News Column

SUNGAME CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operation

May 23, 2014

Forward Looking Statements

This report contains forward looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act") and Section 27A of the Securities Act of 1933 (the "Securities Act"). Statements contained in this report which are not statements of historical facts may be considered forward-looking information with respect to plans, projections, or future performance of the Company as defined under the Private Securities litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those projected. The words "anticipate", "believe", "estimate", "expect", "objective", and "think" or similar expressions used herein are intended to identify forward-looking statements. The forward-looking statements are based on the Company's current views and assumptions and involve risks and uncertainties that include, among other things, national and international economic and market conditions; our ability to raise capital and complete the acquisition of certain assets; our ability to sustain, manage, or forecast growth; existing government regulations and the changes in, or the failure to comply with, government regulations; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

Except as may be required by applicable law, we do not undertake or intend to update or revise our forward-looking statements, and we assume no obligation to update any forward-looking statements contained in this report as a result of new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. You should carefully review and consider the various disclosures we make in this report and our other reports filed with the SEC that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business. The following discussion and analysis should be read in conjunction with the financial statements and related footnotes included elsewhere in this quarterly report which provide additional information concerning the Company's financial activities and condition.

Description of Business

We are an early development stage company. Prior to the merger with Freevi Corporation, Sungame was in the process of establishing a 3D virtual world communities. Sungame (also known as the "Company"), trading under the symbol "SGMZ", is the Company behind the Flightdeck.tv content management and discovery platform. Sungame also uses the brand "Freevi" from time to time as a d.b.a., as it acquired Freevi Corp. and the brand has retained its value sufficient to keep using the brand Freevi. Sungame's mission is simple: to enrich people's lives by becoming a leading social networking, content creation, content discovery and distribution platform. Integral to the site's functionality is a central aggregation engine that excels at serving targeted, focused and high quality content and social medial interactions based on the user's specific interests and past usage history. Other tools available on the website are designed to simplify content creation and distribution for content producers, while providing these artists an engaged audience interested in consuming this content. Sungame is also the Company behind Vidirectory, a video based business directory that simplifies online marketing for small businesses.

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The Company had 5 full time employees as of 31 March 2014.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates. We based our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions provide a basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and these differences may be material.

Risks And Uncertainties

We operate in an emerging industry that is subject to market acceptance and technological change. Our operations are subject to significant risks and uncertainties, including financial, operational, technological and other risks associated with operating an emerging business, including the potential risk of business failure.

Revenue Recognition

We recognize revenue from tablet sales when the products are shipped since title to the products has passed when the tablets leave our shipping area. We have no advertising revenues to date but will recognize advertising revenues as advertising services are provided in the future.

Capitalized Software Costs

Capitalized software costs are capitalized when technological feasibility is proven. These costs are amortized over the estimated life of the related assets.

Long Lived Assets

"Long-lived assets" are reviewed for impairment of value whenever events or changes in circumstances indicate that the carrying value of the assets might not be recoverable or at least at the end of each reporting period. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying value of an asset is not recoverable. For Long-lived assets to be held and used, management measures fair value based on quoted market prices or based on discounted estimates of future cash flows.

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Table of Contents Income Taxes



We have effectively provided a full valuation allowance for the tax effects of our net operating losses during the quarter ended March 31, 2014 and March 31, 2013 and for the period from inception (October 21, 2010) to March 31, 2014 to offset the deferred tax asset that might otherwise have been recognized as a result of operating losses in the current period and prior periods since, because of our history of operating losses, management is unable to conclude at this time that realization of such benefit is currently more likely than not.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards, if adopted, will have a material effect on our future financial position, results of operations, and operating cash flows.

Liquidity and Capital Resources

We have incurred significant losses and negative cash flows from operations since our inception in on October 11, 2010. We have an accumulated deficit of $3,968,452 and a working capital deficiency $3,930,908 as of March 31, 2014. These conditions raise substantial doubt about our ability to continue as a going concern. We have historically financed our activities through the private placement of equity securities and through related party advances. Through March 31, 2014, we have dedicated our financial resources to the development of Flightdeck and Vidirectory and the expansion of our tablet business and general and administrative expenses as described later in the section titled Results of Operations.

We have incurred significant losses and negative cash flows from operations since our inception in on October 11, 2010. We have an accumulated deficit of $3,968,452 and a working capital deficiency $3,930,908 as of March 31, 2014. These conditions raise substantial doubt about our ability to continue as a going concern. We have historically financed our activities through the private placement of equity securities and through related party advances. Through March 31, 2014, we have dedicated our financial resources to the development of Flightdeck and Vidirectory and the expansion of our tablet business and general and administrative expenses as described later in the section titled Results of Operations.

Results of Operations - For the three months ended March 31, 2014 compared to the three months ended March 31, 2013;

Revenues

We generated revenue of $657,250 for the three months ended March 31, 2014, versus revenue of $110 for the three months ended March 31, 2013. All of the revenue for the three months ended March 31, 2014 is from tablet sales.

Tablet related Revenue and Cost of Sales

Tablet related revenue and cost of sales were $657,250 and $274,400 for the three months ended March 31, 2014. There were no tablet sales during the three months ended March 31, 2013 as we did not begin selling tablets until the second quarter of 2013.

General and Administrative Expenses

General and administrative expenses were $1,187,807 and $170,002 for the three months ended March 31, 2014 and 2013, respectively. This increase of $1,017,805 was primarily due to an increase in conference and tradeshows as the company develops exposure for its new tablet product totaling $192,719, an increase in consulting fees of $381,817 primarily due to capital raising activities, an increase in travel, and entertainment expense of $115,736, and an increase in legal fees primarily due to a yet to be filed registration statement of $131,293.

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Table of Contents Interest Expense



Interest expense was $0 and $845 for the three months ended March 31, 2014 and 2013, respectively. This decrease of $845 was primarily due to no borrowing during the three months ended March 31, 2014.

Net Loss

Net loss was $846,766 and $181,129 for the three months ended March 31, 2014 and 2013, respectively. This increase in net loss of $665,637 was attributable to the changes in the revenue and expense captions as described above.

Off-Balance Sheet Arrangements

The Company has no Off-Balance Sheet Arrangements.

Tabular Disclosure of Contractual Obligations

Payments due by Period Total Less than 1-3 years 3-5 years More than 5 years Contractual Obligations 1 year Tablet purchase 680,000 680,000 obligations Long Term Debt 60,000 60,000 Obligations Capital Lease Obligations Operating Lease 19,980 19,980 Obligations Other Long Term Liabilities Reflected on the Company's Balance Sheet under GAAP Totals 759,980 759,980 Going Concern



The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred operating losses and negative operating cash flow since inception and future losses are anticipated. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The Company's plan of operations, even if successful, may not result in cash flow sufficient to finance and expand its business.

Realization of assets is dependent upon continued operations of the Company, which in turn is dependent upon management's plans to meet its financing requirements and the success of its future operations. The ability of the Company to continue as a going concern is dependent on improving the Company's profitability and cash flow and securing additional financing.

Management is presently seeking to raise permanent equity capital in the capital markets to eliminate negative working capital and raise the necessary funds to satisfy its operations. Failure to raise equity capital or secure some other form of long-term debt arrangement will cause the Company to further increase its negative working capital deficit and increase its operating losses.

The Company believes in the viability of its strategy to generate revenues and profitability and in its ability to raise additional funds, and believes that the actions presently being taken by the Company provide the opportunity for it to continue as a going concern. However, the Company can give no assurance that such financing will be available on terms advantageous to it, or at all. Should the Company not be successful in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all of its operational activities. The accompanying unaudited condensed financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

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