or it
is more likely than not that it will not have to sell the security prior to its
anticipated recovery. Also in accordance with FSP ASC 320 and ASC 958, prior
periods' noncredit component other than temporary impairment charges are
reclassified as additions to retained earnings and reductions in accumulated
other comprehensive income. The Company does not expect the standard to have a
material impact on the condensed financial statements.
In May 2009, the FASB released ASC 855, "Subsequent Events," which establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before the financial statements are issued or
available to be issued. Effective for our interim financial statements as of
December 31, 2009, we reviewed events occurring through the filing date of this
document.
2. RELATED PARTY TRANSACTIONS
The Company incurred compensation and payroll tax expense in the amount of
$5,000 and $5,558 which was paid to a relative of the Company's President for
the six months ended December 31, 2009 and the year ended June 30, 2009,
respectively.
7
Sweet Spot Games, Inc.
(A Development Stage Company)
Condensed Balance Sheets
December 31, 2009 June 30, 2009
(Unaudited) (Audited)
----------------- --------------
Assets
Current assets
Cash $ 57,122 $ 17,802
----------------- --------------
Property and equipment
Equipment 3,253 3,252
Less: accumulated depreciation (1,475) (933)
----------------- --------------
Net property and equipment 1,778 2,319
Other assets
Software development costs 12,000 24,900
Less: accumulated amortization - (2,767)
----------------- --------------
Total other assets 12,000 22,133
----------------- --------------
$ 70,900 $ 42,254
================= ==============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable - trade $ 600 $ 600
Accrued expenses - 558
----------------- --------------
Total current liabilities 600 1,158
----------------- --------------
Stockholders' equity
par value; none issued - -
Common stock - authorized
75,000,000 shares, $0.001 par
value; issued and outstanding
30,110,000 shares 30,110 30,110
Additional paid in capital 807,755 704,390
Deficit accumulated during the
development stage (767,565) (693,404)
----------------- --------------
Total stockholders' equity 70,300 41,096
----------------- --------------
$ 70,900 $ 42,254
================= ==============
"The accompanying notes to the unaudited condensed financial statements are
an integral part of these statements."
8
Sweet Spot Games, Inc.
(A Development Stage Company)
Unaudited Condensed Income Statements
For the Three For the Three
Months Ended Months Ended
December 31, 2009 December 31, 2008
----------------- -----------------
Revenue
Sales $ - $ -
----------------- -----------------
Operating expenses
Advertising and promotion 571 -
Bank and other interest charges 367 323
Consulting expense 6,700 -
Depreciation and amortization 271 271
Fees and dues 918 -
Legal and professional fees 1,500 500
Management fee 10,300 -
Office expense 231 -
Travel and meals 6,647 12,681
Website 1,699 171
----------------- -----------------
Total operating expenses 29,204 13,946
----------------- -----------------
Other expenses
Loss on software development - -
Loss on foreign exchange 2,340 -
----------------- -----------------
Total other expenses 2,340 -
----------------- -----------------
Net loss $ (31,544) $ (13,946)
----------------- -----------------
Weighted average number of shares
outstanding 30,110,000 29,950,000
Loss per share $ (0.00) $ (0.00)
"The accompanying notes to the unaudited condensed financial statements are
an integral part of these statements."
9
Sweet Spot Games, Inc.
(A Development Stage Company)
Unaudited Condensed Income Statements
For the Six For the Six
Months Ended Months Ended Inception to
December 31, 2009 December 31, 2008 December 31, 2009
------------------ ----------------- ------------------
Revenue
Sales $ - $ - $ 13,325
Operating expenses
Advertising and promotion 1,197 - 1,197
Bank and other interest charges 885 586 2,039
Consulting expense 6,700 - 6,700
Depreciation and amortization 542 391 4,242
Fees and dues 918 - 918
Legal and professional fees 1,500 33,000 651,951
Management fee 14,742 - 20,300
Office expense 1,175 493 2,648
Travel and meals 16,480 13,153 44,035
Website 5,157 471 21,995
Total operating expenses 49,296 48,094 756,025
Other expenses
Loss on software development 22,133 - 22,133
Loss on foreign exchange 2,732 - 2,732
Total other expenses 24,865 - 24,865
Net loss $ (74,161) $ (48,094) $ (767,565)
================== ================= ==================
Weighted average number of
shares outstanding 30,110,000 29,791,429 29,964,474
------------------ ----------------- ------------------
Loss per share $ (0.00) $ (0.00) $ (0.03)
"The accompanying notes to the unaudited condensed financial statements are an integral
part of these statements."
