ITEM 1. BUSINESS
Formation and year of organization
We were incorporated on May 26, 2010, in the State of Delaware. Our authorized capital consists of 500,000,000 shares of our common stock (the “Common Shares”) with a par value of $0.0001 per common share.
Our principal executive offices are currently located in Israel at the following address: 60 Mazeh Street, Apartment 12, Tel Aviv, 65789, Israel. Our telephone number is +972 (54) 2229702. Our website is http://www.progamingcorp.com
Bankruptcy, Receivership or Similar Proceeding
We have never declared bankruptcy, have never been in receivership, and have never been involved in any legal actions or proceedings.
Recent Corporate Developments
On March 1, 2012, we filed a Certificate of Amendment of our Certificate of Incorporation effecting a forward stock split of the Company’s issued and outstanding shares of Common Stock at a ratio of ten-to-one (the “Forward Split”). The Certificate of Amendment provides that each ten (10) outstanding shares of the Company's Common Stock, par value $0.0001 per share, will be split and converted, automatically, without further action, into ten (10) shares of Common Stock. The Forward Split has been reflected in this Annual Report on Form 10-K.
In April 2011, we raised $40,000 and issued 400,000 shares of our common stock to two non-US investors. These transactions did not involve any underwriters, underwriting discounts or commissions, nor any public offering. We believe these transactions were exempt from registration pursuant to Regulation S of the Securities Act of 1933 (the "Securities Act").
Recent Business Developments
On July 10, 2011, we executed a license agreement with GT-SAT International S.A.R.L ("GT-SAT"), a corporation organized under the laws of Luxemburg. Such license agreement granted GT-SAT a non-exclusive right to develop websites and offer online games based on our proprietary gaming platform in Europe, with an exclusive license to develop websites and offer online games based on our proprietary gaming platform in Luxembourg, Belgium, and Holland. In consideration of such license, GT-SAT made an upfront, non refundable, payment of $90,000 and has agreed to pay us royalties on future revenues. On December 26, 2011 GT-SAT has terminated the license agreement. The stated reason for termination was the economic situation in Europe.
On July 1, 2011, we executed a license agreement with Yanir Levin Ltd., an Israeli corporation. Such license agreement granted the licensee a non-exclusive right to develop websites and offer online games based on our proprietary gaming platform in Asia, with an exclusive license to develop websites and offer online games based on our proprietary gaming platform in Israel. In consideration of the license granted to the licensee, the licensee made an upfront, non refundable, payment of $29,000 and has agreed to pay us royalties on future revenues.
Business of Issuer
We are engaged in the development of an online gaming platform and intend to enter into licensing agreements with online game service providers in the United States in order to allow them to offer games of skill on our platform as part of their member services.
The Online Gaming Market
We are currently focusing our marketing efforts on two complementary niche markets: the online gaming market and the online advertizing market.
The online gaming market is the market for games played over the internet. Online games can range from simple text-based games to games incorporating complex graphics and virtual worlds populated by many players simultaneously. Online games include single-player online games and multiplayer online games. Multiplayer online games appeal to online gaming communities, for whom online gaming is a form of social activity.
The online advertizing market is the market for online advertizing campaigns designed to increase the traffic volume of websites. We believe that our proprietary platform will enables advertisers to increase the effectiveness of such campaigns by offering material rewards to winners of online gaming tournaments.
The Market Opportunity
The online gaming market is one of the fastest growing global markets today. According to the CNBC.com article entitled “Rivals Square Off in $15 Billion Online Gaming Market” dated March 26, 2010, the online gaming market is currently estimated to be worth $15 billion. With regard to North America, according to a report by BBC News dated March 24, 2009, the findings of analysts Screen Digest suggested that the multiplayer online gaming market in Europe and North America had grown by 22% and was worth $1.4 billion.
According to a press release issued on July 10, 2009 by comScore, Inc. (NASDAQ: SCOR), a leader in measuring the digital world, there were 87 million U.S. visitors at online game websites in May 2009, an increase of 22 percent from the prior year. comScore noted a significant increase in the size of its audience during the past year as consumers increasingly opted for cheaper entertainment alternatives, driven in part by the reality of economic challenges. According to comScore, Yahoo! Games ranked No. 1 in the online gaming category with 19.4 million visitors, representing a 6-percent increase over the past year, followed by EA Online with 18 million visitors (up 34 percent), Nickelodeon Casual Games with 14.8 million visitors, and WildTangent Network with 13.8 million visitors (up 16 percent).
Edward Hunter, comScore director of gaming solutions, concluded that “Online gaming continues to be one of the top gaining categories over the past year growing at ten times the rate of the total U.S. Internet population and reaching nearly one out of every two Internet users.” He added that “the growth in the category is occurring not only at the top gaming destination sites, but also through viral distribution platforms, including widgets and applications. In fact, some online gaming companies that distributed their games across sites are reaching as many people as the top online gaming sites.” (source: comScore, Inc. July 10, 2009 press release) .
Similarly, in 2009, 21.3 million PC Game full-game digital downloads were purchased in the United States (source: the website of NPD Group).
Today, a gamer wishing to play online must purchase a client account from a game service provider and then he can either play online with friends connected to a private game server or subscribe to a commercial game server and play with other subscribers. The leading business model for the online gaming market that we are aware of is "pay per access," whereby a gamer pays the online game service provider a fee (typically a monthly fee) for the right to access the game service provider’s online games.
Our Software Product
We have developed a proprietary online gaming platform which will enable gamers to play games of skill against each other (either one-to-one or many-to-many), with the winner collecting prize money, or any other prize. All games, scores and statistics will be maintained within the server only. The system’s billing method is proprietary and configured to commercial billing systems.
We have designed our online gaming platform to allow online game service providers to protect novice gamers from entering games with high stakes by restricting such gamers to low entry amount games with players of their own level. Our online gaming platform is capable of creating a statistical gamer rank data file on each participating gamer and, based on rank, will allow him to enter games up to his maximum allowed amount. The software we have developed has the ability to detect if any gamer tries to abuse the level system by opening an account with a new name by ranking him according to his actual game performance.
In addition, our online gaming platform is based on a model that is not dependent on user self-reporting. Unlike other systems that depend on self-reporting by users, our technology includes a reliable accounting mechanism; is easy to implement on third party servers and billing systems; is highly secured (no middleware); and is capable of operation in a variety of game billing scenarios (DM, TDM, CTF, etc.).
Our software product enables a business model that combines traditional online gaming (“pay per access”) with the potential for monetary reward for the winner. Each player who has an account with a game service provider that licenses our platform will be able to pay for the right to compete in games of skill with other players, with the winner of the game to receive his money back plus his competitor’s payments. We completed the development of the prototype of our software product during the third quarter of 2011, and we intend to continue investing in its improvement as necessary.
In March 2012 we completed the development of a Flash based online game that is integrated with our proprietary platform. We intend to leverage this game to market our technology for use in web advertising campaigns.
We also intend to further license our online gaming platform to online game service providers worldwide. To date, we have licensed distribution rights for our online gaming platform to two (2), entities one in Europe and one in Israel; however, the European entity has terminated its license agreement.
Target Market
We currently target two markets
The first market is the online gaming market and the online game service providers in this market. There are hundreds of such game service providers in the United States alone. We intend to offer our online gaming platform to the leading online game service providers as well as to niche providers to enable these game service providers to enhance the gaming experience that they offer their customers, thereby generating additional revenues.
The second market is the internet advertizing market. Currently considerable sums of money are expanded by business entities in order to increase the traffic on their websites. We believe that our proprietary technology has the potential to add a whole new dimension to the capabilities of web marketing and advertizing companies to succeed in this task.
Pricing Model
We plan to enter into licensing agreements with online game service providers, as well as website owners, for the use of our online gaming platform to offer games of skill as part of their services. Our proposed business model is to charge both one-time license fees for the right to license our software, as well as royalties linked to usage, as measured by the number of games of skill played on our online gaming platform (in the case of online gaming).. For example, a player wishing to compete with other players in games of skill on the platform will be required to make a per game payment to the game server based on the player’s level of performance and experience.
Our Competition
While there are a minority of online game service providers that offer gamers the opportunity to play competitive games with a potential for the winners to earn financial rewards, these games service providers do not offer independent, credible results determination, but rather rely on the users self-reporting their game results. The game service providers then act as mediators in the event of a dispute between users. (See, for example, the website of gamebattles.com and the website of VirginGaming.com).
To our knowledge, there are no other online gaming platforms that allow the kind of competitive online gaming that is capable of being offered by our online gaming platform, namely, an online gaming platform that can provide independent and objective results determination without the need for any self-reporting.
However, we anticipate that our business model may be replicated or adapted by our competitors over time.
Competitive Advantages
Our business model and technology have three main competitive advantage compared with existing online gaming offerings:
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Our business model is based on the successful and operating business model employed by the online gambling industry, even though our platform will be designed to host rings of paying members who stand to win rewards in online games of skill such as chess or checker games.
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The “reward for winning” model that we intend to follow offers an adrenalin rush to experienced online players looking for new thrills.
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Our system and technology will operate independently from user feedback, and all the reports and scores will be generated from the server itself, thus removing the possibility of fraud by or disputes between users.
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 will be developing our online gaming platform, and we will license our online gaming platform to online game service providers.
Dependence on One or a Few Major Customers
The nature of our product offering does not mandate any dependence on one or a few major customers, as we expect that our platform will be used by online game service providers and “rings” of online players.
Patent, Trademark, License & Franchise Restrictions and Contractual Obligations & Concessions
We have not entered into any revenue share agreements or other contracts that have given, or could give rise to, obligations or concessions. We have developed an online gaming platform and intend to protect our online gaming platform on the basis of applicable copyright, trade secrecy, trademark and trade name laws. We have researched the availability of the trademark “ProGaming Platforms,” and we did not locate any trademark registrations with the USPTO that included the term “ProGaming Platforms.” We may also affect a “new method of business” type of patent, although we anticipate that our business model may be replicated or adapted by our competitors over time. Beyond the current version of our online gaming platform and our trade name, we do not hold any other intellectual property.
Existing or Probable Government Regulations
Generally, in the U.S., games of skill are distinguished at law from games of chance by the predominant role of skill in determining the outcome of the game. Thus, while wagering on games of chance is prohibited by the laws of the United States and practically all U.S. states, in most U.S. states, a participant in a game of skill is permitted to wager on his own performance in a game of skill. Our business model is directed toward the legal online gaming market, and our software product is intended to facilitate the entirely legal activity of wagering on games of skill by the participants in such games of skill. Nevertheless, there can be no assurance that state regulators will not choose to interpret applicable state anti-gambling statutes to restrict the use of our proposed online gaming platform even when used for the wagering on games of skill. Whether a particular use of our online gaming platform would run afoul of a state’s internet gambling statute is a determination that can differ from state to state. We believe that the use of our online gaming platform to offer games of skill is not gambling under U.S. federal law nor under the laws of a majority of states. Nevertheless, should a particular state or the federal government change or interpret its laws to restrict the use of our online gaming platform, we may no longer be able to offer our software product in such locality or at all. We plan to include in our licensing agreements with game service providers a provision precluding the offering of games of skill for a cash reward in those states which prohibit the wagering on one’s own performance in a game of skill.
Research and Development Activities and Costs
During calendar year 2011 and to date, we have engaged in extensive research and development ("R&D") activities designed to improve the performance of our software platform and to extend its capabilities to meet the needs of today's online gaming market. The majority of R&D expenses incurred during this period were for software development designed to improve our original platform and to create a "type 2" product, which will serve the online advertising industry. These efforts were carried out mainly through retaining the services of independent third party programmers. We intend to continue with such R&D efforts throughout 2012 based on the specific requirements of potential clients and strategic partners.
Costs and Effects of Compliance with Environmental Laws and Regulations
We are not in a business that involves the use of materials in a manufacturing stage where such materials are likely to result in the violation of any existing environmental rules and/or regulations. Further, we do not own any real property that could lead to liability as a landowner. Therefore, we do not anticipate that there will be any substantial costs associated with the compliance with environmental laws and regulations.
Employees
We have no employees. Our officers and Directors provide service to us on an as-needed basis. Currently our research and development efforts are carried out mainly by our CTO and third party outsourced developers. When we commence full operations, we will need to hire support staff as well as software developers.
ITEM 1A.
ITEM 1A. RISK FACTORS
Risks Relating to Our Lack of Operating History
Our business is at an early stage of development and we may not develop an online gaming platform that can be commercialized.
The success of our business is dependent on our ability to develop successfully our online gaming platform, and to secure licensing agreements with existing online game service providers in the United States. Our ability to achieve these goals is unproven, and the lack of operating history makes it difficult to validate our business plan. In addition, the success of our business plan is dependent upon acceptance of our platform by the online gaming community. Should the target market not be as responsive as we anticipate, we will not have in place alternate services or products that we can offer to ensure our continuing as a going concern.
Management believes that it currently has sufficient funds to continue our planned activities at least through the first half of 2012. We also expect to continue to incur operating losses in future periods. These losses will occur because we do not yet have significant revenues to offset the expenses associated with the development and marketing of our online platform. We cannot guarantee that we will ever be successful in generating significant revenues in the future. We recognize that if we are unable to generate significant revenues, we will not be able to earn profits or continue operations.
We have a history of operating losses and we may not achieve future revenues or operating profits.
We have a history of operating losses and we anticipate generating losses until we are able to generate significant revenues. We do not anticipate generating significant revenues before the second half of 2012. Therefore, we may be unable to continue operations in the future as a going concern. No adjustment has been made in the accompanying financial statements to the amounts and classification of assets and liabilities which could result should we be unable to continue as a going concern. If we cannot continue as a viable entity, our stockholders may lose some or all of their investment in us.
We have a going concern note indicating the possibility that we may not be able to continue to operate.
Our financial statement, as of December 31,2011 include a going concern note, which raises a substantial doubt about the Company’s ability to continue as a going concern . As a result, we may face difficulty in obtaining additional necessary funding. There can be no assurance that we will ever achieve any revenues or profitability. The revenue and income potential of our proposed business and operations are unproven, and the lack of operating history makes it difficult to evaluate the future prospects of our business.
We have a limited operating history on which investors may evaluate our operations and prospects for profitable operations.
We were incorporated on May 26, 2010. We currently have two agreements, of which one was canceled, with online game service providers, but these agreements have not generated any significant revenues. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any significant operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.
Our business plan may be unsuccessful.
The success of our business plan is dependent on our ability to develop successfully our online gaming platform and to secure licensing agreements with existing online game service providers in the United States. Our ability to develop software for this market is unproven, and the lack of operating history makes it difficult to validate our business plan. In addition, the success of our business plan is dependent upon acceptance of our platform by the online gaming community. Should the target market not be as responsive as we anticipate, we will not have in place alternate services or products that we can offer to ensure our continuing as a going concern.
Our officers have no experience in operating an online gaming platform.
Since our officers and directors have no experience in operating an online gaming platform, they may make inexperienced or uninformed decisions regarding the development of software for this market, the operation of our business, or the marketing of our platform, which could harm our business and result in our having to suspend or cease operations, which could cause investors to lose their entire investment.
Risks Relating to Our Business
Our executive officers and directors have significant voting power and may take actions that may be different than actions sought by our other stockholders.
Our officers and directors own approximately 30.24 % of the outstanding shares of our common stock. These stockholders will be able to exercise significant influence over all matters requiring stockholder approval. This influence over our affairs might be adverse to the interest of our other stockholders. In addition, this concentration of ownership could delay or prevent a change in control and might have an adverse effect on the market price of our common stock.
Our officers and directors are located in Israel and our assets may also be held from time to time outside of the United States.
Since all of our officers and directors are located in Israel, any attempt to enforce liabilities upon such individuals under the U.S. securities and bankruptcy laws may be difficult.
In accordance with the Israeli Law on Enforcement of Foreign Judgments, 5718-1958, and subject to certain time limitations (the application to enforce the judgment must be made within five years of the date of judgment or such other period as might be agreed between Israel and the United States), an Israeli court may declare a foreign civil judgment enforceable if it finds that:
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the judgment was rendered by a court which was, according to the laws of the State in which the court is located, competent to render the judgment;
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the judgment may no longer be appealed;
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the obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel and the substance of the judgment is not contrary to public policy; and
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the judgment is executory in the State in which it was given.
An Israeli court will not declare a foreign judgment enforceable if:
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the judgment was obtained by fraud;
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there is a finding of lack of due process;
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the judgment was rendered by a court not competent to render it according to the laws of private international law in Israel;
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the judgment is in conflict with another judgment that was given in the same matter between the same parties and that is still valid; or
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the time the action was instituted in the foreign court, a suit in the same matter and between the same parties was pending before a court or tribunal in Israel.