10
Sweet Spot Games, Inc.
(A Development Stage Company)
Unaudited Condensed Statements of Stockholder Equity
Common Stock Additional
Number Paid in Accumulated
of Shares Amount Capital Deficit Total
--------- ------ --------- ------------- -----
Balance at June 2, 2008
(Date of Inception) 26,500,000 $ 26,500 $ (14,000) $ - $ 12,500
Common stock issued for services
performed 3,000,000 3,000 597,000 - 600,000
Net loss for June 2, 2008 to
June 30, 2008 - - - (612,101) (612,101)
---------- -------- ----------- ---------- -----------
Balance at June 30, 2008 29,500,000 29,500 583,000 (612,101) 399
Private placement memorandum,
shares issued from July 1, 2008
to September 30, 2008 at $0.20
per share 450,000 450 89,550 - 90,000
Private placement memorandum,
shares issued in April and
May 2009 at $0.20 per share 160,000 160 31,840 - 32,000
Net loss for the year ended
June 30, 2009 - - - (81,303) (81,303)
---------- -------- ----------- ---------- -----------
Balance at June 30, 2009 30,110,000 30,110 704,390 (693,404) 41,096
Additional paid in capital - - 104,000 - 104,000
Syndication fees - - (635) - (635)
Net loss for the six months ended
December 31, 2009 - - - (74,161) (74,161)
---------- -------- ----------- ----------- -----------
Balance at December 31, 2009 30,110,000 $ 30,110 $ 807,755 $(767,565) $ 70,300
========== ======== =========== =========== ===========
The accompanying notes to the unaudited condensed financial statements are an integral part of these statements.
11
Sweet Spot Games, Inc.
(A Development Stage Company)
Unaudited Condensed Statements of Cash Flows
For the Six For the Six
Months Ended Months Ended Inception to
December 31, 2009 December 31, 2008 December 31, 2009
----------------- ----------------- -----------------
Cash flows from operating activities
Net loss $ (74,161) $ (48,094) $ (767,565)
Adjustments to reconcile net loss to
cash used in operating activities
Depreciation and amortizatio 542 391 4,242
Common stock issued for services performed - - 600,000
Loss on software development 22,133 - 22,133
Loss on foreign exchange 2,732 - 2,732
Changes in assets and liabilities
Accounts payable - 500 600
Accrued expenses (558) - -
----------------- ----------------- -----------------
Net cash used in operating activities (49,312) (47,203) (137,858)
----------------- ----------------- -----------------
Cash flows from investing activities
Cash purchases of property and equipment - (3,253) (3,253)
Cash spent on software development costs (12,000) (17,300) (36,900)
----------------- ----------------- -----------------
Net cash used in investing activities (12,000) (20,553) (40,153)
----------------- ----------------- -----------------
Cash flows from financing activities
Additional paid in capital 101,267 90,000 235,768
Syndication fees (635) - (635)
----------------- ----------------- -----------------
Net cash provided by financing activities 100,632 90,000 235,133
----------------- ----------------- -----------------
Net increase in cash 39,320 22,244 57,122
Cash at beginning of period 17,802 399 -
----------------- ----------------- -----------------
Cash at end of year $ 57,122 $ 22,643 $ 57,122
================= ================= =================
The accompanying notes to the unaudited condensed financial statements are an integral part of these statements.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Forward Looking Statements
We make certain forward-looking statements in this report. Statements that
are not historical facts included in this Form 10-Q are "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties
that could cause actual results to differ from projected results. Such
statements address activities, events or developments that the
Company expects, believes, projects, intends or anticipates will or
may occur, including such matters as future capital, debt
restructuring, pending legal proceedings, business strategies,
expansion and growth of the Company's operations, and cash flow. Factors
that could cause actual results to differ materially ("Cautionary
Disclosures") are described throughout this Form 10-Q. Cautionary
Disclosures include, among others: general economic conditions, the
strength and financial resources of the Company's competitors,
environmental and governmental regulation, labor relations, availability and
cost of employees, material and equipment, regulatory
developments and compliance, fluctuations in currency exchange
rates and legal proceedings. Statements concerning our future
operations, prospects, strategies, financial condition, future
economic performance (including growth and earnings), demand for
our services, and other statements of our plans, beliefs, or
expectations, including the statements contained under the
captions "Risk Factors," "Management's Discussion and Analysis or Plan of
Operation," "Description of Business," as well as captions elsewhere in
this document, are forward-looking statements. In some cases these
statements are identifiable through the use of words such as
"anticipate," "believe," "estimate," "expect," "intend," "plan,"
"project," "target," "can," "could," "may," "should," "will,"
"would," and similar expressions. We intend such forward-looking
statements to be covered by the safe harbor provisions contained in
Section 27A of the Securities Act of 1933, as amended (the "Securities
Act") and in Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). All written and oral forward-looking
statements attributable to the Company are expressly qualified in
their entirety by the Cautionary Disclosures. The Company disclaims
any obligation to update or revise any forward-looking statement to reflect
events or circumstances occurring hereafter or to reflect the
occurrence of anticipated or unanticipated events.