Furthermore, Israeli courts may not adjudicate a claim based on a violation of U.S. securities laws if the court determines that Israel is not the most appropriate forum in which to bring such a claim. Even if an Israeli court agrees to hear such a claim, it may determine that Israeli law, not U.S. law, is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact, which can be a time-consuming and costly process.
Our assets may also be held from time to time outside of the United States. Since our Directors and executive officers are foreign citizens and do not reside in the United States, it may be difficult for courts in the United States to obtain jurisdiction over our foreign assets or persons, and as a result, it may be difficult or impossible for you to enforce judgments rendered against us or our Directors or executive officers in United States courts. Thus, investing in us may pose a greater risk because should any situation arise in the future in which you would have a cause of action against these persons or against us, you may face potential difficulties in bringing lawsuits or, if successful, in collecting judgments against these persons or against the Company.
We may not be able to raise the required capital to conduct our operations and develop and commercialize our product.
We were incorporated on May 26, 2010. We have completed development of our online gaming platform and have entered into two agreements with online game service providers (although one agreement has been terminated), but we have not generated any significant revenues. Although we have commenced the marketing of our online gaming platform, we may not be able to execute our business plan. If we do not generate any significant revenues during our first years of operations, we may require additional financing in order to establish profitable operations. Such additional financing, if required, may not be forthcoming. Even if additional financing is available, it may not be available on terms we find favorable. Failure to secure any needed additional financing may have a serious effect on our company's ability to survive. At this time, there are no anticipated additional sources of funds in place.
If we continue to suffer losses, investors may not receive any return on their investment and may lose their entire investment. Our prospects must be considered speculative in light of the risks, expenses, and difficulties frequently encountered by companies in their early stages of development, particularly in light of the uncertainties relating to the new, competitive and rapidly evolving markets in which we anticipate we will operate. To attempt to address these risks, we must, among other things, further develop our technology and product, successfully implement our development, marketing and commercialization strategies, respond to competitive developments, and attract, retain, and motivate qualified personnel. A substantial risk is involved in investing in us because, as an early stage company we have fewer resources than an established company, our management may be more likely to make mistakes at such an early stage, and we may be more vulnerable operationally and financially to any mistakes that may be made as well as to external factors beyond our control.
We expect to continue to incur operating losses in future periods. These losses will occur because we do not yet have any significant revenues to offset the expenses associated with the development and promotion of our platform. We cannot guarantee that we will ever be successful in generating significant revenues in the future. We recognize that if we are unable to generate significant revenues, we will not be able to earn profits or continue operations.
Our lack of business diversification could result in the loss of your investment if revenues from our primary product decrease.
Currently, our business is focused on the development and marketing of an online gaming platform. We do not have any other lines of business or other sources of revenue if we are unable to successfully implement our business plan. Our lack of business diversification could cause you to lose all or some of your investment if we are unable to generate revenues by the operation of the gaming platform since we do not have any other lines of business or alternative revenue sources.
We need to retain key personnel to support our activities and ongoing operations, and a loss of certain key personnel could significantly hinder our ability to move forward with our business plan.
The development, promotion, and operation of our online gaming platform will continue to place a significant strain on our limited personnel, management, and other resources. Our future success depends upon the continued services of our executive officers and other needed key employees and contractors who have critical industry experience and relationships that we will rely on to implement our business plan. The loss of the services of any of our officers or the lack of availability of other skilled personnel would negatively impact our ability to market and sell our product, which could adversely affect our financial results and impair our growth.
Since our officers and Directors may work or consult for other companies, their other activities could slow down our operations.
Our officers and directors are not required to work exclusively for us and do not devote all of their time to our operations. Presently, our officers and directors allocate only a portion of their time to the operation of our business. Since our officers and directors are currently employed full-time elsewhere, they are each able to commit to us only up to 20-25 hours a week. Therefore, it is possible that their pursuit of other activities may slow our operations and reduce our financial results because of the slow-down in operations.
The commercialization of our online gaming platform will be delayed if third parties fail to enter into licensing agreements with us.
We intend to enter into licensing agreements with existing online game service providers to host our platform, and therefore will be dependent on those third parties to make our platform available to online gamers. We have entered into two licensing agreements with existing online game service providers, and one of them has been terminated. We may not be successful in selecting additional suitable online game service providers or in negotiating any agreements with them. If we are unable to enter into additional relationships with existing online game service providers on acceptable commercial terms, we may not be able to commercialize our software product, and our revenue may decrease and our business may fail.
We depend on market acceptance of our online gaming platform. If our platform does not gain market acceptance, our ability to compete will be adversely affected.
Our success will depend in large part on our ability successfully to market our online gaming platform to third party online game service providers. Although we intend to highlight the distinction between our software, which is based on a model of “competition for reward,” from our competitors’ model of “pay per access,” no assurances can be given that we will be able successfully to promote our platform or achieve acceptance from the online gaming community. Moreover, failure successfully to commercialize our platform to third party online game service providers on a timely and cost-effective basis will have a material adverse effect on our ability to compete in our targeted market.
We are a small company with limited resources compared to some of our current and potential competitors and we may not be able to compete effectively and increase market share.
Most of our current and potential competitors have longer operating histories, significantly greater resources, and name recognition, and a larger base of customers than we have. As a result, these competitors have greater credibility with our potential customers. They also may be able to adopt more aggressive licensing policies and devote greater resources to the development, promotion, and sale of their products and services than we can to ours.
Failure to meet customers’ expectations or deliver expected performance could result in losses and negative publicity, which would harm our business.
If our online gaming platform fails to perform in the manner expected by our licensees, then our revenues may be delayed or lost due to adverse customer reaction. In addition, negative publicity about us and our software product could adversely affect our ability to attract or retain licensees. Furthermore, disappointed customers may initiate claims for damages against our licensees and us, regardless of our responsibility for their disappointment.
Risks Relating to Technology and Intellectual Property
We may lose licensees if we experience system failures that significantly disrupt the availability and quality of our online gaming platform.
The operation of our online gaming platform will depend on our ability to avoid and mitigate any interruptions in service or reduced capacity for customers. Interruptions in service or performance problems, for whatever reason, could undermine confidence in our platform and cause us to lose licensees or make it more difficult to attract new ones.
The online gaming market is subject to rapid technological change.
Our business is in an emerging market that is characterized by rapid changes in customer requirements, frequent introductions of new and enhanced products and services, and continuing and rapid technological advancement. To compete successfully in software development for the online gaming market, we must continue to design, develop and sell new and enhanced products and services that provide increasingly higher levels of performance and reliability at lower cost. These new and enhanced products and services must take advantage of technological advancements and changes, and respond to new customer requirements. Our success in designing, developing, and selling such products and services will depend on a variety of factors, including:
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Identifying and responding to market demand for new products and services;
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Keeping abreast of technological changes;
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Timely developing and implementing new product/service offerings and features;
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Maintaining quality of performance;
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Providing cost-effective service and support; and
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Promoting our products and services and expanding our market share.
If we are unable, due to resource constraints or technological or other reasons, to develop and introduce new or enhanced products and services in a timely manner, if such new or enhanced products and services do not achieve sufficient market acceptance, or if such new product and service introductions decrease demand for existing products/services, our operating results would decline and our business would not grow.
If a third party asserts that we infringe upon its proprietary rights, we could be required to redesign our product, pay significant royalties, or enter into license agreements.
Although presently we are not aware of any such claims, a third party may assert that our online gaming platform violates its intellectual property rights. As the number of online gaming platforms in our market increases, we believe that infringement claims will become more common. Any claims against us, regardless of their merit, could:
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Be expensive and time-consuming to defend;
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Result in negative publicity;
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Force us to stop operating our platform;
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Divert management’s attention and our other resources; or
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Require us to enter into royalty or licensing agreements in order to obtain the right to operate our platform, which right may not be available on terms acceptable to us, if at all.
In addition, we believe that any successful challenge to our use of a trademark or domain name could substantially diminish our ability to conduct business in a particular market or jurisdiction and thus could decrease our revenues and/or result in losses to our business.
Our online gaming platform will employ proprietary technology, which will be difficult to protect.
Our success and ability to compete are dependent to a significant degree on our proprietary technology. We intend to rely on a combination of patent, trade secret, copyright and trademark laws, together with non-disclosure agreements and technological measures to establish and protect proprietary rights in our online gaming platform. We cannot assure investors that these efforts will provide meaningful protection for our technology because:
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some foreign countries may not protect our proprietary rights as fully as do the laws of the United States;
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if a competitor were to infringe on our proprietary rights, enforcing our rights may be time consuming and costly, diverting management’s attention and our resources;
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measures like entering into non-disclosure and non-competition agreements afford only limited protection;
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unauthorized and/or unidentifiable parties may attempt to copy aspects of our products and develop similar software or to obtain and use information that we regard as proprietary; and
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our competitors may be able to design around our intellectual property rights or independently develop products that are substantially equivalent or superior to our products.
Regulatory Risks
We face risks related to compliance with corporate governance laws and financial reporting standards.
The Sarbanes-Oxley Act of 2002, as well as related new rules and regulations implemented by the Securities and Exchange Commission and the Public Company Accounting Oversight Board, require changes in the corporate governance practices and financial reporting standards for public companies. These new laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002 relating to internal control over financial reporting, have materially increased the legal and financial compliance costs of small companies and have made some activities more time-consuming and more burdensome.
We may not have effective internal controls.
In connection with Section 404 of the Sarbanes-Oxley Act of 2002, we need to assess the adequacy of our internal control, remedy any weaknesses that may be identified, validate that controls are functioning as documented and implement a continuous reporting and improvement process for internal controls. We may discover deficiencies that require us to improve our procedures, processes and systems in order to ensure that our internal controls are adequate and effective and that we are in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. If the deficiencies are not adequately addressed, or if we are unable to complete all of our testing and any remediation in time for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the SEC rules under it, we would be unable to conclude that our internal controls over financial reporting are designed and operating effectively, which could adversely affect investor confidence in our internal controls over financial reporting.
Our online gaming platform may be subject to government regulation, and failure to comply with applicable regulations could result in fines, suspensions, seizure actions, injunctions and criminal prosecutions.
Although our software product is directed toward the online gaming market and not the online gambling market, there can be no assurance that state regulators will not choose to interpret applicable state anti-gambling statutes to restrict the use of our proposed online gaming platform. Generally, wagering on skill-based games by the participants in such games is excluded from federal prohibitions against online gambling, as well as the prohibitions found in a majority of state laws. Nevertheless, whether a particular use of our online gaming platform would run afoul of a state’s internet gambling statute is a determination that can differ from state to state. We believe that the use of our online gaming platform to offer games of skill is not gambling under U.S. federal law nor the laws of a majority of states. However, should a particular state or the federal government interpret or change its laws to restrict the use of our online gaming platform, we may no longer be able to offer our software product in such locality or at all, which could have a material adverse effect on our business and operating results.
Future regulation of online gaming could restrict our business, prevent us or our licensees from operating our platform, and/or increase our cost of doing business.
The laws, regulations, or rulings that specifically address the online gaming industry are subject to change. We are unable to predict the impact, if any, that future legislation, judicial precedents, or regulations relating to online gaming may have on our business, financial condition, and results of operations. The increasing growth in popularity of the online gaming market heightens the risk that the United States Government will seek to increase the regulation of such market, which could have a material adverse effect on our business, financial condition, and operating results.
Risks Relating to Operating in Israel
We conduct our operations in Israel and therefore our results may be adversely affected by political, economic and military instability in Israel.
Our principal executive offices and our officers and Directors are located in Israel. Accordingly, political, economic and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely affect our operations and could make it more difficult for us to raise capital. Since September 2000, terrorist violence in Israel has increased significantly and negotiations between Israel and Palestinian representatives have not achieved a peaceful resolution of the conflict. The establishment in 2006 of a government in Gaza by representatives of the Hamas militant group has created additional unrest and uncertainty in the region.
Further, Israel is currently engaged in an armed conflict with Hamas, which until Operation Cast Lead in January 2009 had involved thousands of missile strikes and had disrupted most day-to-day civilian activity in southern Israel. The missile attacks by Hamas did not target Tel Aviv, the location of our principal executive offices; however, any armed conflict, terrorist activity or political instability in the region may negatively affect business conditions and could significantly harm our results of operations.
ITEM 2.
ITEM 2. PROPERTIES
Our Principal Executive Offices
We do not own any real property. We currently maintain our corporate office at 60 Mazeh Street, Apartment 12, Tel Aviv, 65789, Israel. This space has been provided to us by one of our Directors and we do not pay monthly rent for use of this space. This space is sufficient until we complete the development of our platform.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against our Company, nor of any proceedings that a governmental authority is contemplating against us.
We know of no material proceedings to which any of our Directors, officers, affiliates, owner of record or beneficially of more than 5 percent of our voting securities or security holders is an adverse party or has a material interest adverse to our interest.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Common Shares are traded on the over-the-counter market and quoted on the OTCQB under the symbol “PPTF.” On March 23, 2012, the closing price for our shares of common stock as reported on the OTCQB was $0.28.
The high and the low bid prices for our shares of common stock are based on inter-dealer prices, without retail mark-up, markdown, or commission, and may not represent actual transactions.
The table below sets forth the range of high and low bid information for our shares of common shares as quoted on the OTCBB for each of the quarters during the fiscal year ended December 31, 2011. This information has been adjusted to reflect the 10-for-1 forward stock split that was effective March 2, 2012.
The company's common equity was not traded in any public trading market during 2010.
Holders of our Common Shares
As of March 26, 2012, there were 51 registered stockholders holding 50,455,000 common shares issued and outstanding.
Dividends
Since our inception, we have not declared nor paid any cash dividends on our capital stock and we do not anticipate paying any cash dividends in the foreseeable future. Our current policy is to retain any earnings in order to finance our operations. Our Board of Directors will determine future declarations and payments of dividends, if any, in light of the then-current conditions it deems relevant and in accordance with applicable corporate law.
Securities Authorized for Issuance under Equity Compensation Plans
We have no existing equity compensation plan.
Recent Sales of Unregistered Securities; Use of Proceeds from Sale of Registered Securities
In April 2011, we raised $40,000 and issued 400,000 shares of our common stock to two non-US investors. These transactions did not involve any underwriters, underwriting discounts or commissions, nor any public offering This transaction did not involve any underwriters, underwriting discounts or commissions, nor any public offering. The shares were issued under the exemptions from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”).
On March 13, 2012 we issued 30,000 restricted shares of our common stock to one US service provider. This transaction did not involve any underwriters, underwriting discounts or commissions, nor any public offeringThe shares were issued under the exemptions from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”).
On March 18, 2012 we issued 25,000 shares of our common stock to one non-US investor. This transaction did not involve any underwriters, underwriting discounts or commissions, nor any public offering. The shares were issued under the exemption from registration provided by Regulation S of the Securities Act.
Purchases of Equity Securities by the Issuer and Affiliated Purchases
During the fourth quarter of the fiscal year ended December 31, 2011, neither we nor any “affiliated purchaser,” as that term is defined in Rule 10b-18(a)(3) under the Exchange Act, repurchased any of our common stock or other securities.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand our historical results of operations during the periods presented and our financial condition. This MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes to consolidated financial statements, and contains forward-looking statements that involve risks and uncertainties. See section entitled “Forward-Looking Statements” above.
EXECUTIVE OVERVIEW
We are a development stage company with limited operations and no significant revenues from our business operations. There is substantial doubt that we can continue as an on-going business for the next twelve months. We do not anticipate that we will generate significant revenues until we enter into licensing agreements with additional online gaming servers, or web advertisers, to permit them to offer games of skill on our platform as part of their member services, or as part of their advertising campaign. Accordingly, we must raise cash from sources other than our operations in order to implement our marketing plan.
In our management’s opinion, there is a potential demand for our technology which will enable online game service providers, and websites engaged in marketing efforts designed to increase traffic, to provide a platform offering financial rewards to winners of online competitive games of skill.
On July 10, 2011, we executed a license agreement with GT-SAT International S.A.R.L ("GT-SAT"), a corporation organized under the laws of Luxemburg. Such license agreement granted GT-SAT a non-exclusive right to develop websites and offer online games based on our proprietary gaming platform in Europe, with an exclusive license to develop websites and offer online games based on our proprietary gaming platform in Luxembourg, Belgium, and Holland. In consideration of such license, GT-SAT made an upfront, non refundable, payment of $90,000 and has agreed to pay us royalties on future revenues. On December 26, 2011, GT-SAT terminated this agreement. The stated reason for termination was the economic situation in Europe.
On July 1, 2011, we executed a license agreement with Yanir Levin Ltd., an Israeli corporation. Such license agreement granted the licensee a non-exclusive right to develop websites and offer online games based on our proprietary gaming platform in Asia, with an exclusive license to develop websites and offer online games based on our proprietary gaming platform in Israel. In consideration of the license granted to the licensee, the licensee made an upfront, non refundable, payment of $29,000 and has agreed to pay us royalties on future revenues.