The nature of our business makes predicting the future trends of our
revenues, expenses, and net income difficult. Thus, our ability to predict
results or the actual effect of our future plans or strategies is
inherently uncertain. The risks and uncertainties involved in our
business could affect the matters referred to in any forward-looking
statements and it is possible that our actual results may differ
materially from the anticipated results indicated in these forward-looking
statements. Important factors that could cause actual results to
differ from those in the forward-looking statements include, without
limitation, the factors discussed in the section entitled "Risk Factors" and
the following:
13
- the effect of political, economic, and market conditions and
geopolitical events;
- legislative and regulatory changes that affect our business;
- the availability of funds and working capital;
- the actions and initiatives of current and potential competitors;
- investor sentiment; and
- our reputation.
We do not undertake any responsibility to publicly release any
revisions to these forward-looking statements to take into account events or
circumstances that occur after the date of this report. Additionally, we do
not undertake any responsibility to update you on the occurrence of any
unanticipated events which may cause actual results to differ from those
expressed or implied by any forward-looking statements.
The following discussion and analysis should be read in conjunction with
our consolidated financial statements and the related notes thereto as filed
with the SEC and other financial information contained elsewhere in this Form
10-Q.
Overview
Sweet Spot Games, Inc. (the "Company") is currently a developmental stage
company that has limited revenues.
The company expects to launch its first fully developed online multiplayer
game, "Jockey" early in 2010. The game is an online horse racing simulator
which allows users worldwide to connect through the Internet, download the
software and become virtual jockeys.
The "pay to play" aspect of the game and advertising are the two methods that
the company will use to generate revenue. The payment from each participant is
broken down into four categories that will allow users to be able to choose the
intensity of their bet on each race. They will have the ability to setup an
online account with an online payment processing company and will be able to
withdraw and deposit funds in real-time. Payment will be categorized into $2,
$5, $10 and $20 dollar rooms. Once a room is filled with the necessary 8
players the race will commence. There will be multiple rooms for each category.
The company will take a 25% cut from each race, leaving the remaining 75% to be
distributed among the top three finishers.
14
The game itself allows users to control the horse and easily manoeuvre camera
angles which will enable them to view 360 degrees from their current position,
similar to real life. Jockey has also built-in collision detection that slows
down the horse if the rider happens to bump into another horse or if they hit a
barrier. Each user will be allowed to use 10 lashes that speed up the horse by
15%. Steering and the timing of the lashes will be determining factors in the
race. The bottom of each users' screen displays the elapsed time, current
position on the track, placement and speed in km/h.
The Company has the ability to develop gaming applications in a true 3D
environment featuring skill-based multi-player connectivity and a "pay-for-
play" payment platform. The Company has chosen the approach of marketing its
applications to existing online portals that have the ability to host and
feature the applications to their existing audience. This strategy allows the
Company to focus on using its current resources on developing an extensive
portfolio of online gaming applications rather than marketing the games
independently.
Plan of Operations
To date the Company has financed its operations exclusively from private
placements. Until the Company begins to generate revenues, it expects to
continue to rely on raising capital through the sale of its common stock to
third parties. The Company has no other sources of capital and there can be no
guarantee that the Company will be able to meet its obligations or obtain
sufficient capital to complete its plan of operations for the next twelve (12)
months. There is no assurance that our officers can or will provide such funds
when the need arises.
The Company was organized in Nevada on June 2, 2008. The Company is a
development stage company and currently has limited operations. The Company is
a developer of online multiplayer skill-based "pay-for-play" gaming
applications.
The Company has the ability to develop gaming applications in a true 3D
environment featuring multi-player connectivity and a "pay-for-play" payment
platform. The Company has chosen the approach of marketing its applications to
existing online gaming portals that have the ability to host and feature the
applications to their existing audience. This strategy allows the company to
focus on using its current resources on developing an extensive portfolio of
online gaming applications rather than marketing the games independently.
"Jockey" is expected to be an online multi-player skill-based horse racing
simulator that allows users from around the world to connect and compete
amongst each other in a true 3D environment for real-money. Upon completion,
the Company intends to license the "Jockey" game on a "white-label" revenue-
sharing basis to existing online portals that already have a significant amount
of traffic and are looking to expand their offering within the gaming market.
To date we have received no royalties or revenues from the "Jockey" game. The
Company hopes to position itself as a leader in the development of multi-player
skill-based gaming applications for the online and mobile application market.
The game itself allows users to control the horse and easily manoeuvre camera
angles which will enable them to view 360 degrees from their current position,
similar to real life. Jockey has also built-in collision detection that slow
down the horse if the rider happens to bump into another horse or if they hit a
barrier. Each user will be allowed to use 10 lashes that speed up the horse by
15%. Steering and the timing of the lashes will be determining factors in the
race. The bottom of each users' screen displays the elapsed time, current
position on the track, placement and speed in km/h.
The revenue making aspect of the company is generated by a "pay to play" model.
Users pay a specified amount depending on which game room they enter. They are
allowed to spend $2, $5, $10 and $20. Once a room is filled with 8 players the
race begins. The top three finishers split 75% of the pot while the house takes
a cut of 25%.
15
We believe the online gaming portal community exceeds 1,200 major players
throughout the global landscape. Our approach from the onset was to specialize
in our niche in becoming a developer of online multi-player skill-based games
and in turn license these applications on a white-label revenue-sharing basis.
Our approach in marketing our gaming applications includes the initial
generation of an extensive database that will contain the contact information
of each online gaming portal that exceeds certain minimum specifications in
terms of membership size, geographic scope, licensing retention and
jurisdiction and daily traffic volumes. Once we have narrowed down our contact
list with portals that we determine would benefit most from incorporating our
applications, an initial call will be placed into each company to determine who
has the role of Director of Marketing or Business Development. Once
determining our point of contact, an initial package will be sent out
containing information on Sweet Spot Games, Inc. and a proposed Partnership
Plan.
Our initial goal is to establish the core gaming infrastructure that will
facilitate the licensing mechanism to our partner network. Our approach in
licensing our applications included a "black box" local installation and a
monetary audit tool that monitors the cash flow of "pay-for-play" revenue from
our specific applications installed on the partner portal.
Our secondary goal is to initiate our marketing initiatives and focus
exclusively on generating solid relationships with large online gaming portals.
Our partnership agreements will be structured on a revenue sharing model. Our
system is currently structured to conduct a bi-weekly cash-flow audit and will
generate a report that will show what revenues have been generated and what
percentage of "net" revenue is owed to our affiliate.
We are aware that each application that we launch within our partner network
retains a "life-cycle". The community of users that participate in playing
these applications are on the constant look-out for the next best "app". Our
mandate includes the constant development of gaming applications that will
facilitate the constant demand. Expanding and retaining our development team
is top-priority.
16
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. Overall, we had a net loss of $ 74, 161 for the six
months ended December 31, 2009. During the six months ended December
31, 2009, we had net cash used in operating activities of $(49,312), net cash
used in investing activities of $(12,000), and net cash provided by financing
activities of $100,632. At the end of the three-month period, our cash balance
was $57,122.
CASH FLOWS FROM OPERATING ACTIVITIES. Net cash used in operating
activities of $(49,312) for the six months ended December 31,
2009 was primarily attributable to the net loss from operations. The
adjustments to reconcile the net loss to net cash included depreciation
and amortization expense of $542 , loss on software development of $22,133,
loss on foreign exchange of $2,732, and accrued expenses of $(558).
CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing
activities of $(12,000) for the six months ended December 31, 2009
was entirely attributable to the $12,000 from cash spent on software
development costs.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash of $100,632 provided by
financing activities in the six months ended December 31, 2009 was due
to additional paid in capital of $101,267 with syndication fees of $(635).
FINANCING. We ended December 31, 2009 with $57,122 of cash and cash equivalents
on our balance sheet. The cash at the beginning of the period was $17,802, and
the net increase in cash was $ 39,320 .
INTERNAL SOURCES OF LIQUIDITY. There is no assurance that funds from our
operations, if and when they commence, will meet the requirements of
our daily operations in the future. In the event thatfunds from our
operations are insufficient to meet our operating requirements, we
will need to seek other sources of financing to maintain liquidity.