In April 2011, we raised $40,000 and issued 400,000 shares of our common stock to two non-US investors. These transactions did not involve any underwriters, underwriting discounts or commissions, nor any public offering. We believe these transactions were exempt from registration pursuant to Regulation S of the Securities Act.
We believe that we have sufficient cash on hand to allow us to market our online gaming platform to potential clients and remain in business through the first half of 2012. If after that we are unable to generate significant revenues for any reason, or if we are unable to make a reasonable profit, we may have to suspend or cease operations. At the present time, we have not made any arrangements to raise additional cash. Other than as described in this paragraph, we have no financing plans at this time.
Over the next twelve months, we plan to license our online gaming platform to third party licensees to permit them to offer games of skill on our platform as part of their member services. We initially intend to focus on the following activities:
•
Securing licensing agreements with online game service providers in the United States who, as part of the services offered by such online game service providers, will offer their member players the opportunity to utilize our online gaming platform to play games of skill.
•
Advertising our online gaming platform online on gamers’ portals, blogs and forums with a view to achieving maximum exposure to the online gaming community.
•
Hosting annual public relations events to raise awareness of our online gaming platform and the opportunity it offers to online game service providers to expand their business.
In order to carry out this plan and remain in business during the next twelve month period, we require total cash resources of at least $180,000. We currently do not have such liquidity. We plan to raise additional funds through private offering of our common stock. If we are unable to raise such funds we will have to revise our plan of operations.
Marketing/Advertising Strategy
In addition to advertising our online gaming platform on gamers’ portals, blogs and forums with a view to achieving maximum exposure to the online gaming community, we currently plan to market our technology and services through a select sales and marketing strategy whereby we identify key potential online game service providers that meet our licensee profile, and then contact such prospects directly. We also plan to attend industry trade shows around the world to generate new prospects, and respond to referrals from online game service providers and other industry participants. We will seek licensees with an established brand, a robust subscriber base, and sufficient resources and commitment to successfully market games of skill offered on our platform.
Results of Operations
During the year ended December 31, 2011, we incurred a net loss of $70,599 compared to a net loss of $31,402 during the period from May 26, 2010 (date of inception) through December 31, 2010.
The increase in the net loss is due to increase in research and development expenses during 2011 as compared to 2010 and due to increased general and administrative expenses, in 2011 as compared to 2010 primarily due to an increase in audit, accounting and legal fees and an increase in selling expenses in 2011 as compared with no selling expenses in 2010.
Purchase or Sale of Equipment
Other than the purchase of access servers, work stations and relevant literature, we do not expect to purchase or sell any plant or significant equipment.
Revenues
In the year ended December 31, 2011, we had revenues on the amount of $92,908 from two licensing agreements signed with two customers. We had no revenues for the period from May 26, 2010 (date of inception) through December 31, 2010.
Liquidity and Capital Resources
Our balance sheet as of December 31, 2011 and 2010 reflects assets of $115,817 and $70,328, respectively, and total of cash and cash equivalents of $110,847 and $68,868, respectively. Working Capital as of December 31, 2011 and 2010 has been $51,576 and $62,684, respectively. Such working capital has been sufficient to sustain our operations to date.
Since inception we had cash flows of $119,000, all in 2011, from the two license agreements described above.
For the year ended December 31, 2011 and for the periods from inception through December 31, 2010 and 2011, net cash provided by (used in) operations was $6,866, $(8,118) and $(1,252), respectively. The increase for 2011 as compared to 2010 resulted from inflows of $119,000 generated through the aforementioned revenues, which has been offset by outflows of $112,134 in connection with our operating expenses, of which $50,026 were paid for research and development, $38,181 for legal and audit fees and additional $23,927 for other management fees and other expenses.
For the year ended December 31, 2011 and for the periods from inception through December 31, 2010 and 2011, net cash (used in) investing activities was $(4,887), $0, and $(4,887), respectively. The increase in net cash used in investing activities for 2011 as compared to 2010 resulted primarily from cash restricted by the bank.
For the year ended December 31, 2011 and for the periods from inception through December 31, 2010 and 2011, net cash provided by financing activities was $40,000, $76,986, and $116,986, respectively. The decrease for 2011 as compared to 2010 resulted from a larger issuance of shares of common stock for cash during 2010.
Our positive cash flow from operational activity generated during 2011 through was due to two sporadic license agreements. The current economic situation leads us to the conclusion that additional such license agreements are not likely during the upcoming months. We may generate some revenues in 2012; however any such revenues, are not expected to be material. If we disregard the aforementioned license agreements, our cash burn rate during 2011 was approximately $9,400 per month. Our operational expenses during 2012 are expected to increase compare to 2011, and we therefore expect the cash burn rate to increase respectively to approximately $15,000 per month. Based on such burn rate, we have sufficient liquidity until the third quarter of 2012.
Our ability to create sufficient working capital to sustain us over the next twelve month period, and beyond, is dependent on our entering into additional licensing agreement and on our success in issuing additional debt or equity, or entering into strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
Going Concern Consideration
There is substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures with respect to this matter.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES
Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.
Revenue Recognition
The Company is in the development stage and has yet to realize revenues from operations. Once the Company has commenced operations, it will recognize revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable.
Loss per Common Share
Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding as of December 31, 2011 and 2010.
Estimates
The financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of December 31, 2011 and 2010, and expenses for the year ended December 31, 2011, period from inception to December 31, 2010, and cumulative from inception. Actual results could differ from those estimates made by management.
Fair value measurements:
As defined in ASC 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”), fair value is based on the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, ASC 820-10 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Other inputs that are observable, directly or indirectly, such as quoted prices for similar assets and liabilities or market corroborated inputs.
Level 3: Unobservable inputs are used when little or no market data is available, which requires the Company to develop its own assumptions about how market participants would value the assets or liabilities. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques in its assessment that maximize the use of observable inputs and minimize the use of unobservable inputs.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
To the Board of Directors and
Stockholders of PROGAMING PLATFORMS CORP.
We have audited the accompanying balance sheets of PROGAMING PLATFORMS CORP. as of December 31, 2011 and 2010, and the related statements of income, stockholders’ equity and comprehensive income, and cash flows for the year then ended and for the periods from inception date through December 31, 2010 and 2011. PROGAMING PLATFORMS CORP.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. We were not engaged to examine management’s assertion about the effectiveness of PROGAMING PLATFORMS CORP.’s internal control over financial reporting as of December 31, 2011 included in the accompanying Form 10-K Report and, accordingly, we do not express an opinion thereon.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 PROGAMING PLATFORMS CORP. as of December 31, 2011 and 2010 and the results of its operations and its cash flows for the year then ended and for the periods from inception date through December 31, 2010 and 2011 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has not established sufficient sources of revenue to cover its operating costs and expenses. As such, it has incurred an operating loss since inception. Further, as of December 31, 2011 the cash resources of the Company were insufficient to meet its planned business objectives. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 2 to the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
PROGAMING PLATFORMS CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF DECEMBER 31, 2011 AND 2010 (Restated)
The accompanying notes to financial statements are an integral part of these financial statements.
PROGAMING PLATFORMS CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011 AND THE PERIODS FROM
INCEPTION (May 26, 2010) TO DECEMBER 31, 2010 (RESTATED) AND 2011
The accompanying notes to financial statements are an integral part of these financial statements.
PROGAMING PLATFORMS CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (May 26, 2010)
THROUGH DECEMBER 31, 2011
The accompanying notes to financial statements are an integral part of these financial statements.
PROGAMING PLATFORMS CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2011 AND THE PERIODS
FROM INCEPTION (May 26, 2010) TO DECEMBER 31, 2010 (RESTATED) AND 2011
The accompanying notes to financial statements are an integral part of these financial statements.
PROGAMING PLATFORMS CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Basis of Presentation and Organization
ProGaming Platforms Corp. (“ProGaming Platforms” or the “Company”) is a Delaware corporation in the development stage and has not commenced operations. The Company was incorporated under the laws of the State of Delaware on May 26, 2010. The business plan of the Company is to engage in the development of an online gaming platform and to enter into licensing agreements with game servers in the United States in order to allow them to offer games of skill on our platform as part of their member services.
The accompanying financial statements of the Company were prepared from the accounts of the Company under the accrual basis of accounting.
Cash and Cash Equivalents
For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.