EXTERNAL SOURCES OF LIQUIDITY. We intend to pursue all potential
financing options in 20 10 as we look to secure additional funds
to both stabilize and grow our business operations and begin extraction.
Our management will review any financing options at their disposal and
will judge each potential source of funds on its individual merits. We
cannot assure you that we will be able to secure additional funds from
debt or equity financing, as and when we need to or if we can, that the terms
of such financing will be favorable to us or our existing shareholders.
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INFLATION. Our management believes that inflation has not had a material
effect on our results of operations, and does not expect that it will in fiscal
year 2009.
OFF-BALANCE SHEET ARRANGEMENTS. We do not have any off-balance sheet
arrangements.
RESULTS OF OPERATIONS
Comparison of the three months ended December 31, 2009, to the three months
ended December 31, 2008:
Operating Expense
The Company recorded an operating loss of $(31,544) for the three months ended
December 31, 2009 compared to a loss of $(13,946) for the three months ended
December 31, 2008. Legal and professional fees were $(1,500) for the three
months ended December 31, 2009, as compared to $500 in the same period of 2008.
Depreciation and amortization were $271 for the three months ended December 31,
2009. Expenses were added for the three months ended December 31, 2009 for
advertising and promotion, totaling $571 and a management fee, totaling
$10,300. Also, the travel and meals expense decreased from $12,681 in the three
months ended December 31, 2008 to $6,647 for the same period of 2009. The
website development expense increased from $171 to $1,699 for those same
respective periods.
Other Income (Expense)
Foreign exchange expense increased to $2,340 for the three months ended
December 31, 2009, compared to no expenses for foreign exchange in the same
period of 2008.
Net Loss
The net loss for the three months ended December 31, 2009 was $(31,544)
as compared to a net loss of $(13,946) for the three months ended
December 31, 2008.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
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CONTROLS AND PROCEDURES
CONTROLS AND PROCEDURES
Quarterly Evaluation of Controls Update to December 31, 2009
As of the end of the period covered by this quarterly report on Form 10- Q, we
evaluated the effectiveness of the design and operation of (i) our disclosure
controls and procedures ("Disclosure Controls"), and (ii) our internal control
over financial reporting ("Internal Controls"). This evaluation ("Evaluation")
was performed by our President and Chief Executive Officer for the quarter
ended September 30, 2009, Greg Galanis ("CEO") and by our Chief Financial
Officer for the quarter ended September 30, 2009. In this section, we present
the conclusions of our CEO based on and as of the date of the Evaluation, (i)
with respect to the effectiveness of our Disclosure Controls, and (ii) with
respect to any change in our Internal Controls that occurred during the most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect our Internal Controls.
Our auditors, Brock, Schechter & Polakotf, LLP, reported to management on
system deficiencies that constituted material weaknesses in the internal
controls of the Company. We have received their comments and propose to act on
their observations as follows:
1. Internal Control Environment - In order to address the issue, we are
currently implementing an internal control system which, as defined by the
Committee of Sponsoring Organization of the Treadway Commission, achieves the
establishment of a control environment, risk assessment, control activities,
information and communication and monitoring.
2. ATM activity - With the implementation of the internal controls
mentioned above the use of the ATM has been precluded and according to these
internal controls, receipts for business purposes and invoices for services are
retained for the timely and accurate recording into the general ledger system
for monitoring and communicating all financial information.
CEO and CFO Certifications
Attached to this quarterly report, as Exhibits 31.1 and 32.1, are
certain certifications of the CEO and CFO, which are required in
accordance with the Exchange Act and the Commission's rules
implementing such section (the "Rule 13a- 14(a)/15d-14(a)
Certifications"). This section of the quarterly report contains the
information concerning the Evaluation referred to in the Rule 13a-
14(a)/15d-14(a) Certifications. This information should be read in
conjunction with the Rule 13a- 14(a)/15d-14(a) Certifications for a more
complete understanding of the topic presented.
Disclosure Controls and Internal Controls
Disclosure Controls are procedures designed with the objective of ensuring that
information required to be disclosed in our reports filed with the Commission
under the Exchange Act, such as this quarterly report, is recorded, processed,
summarized and reported within the time period specified in the
Commission's rules and forms. Disclosure Controls are also designed with the
objective of ensuring that material information
relating to the Company is made known to the CEO and the CFO by others,
particularly during the period in which the applicable report is being
prepared. Internal Controls, on the other hand, are procedures which are
designed with the objective of providing reasonable assurance that (i)
our transactions are properly authorized, (ii) our assets are
safeguarded against unauthorized or improper use, and (iii) our
transactions are properly recorded and reported, all to permit the
preparation of complete and accurate financial statements in
conformity with accounting principles generally accepted in the United
States.