Restricted cash
Cash and cash items which are restricted as to withdrawal or usage. Restricted cash includes legally restricted deposits held as compensating balances against credit cards.
Revenue Recognition
The Company is in the development stage and has yet to realize revenues from operations. Once the Company has commenced operations, it will recognize revenues when delivery of goods or completion of services has occurred provided there is persuasive evidence of an agreement, acceptance has been approved by its customers, the fee is fixed or determinable based on the completion of stated terms and conditions, and collection of any related receivable is probable.
Loss per Common Share
Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding as of December 31, 2011 and 2010.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.
The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carryforward period under the Federal tax laws.
Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimate.
Fair Value of Financial Instruments
The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of December 31, 2011 and 2010, the carrying value of accounts payable and accrued liabilities approximated fair value due to the short-term nature and maturity of these instruments.
Property and equipment:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets. The annual depreciation rates are as follows:
Deferred Offering Costs
The Company defers as other assets the direct incremental costs of raising capital until such time as the offering is completed. At the time of the completion of the offering, the costs are charged against the capital raised. Should the offering be terminated, deferred offering costs are charged to operations during the period in which the offering is terminated.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives when events or circumstances lead management to believe that the carrying value of an asset may not be recoverable. As of December 31, 2011, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.
Estimates
The financial statements are prepared on the basis of accounting principles generally accepted in the United States. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of December 31, 2011 and 2010, and expenses for the year ended December 31, 2011,and the periods from inception to December 31, 2010, and 2011. Actual results could differ from those estimates made by management.
Fair value measurements:
As defined in ASC 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”), fair value is based on the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, ASC 820-10 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Other inputs that are observable, directly or indirectly, such as quoted prices for similar assets and liabilities or market corroborated inputs.
Level 3: Unobservable inputs are used when little or no market data is available, which requires the Company to develop its own assumptions about how market participants would value the assets or liabilities. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes valuation techniques in its assessment that maximize the use of observable inputs and minimize the use of unobservable inputs.
The following table presents the Company’s financial assets and liabilities that are carried at fair value, classified according to the three categories described above:
Impact of recently issued accounting standards:
In May 2011, the FASB issued ASU 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRSs")." Under ASU 2011-04, the guidance amends certain accounting and disclosure requirements related to fair value measurements to ensure that fair value has the same meaning in U.S. GAAP and in IFRS and that their respective fair value measurement and disclosure requirements are the same. ASU 2011-04 is effective for public entities during interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. The Company does not believe that the adoption of ASU 2011-04 will have a material impact on its results of operation and financial condition.
In June 2011, the FASB issued ASU No. 2011-05, "Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income," ("ASU 2011-05") which amended current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders' equity. Instead, comprehensive income must be reported in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. In December 2011, the FASB deferred the requirement to present components of reclassifications of other comprehensive income on the face of the income statement that had previously been included in the June 2011 amended standard. These amended standards are to be applied retrospectively for interim and annual periods beginning after December 15, 2011. The Company does not believe that the adoption of ASU 2011-04 will have a material impact on its results of operation and financial condition.
In December 2011, the FASB issued Accounting Standards Update No. 2011-11, "Disclosures about Offsetting Assets and Liabilities" ("ASU 2011-11"). The objective of ASU 2011-11 is to enhance disclosures by requiring improved information about financial instruments and derivative instruments in relation to netting arrangements. ASU 2011-11 is effective for interim and annual periods beginning on or after January 1, 2013. The Company is currently evaluating the impact of this guidance; however, since this update affects disclosures only, it is not expected to have a material impact on the Company's financial statements.
There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to a have a material impact on the Company's financial position, results of operations or cash flows.
(2) Development Stage Activities and Going Concern
The Company is currently in the development stage, and has limited operations. The business plan of the Company is to engage in the development of an online gaming platform and to enter into licensing agreements with game servers in the United States in order to allow them to offer games of skill on our platform as part of their member services.
The Company commenced a capital formation activity by filing a Registration Statement on Form S-1 with the SEC (the "Registration Statement") to register and sell in a self-directed offering 2,000,000 shares of newly issued common stock at an offering price of $0.05 per share for proceeds of up to $100,000. The aforementioned registration statement was approved by the SEC, with an effective date of October 25, 2010 and the shares registered pursuant to this Registration Statement were sold by the Company as described in Note 3 below.
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of December 31, 2011, the cash resources of the Company were insufficient to meet its current business plan. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
(3) Common Stock
During the second quarter of 2011, the Company raised $40,000 through the private offering of shares of its restricted common stock. The Company sold 400,000 shares at $0.10 per share.
On June 7, 2010, the Company issued 15,250,000 shares of its common stock to individuals who are Directors and officers of the company for $153 subscriptions receivable.
On June 7, 2010, the Company issued 14,750,000 shares of its common stock to individuals who are founders of the company for $147 subscriptions receivable.
On December 21, 2010 the Company issued 20,000,000 shares of its common stock to various individuals, for $100,000 in cash. Such funds were raised through public offering, in accordance with the terms and conditions of the Registration Statement. Offering costs were $23,014.
(4) Revenue Recognition
On July 1 2011 and on July 10, 2011, the Company signed license agreements with two separate corporations in Israel and Luxemburg (the "Licensees"). Subject to the terms and condition of each agreement the Company granted each Licensee a license to use the Company's proprietary online gaming platform in certain parts of the world. Each license is, in general, non-exclusive, except for certain countries specified within each agreement. The agreements grant each Licensee the right to develop and operate websites offering online games based on the Company's proprietary technology for a period of 5 years as of the respective agreement's effective date. In the event that by the eighteenth-month anniversary of the each agreement's effective date the respective Licensee fails to have at least one active website in each of the countries that comprise the exclusive territory of the agreement, the Company shall be entitled to either terminate exclusivity for these countries or terminate the entire agreement. In consideration of these agreements, and of support services to be provided by the Company through the license period, the Licensees have paid the Company non-refundable, one-time license fees totaling $119,000. In addition to such license fees, once each Licensee realizes revenues at a certain level specified in its respective agreement from its use of the Company's platform, it shall pay the Company a royalty in the amount of 50% of gross revenues realized from its use of this platform.
On December 26, 2011, the corporation from Luxemburg announced the termination of the agreement due to the economic situation in Europe. As a result, the entire license fee in the amount of $90,000 was recognized immediately as revenues.
As of December 31, 2011, the Company recognized a total sum of $92,908 in revenues out of the total $119,000 license fees paid for both of the aforementioned agreements. The contract in the amount of $90,000 was canceled by the client, therefore we recognized the whole sum as revenues according to the terms of the agreement. The second contract grants the client licenses for a period of 5 years, accordingly, $2,908 were recorded as revenues in 2011, the remaining sum of $26,092 was deferred on the Company's balance sheet, $5,800 as current and $20,292 as long term liabilities, and is expected to be recognized over the remaining period of the agreements.
As of December 31, 2011, no royalties have been paid by or recognized in connection with the aforementioned agreements.
One of the aforementioned Licensees is beneficially owned by an individual who holds 25,000 shares of the Company's common stock.
(5) Income Taxes
The provision (benefit) for income taxes for the year ended December 31, 2011 and the period from inception to December 31, 2010, was as follows (assuming a 23% effective tax rate):
The Company had deferred income tax assets as of December 31, 2011 and 2010, as follows:
The Company provided a valuation allowance equal to the deferred income tax assets for the year ended December 31, 2011 and the period from inception to December 31, 2010, because it is not presently known whether future taxable income will be sufficient to utilize the loss carryforwards.
As of December 31, 2011 and 2010, the Company had approximately $84,901 in tax loss carryforwards that can be utilized in future periods to reduce taxable income, and expire by the year 2030.
The Company did not identify any material uncertain tax positions that will be filed. The Company did not recognize any interest or penalties for unrecognized tax benefits during the year ended December 31, 2011 and the period from inception to December 31, 2010.
The Company will file income tax returns in the United States. All tax years are closed by expiration of the statute of limitations. The year ended December 31, 2011 and the period from inception to December 31, 2010.
(6) Related Party Transactions
On February 28, 2011, the Company executed consulting agreements (the "Agreements") with its three officers (the "Officers"), who are also owners of 15,250,000 shares of its common stock, effective for an initial term of one year from February 1, 2011, renewing each year for an additional year. In consideration of their consulting services, pursuant to the Agreements, the Company shall pay each officer $1,000 per month. The Officers will also be entitled to stock based compensation, in accordance with a stock option plan to be adopted by the Company in the future. The Company accounted for consulting expenses at a sum of $33,000 during 2011.
As described in Note 3, on June 7, 2010, the Company issued 15,250,000 shares of its common stock to Directors and officers for $153 subscriptions receivable.
As of December 31, 2010, the Company received R&D services, at no charge, related to the development of a prototype of the Company's Platform, from its CTO, Mr. Boaz Lowenstein, and from its CEO, Mr Tamir Levinas, who together own 15.5% of the Company’s outstanding shares of Common Stock. This arrangement was terminated on February 1, 2011, and has been replaced by consulting agreements between the Company and the two officers (see above for further details). In addition, during the fourth quarter of 2010, the Company received certain computing services and resources at no charge to the Company from Oasis Communication Technologies Ltd., a company in which Mr. Tamir Levinas holds a 27% ownership interest. The 2010 services were recorded at the Company's financial statements as contribution of services from shareholder, see note 7 - Restatement.
(7) Restatement
The financial statements for the period from inception to December 31, 2010 were restated pursuant to an error discovered during the preparation of 2011 financial statements. A shareholder of the company provided the company with software development services through a company under his control. These services were provided free of charge and were not recorded in the previously reported 2010 financial statements.
Effects on previously issued 2010 financial statements as follows:
The accompanying financial statements for the period from inception to December 31, 2010 have been restated to reflect the corrections in accordance with FASB ASC 250-10-50-7, “Accounting Change and Error Corrections Disclosure”. This restatement is due to corrections of an error in previously reported financial statements. Net income per common share remained the same at $(0.00) as a result of these changes. The effect on the Company's previously issued financial statements for the year ended December 31, 2010 is summarized below:
Balance sheet as of December 31, 2010
Statement of Operations for the Period from Inception to December 31, 2010
Statement of Cash Flows for the Period from Inception to December 31, 2010
(8) Subsequent Events
On March 1, 2012, the Company filed a Certificate of Amendment to its Certificate of Incorporation effecting a forward stock split of the Company’s issued and outstanding shares of Common Stock at a ratio of ten-to-one (the “Forward Split”). The Certificate of Amendment provides that each ten (10) outstanding shares of the Company's Common Stock, par value $0.0001 per share, will be split and converted, automatically, without further action, into ten (10) shares of Common Stock. The Forward Split has been reflected in the Company's financial statements for year ended December 31, 2011.
On March 13, 2012 the Company issued 30,000 restricted shares of common stock and on March 18, 2012 the Company issued 25,000 shares of common stock in consideration for services provided to the Company.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
Disclosure controls and procedures are the controls and other procedures that are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the principal executive and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Our Chief Executive Officer and Principal Financial Officer, are responsible for evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this annual report. As discussed elsewhere in this 10-K, we have restated our financial statements as of December 31, 2010.
In connection with this restatement and as a result of the determination to correct the Company’s financial statements for the year ended December 31, 2010 and in connection with management’s ongoing assessment of internal controls over financial reporting, the Company’s Chief Executive Officer and Chief Financial Officer undertook a special evaluation of the effectiveness of the Company’s internal control over financial reporting. As a result of their assessment, the Company’s Chief Executive Officer and Chief Financial Officer identified a material weakness in the Company’s internal control over financial reporting, in connection with accounting for contribution of research and development services from a shareholder. The Company’s management intends to take all necessary steps to address this material weakness. Management approved a resolution to enhance verification of accounting treatment for contribution of research and development services from a shareholder in the future, by retaining expert consultants to review its accounting treatments, and to carefully validate that such treatments are in full alignment with U.S. GAAP. The Company believes that these remediation actions will improve the Company’s internal controls over financial reporting and are sufficient to remediate the material weakness described above.
While the aforementioned reflects a material weakness in our controls over financial reporting during the year ended December 31, 2010, we note that during such period we were a new reporting company, and were in the process of implementing disclosure controls and procedures. Besides for the error with regard to accounting for contribution of services, no other errors were found. During the year ended December 31, 2011, we improved our internal controls and procedures, and therefore we believe that the weakness described above is not reflective of our current disclosure controls and procedures. We also believe that the discovery of such error and the restatement of the Company’s financial statements for the year ended December 31, 2010, is a direct result of the controls and procedures adopted during 2011.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Securities Exchange Act Rule 13a-15(f). Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with U.S. GAAP.
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the design and effectiveness of our internal control over financial reporting as of the fiscal year covered by this Report based on the framework issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission in Internal Control-Integrated Framework.
Based upon and as of the date of that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports our Company files and submits under the Securities Exchange Act is recorded, processed, summarized and reported as and when required.
During our aforementioned assessment, we discovered a significant deficiency in our IT process, which was due to the fact that we were unable to assert that our bookkeeping system data was properly backed-up by a third party database hosting provider. While we are quite certain that proper backup procedures are maintained by this provider, we were unable to obtain any evidence for this, as this provider was not willing to disclose its back-up policy. As a result, since the beginning of 2012, we transferred our bookkeeping to a new third party database hosting provider, which maintains a proper, transparent and ascertainable backup policy.
(c) Change in Internal Control over Financial Reporting
During the year ended December 31, 2011, the board of directors of the Company considered the effect of the restatement of our previously issued annual report on Form 10-K for the Fiscal Year Ended December 31, 2010, on the effectiveness of the Company's disclosure controls and procedures. Appropriate changes have been and will continue to be made to prevent the occurrence of such errors in the future. The Company implemented additional procedures and policies in order to improve the effectiveness, accuracy and reliability of the accounting data to allow for the preparation of the Company’s financial statements in accordance with Generally Accepted Accounting Principles. In addition, management will work with external advisors to ensure that the Company chooses the appropriate accounting policies and their appropriate implementation
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our Directors hold office until the next annual general meeting of the stockholders or until their successors are elected and qualified. Our officers are appointed by our Board of Directors and hold office until the earlier of their death, retirement, resignation, or removal.
Our officers and Directors and their ages and positions are as follows:
Name
Age
Position
Mr. Tamir Levinas
Chief Executive Officer and Director
Mr. Boaz Lowenstein
Chief Technical Officer and Director
Mr. Doron Uziel
Chief Financial Officer and Secretary
Mr. Tamir Levinas
Mr. Levinas has been our Chief Executive Officer and a Director since we were incorporated on May 26, 2010. Mr. Levinas devotes approximately 20-25 hours per week to our affairs. From 1998 until 2004, Mr. Levinas held several positions at Internet Gold (Nasdaq: IGLD), including from 2002 until 2004 as head of technical development of Internet Gold, where he was responsible for managing all aspects of the technical department activities, project management and engineering, as well as being responsible for technical vendor relations and procurement. In 2004, Mr. Levinas co-founded Oasis Communication Technologies, a leading network integrator in the service provider market, and serves as the company’s director of business development. In addition, from 2004 to present, Mr. Levinas has also been the head of research and development and a member of the Board of Directors of Smart Energy Solutions, Inc. (OTCBB: SMGY). Mr. Levinas is not an officer or Director of any reporting company other than Smart Energy Solutions, Inc.
In 2004, Mr. Levinas earned his Bachelors of Arts degree in Business and IT Management at IDC Herzliya, Israel, and has studied computer science at the New Jersey Institute of Technology.
The Board has concluded that Mr. Levinas should serve as director of the Company because of his technical, management, and entrepreneurial experience.
Mr. Boaz Lowenstein
Mr. Lowenstein has been our Chief Technical Officer and a Director since we were incorporated on May 26, 2010.
Since 1999, Mr. Lowenstein has been a Unix manager at Internet Gold (Nasdaq: IGLD), and since 2007 he has been a computing infrastructure and ISP services manager at its affiliate, 012 Smile.Communications Ltd. He has over a decade of experience in large scale system management and development.
From 1998 to 2001, Mr. Lowenstein studied computer science at the Open University of Israel.
Mr. Lowenstein is not an officer or Director of any other reporting company. Mr. Lowenstein devotes approximately 20-25 hours per week to our affairs.
The Board has concluded that Mr. Lowenstein should serve as director of the Company because of his technical know-how and his experience in system management and development.
Mr. Doron Uziel
Mr. Uziel has been our Chief Financial Officer and Secretary since we were incorporated on May 26, 2010.