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Limitations on the Effectiveness of Controls
Our management does not expect that our Disclosure Controls or our
Internal Controls will prevent all error and all fraud. A control system, no
matter how well developed and operated, can provide only reasonable, but not
absolute assurance that the objectives of the control system are met.
Further, the design of the control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances so of fraud, if any, within the Company have
been detected. These inherent limitations include the realities that judgments
in decision -making can be faulty, and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by
the individual acts of some persons, by collusion of two or more people, or
by management override of the control. The design of a system of controls
also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated objectives under all potential future
conditions. Over time, control may become inadequate because of changes in
conditions, or because the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a cost-
effective control system, misstatements due to error or fraud may occur and
not be detected.
Scope of the Evaluation
The CEO and CFO's evaluation of our Disclosure Controls and Internal
Controls included a review of the controls' (i) objectives, (ii)
design, (iii) implementation, and (iv) the effect of the controls on the
information generated for use in this quarterly report. In the course of
the Evaluation, the CEO and CFO sought to identify data errors,
control problems, acts of fraud, and they sought to confirm that appropriate
corrective action, including process improvements, was being undertaken.
This type of evaluation is done on a quarterly basis so that the conclusions
concerning the effectiveness of our controls can be reported in our
quarterly reports on Form 10-QSB and annual reports on Form 10-KSB. The
overall goals of these various evaluation activities are to monitor our
Disclosure Controls and our Internal Controls, and to make modifications
if and as necessary. Our external auditors also review Internal Controls in
connection with their audit and review activities. Our intent in this regard
is that the Disclosure Controls and the Internal Controls will be
maintained as dynamic systems that change (including improvements
and corrections) as conditions warrant.
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Among other matters, we sought in our Evaluation to determine whether
there were any significant deficiencies or material weaknesses in our
Internal Controls, which are reasonably likely to adversely affect
our ability to record, process, summarize and report financial information,
or whether we had identified any acts of fraud, whether or not material,
involving management or other employees who have a significant role in
our Internal Controls. This information was important for both the
Evaluation, generally, and because the Rule 13a-14(a)/15d-14(a)
Certifications, Item 5, require that the CEO and CFO disclose that
information to our Board , and to our independent auditors, and to
report on related matters in this section of the quarterly report. In the
professional auditing literature, "significant deficiencies" are referred to
as "reportable conditions". These are control issues that could have
significant adverse affect on the ability to record, process,
summarize and report financial data in the financial statements. A
"material weakness" is defined in the auditing literature as a
particularly serious reportable condition where the internal control does
not reduce, to a relatively low level, the risk that misstatement cause by
error or fraud may occur in amounts that would be material in relation to
the financial statements and not be detected within a timely period by
employee in the normal course of performing their assigned functions. We also
sought to deal with other controls matters in the Evaluation, and in
each case, if a problem was identified; we considered what revisions,
improvements and/or corrections to make in accordance with our ongoing
procedures.
Conclusions
Based upon the Evaluation, the changes recommended by our auditors did not take
effect during the quarter ended December 31 , 2009 and material
weaknesses still existed as of December 31 , 2009. The Company intends
to implement disclosure controls and procedures as designed to provide
reasonable assurance of achieving our objectives subsequent to the quarter
ended December 31 , 2009. Our CEO and CFO have concluded that our
disclosure controls and procedures are effective at that reasonable assurance
level to ensure that material information relating to the Company is
made known to management,
including the CEO and CFO, particularly during the period when our
periodic reports are being prepared, and that our Internal Controls are
effective at that assurance level to provide reasonable assurance that our
financial statements are fairly presented inconformity with accounting
principles generally accepted in the United States.
Additionally, there has been no change in our Internal Controls that occurred
during our most recent fiscal quarter that has materially affected, or is
reasonably likely to affect, our Internal Controls.
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EXHIBITS
(a) Exhibits required to be filed by Item 601 of Regulation S-B:
31.1 Certification of Chief Executive Officer and Chief Financial Officer
Under Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SWEET SPOT GAMES, INC.
February 12, 2010
/s/ GREGORY GALANIS, President
- ---------------------------
GREGORY GALANIS,
President and Chief Executive Officer
(Principal Executive Officer and Principal Financial and
Accounting Officer)
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