From 2009 until 2010, Mr. Uziel served as the Chief Operating Officer of Saar Paz Insurance Agency. From 2008 until 2009, Mr. Uziel served as the Treasurer of Energtek Inc. (EGTK.OB), a public company engaged in the development and distribution of clean energy solutions. Mr. Uziel also served as director of Energtek Inc. between May 2006 and March 2008, and served as Chief Executive Officer of that company on a part-time basis from May 2006 to October 2007. From 2005 to 2007, Mr. Uziel was employed as the Controller of TraceGuard Technologies Inc. (TCGD.OB), a public company engaged in the development of homeland security technology.
Mr. Uziel earned his Bachelor of Arts degree (with Honors) in Economics at Tel Aviv University’s School of Economics in 1992, and his Masters of Economics (with Honors) at the same institution in 1993.
Mr. Uziel is not an officer or Director of any reporting company. Mr. Uziel devotes approximately 20-25 hours per week to our affairs.
Committees of the Board of Directors
We do not presently have a separately constituted audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board of Directors. As such, our entire Board of Directors acts as our audit committee.
Audit Committee Financial Expert
Our Board of Directors does not currently have any member who qualifies as an audit committee financial expert. We believe that the cost related to retaining such a financial expert at this time is prohibitive. Further, because we are in the start-up stage of our business operations, we believe the services of an audit committee financial expert are not warranted at this time.
Involvement in Legal Proceedings
None of our Directors, nominee for Directors, or officers has appeared as a party during the past ten years in any legal proceedings that may bear on his ability or integrity to serve as a Director or officer of the Company.
Board Leadership Structure
The Company has chosen to combine the principal executive officer and Board chairman positions. The Company believes that this Board leadership structure is the most appropriate for the Company for the following reasons. First, the Company is a development stage company and at this early stage it is more efficient to have the leadership of the Board in the same hands as the principal executive officer of the Company. The challenges faced by the Company at this stage - obtaining financing and performing research and development activities - are most efficiently dealt with by having one person intimately familiar with both the operational aspects as well as the strategic aspects of the Company’s business. Second, Mr. Levinas is uniquely suited to fulfill both positions of responsibility because he possesses management experience, technical experience, and experience with start-up companies.
Code of Ethics
We do not currently have a Code of Ethics applicable to our principal executive, financial and accounting officers; however, we are considering whether to implement such a code in 2012.
Potential Conflict of Interest
Since we do not have an audit or compensation committee comprised of independent Directors, the functions that would have been performed by such committees are performed by our Board of Directors. Thus, there is a potential conflict of interest in that our Directors have the authority to determine issues concerning management compensation, in essence their own, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executives or Directors.
Board’s Role in Risk Oversight
The Board assesses on an ongoing basis the risks faced by the Company. These risks include financial, technological, competitive, and operational risks. The Board dedicates time at each of its meetings to review and consider the relevant risks faced by the Company at that time. In addition, since the Company does not have an Audit Committee, the Board is also responsible for the assessment and oversight of the Company’s financial risk exposures.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The particulars of compensation paid to the following persons during the year ended December 31, 2011, are set out in the summary compensation table below:
·
our Chief Executive Officer (Principal Executive Officer);
·
our Chief Financial Officer (Principal Financial Officer);
·
each of our three most highly compensated executive officers, other than the Principal Executive Officer and the Principal Financial Officer, who were serving as executive officers at the end of the fiscal year ended December 31, 2011; and
·
up to two additional individuals for whom disclosure would have been provided under the item above but for the fact that the individual was not serving as our executive officer at the end of the fiscal year ended December 31, 2011;
(Collectively, the “Named Executive Officers”):
Notes:
(1)
Mr. Levinas has been our Chief Executive Officer (Principal Executive Officer) and a Director since May 26, 2010.
(2)
Mr. Uziel has been our Chief Financial Officer (Principal Financial Officer) since May 26, 2010.
(3)
Mr. Lowenstein has been our Chief Technical Officer and a Director since May 26, 2010.
Option/SAR Grants
We do not currently have a stock option plan. No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to any executive officer or any Director since our inception; accordingly, no stock options have been granted or exercised by any of the officers or Directors since we were founded.
Long-Term Incentive Plans and Awards
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual grants or agreements regarding future payouts under non-stock price-based plans have been made to any executive officer or any Director or any employee or consultant since our inception; accordingly, no future payouts under non-stock price-based plans or agreements have been granted or entered into or exercised by any of the officers or Directors or employees or consultants since we were founded.
Compensation of Directors
There are no current arrangements pursuant to which Directors are or will be compensated in the future for any services provided as a Director.
Employment Contracts, Termination of Employment, Change-in-Control Arrangements
Effective as of February 1, 2011, we entered into consulting agreements with our three officers. Each of these consulting agreements was for an initial term of 12 months and automatically renews each year for an additional 12-month period; however, either party may terminate the consulting agreement by providing one month’s notice. In consideration of each officer’s consulting services, pursuant to the consulting agreements, the Company shall pay each officer an amount of One Thousand U.S. Dollars (US$1,000) per month. Each officer will also be entitled to stock based compensation in accordance with a stock option plan to be adopted by the Company in the future.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Beneficial Ownership of Holdings
The following table sets forth, as of March 26, 2012, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5 percent of our common stock, as well as by each of our current Directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
The percentages below are calculated based on 50,455,000 shares of our common stock issued and outstanding as of March 26, 2012. We do not have any outstanding options, warrants or other securities exercisable for or convertible into shares of our common stock.
(¹)
Based on 50,455,000 shares of our common stock outstanding.
(²)
The address for Mr. Uziel is 12 Max Shaine Street, Rehovot, Israel.
Theaddress for Mr. Levinas is 60 Mazeh Street, Apartment 12, Tel Aviv, Israel.
Theaddress for Mr. Lowenstein is 1 Hashizaf Street, Kadima, Israel.
Changes in Control
We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change of control of our Company.
Equity Compensation Plan Information
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Except as disclosed below, since the beginning of the fiscal year preceding the last fiscal year none of the following persons has had any direct or indirect material interest in any transaction to which our Company was or is a party, or in any proposed transaction to which our Company proposes to be a party:
·
any Director or officer of our Company;
·
any proposed Director of officer of our Company;
·
any person who beneficially owns, directly or indirectly, shares carrying more than 5 percent of the voting rights attached to our common stock; or
·
any member of the immediate family of any of the foregoing persons (including a spouse, parents, children, siblings, and in-laws).
We currently do not have any agreement with any of our directors or other related parties, except for service agreements as follows:
Effective as of February 1, 2011, we entered into consulting agreements with our three officers. Each of these consulting agreements was for an initial term of 12 months and automatically renews each year for an additional 12-month period; however, either party may terminate the consulting agreement by providing one month’s notice. In consideration of each officer’s consulting services, pursuant to the consulting agreements, the Company shall pay each officer an amount of One Thousand U.S. Dollars (US$1,000) per month. Each officer will also be entitled to stock based compensation in accordance with a stock option plan to be adopted by the Company in the future.
Director Independence
We are not subject to listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of “independent Directors.” We do not believe that either of our directors currently meets the definition of “independent” as promulgated by the rules and regulations of NASDAQ.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
The aggregate fees billed since incorporation for professional services rendered by the principal accountant for the audit of our financial statements and review of financial statements included in our quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
Notes:
(1)
For the year ended December 31, 2011, the principal accountants of the Company were Yarel & Partners, CPAs.
(2)
For the year ended December 31, 2010, the principal accountants of the Company were Weinberg & Baer LLC.
Since incorporation and as of the fiscal year ended December 31, 2011, there were no fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under Item 9(e)(1) of Schedule 14A, for professional services rendered by the principal account for tax compliance, tax advice, and tax planning, for products and services provided by the principal accountant, other than the services reported in Item 9(e)(1) through 9(d)(3) of Schedule 14A.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
Given the small size of our Board as well as the limited activities of our Company, our Board of Directors acts as our Audit Committee. Our Board pre-approves all audit and permissible non-audit services. These services may include audit services, audit-related services, tax services, and other services. Our Board approves these services on a case-by-case basis.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
Financial Statements and financial statement schedules
(1) and (2) The financial statements and financial statement schedules required to be filed as part of this report are set forth in Item 8 of Part II of this report.
(3) Exhibits. See Item 15(b) below.
(b)
Exhibits required by Item 601 of Regulation S-K
*Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By:
/s/ Tamir Levinas
By:
/s/ Doron Uziel
Name: Tamir Levinas
Name: Doron Uziel
Title: President, Chief Executive Officer (Principal Executive Officer) and Director
Title: Chief Financial Officer (Principal Financial and Accounting Officer)
Dated: March 30, 2012