UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2010
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _________________ to _________________
Commission file number 000-51255
WIN GAMING MEDIA, INC.
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 98-037121
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
55 IGAL ALON STREET, TEL AVIV, ISRAEL 67891
(Address of principal executive offices) (Zip code)
(972) - 73 - 755-4500
(Registrant's telephone number, including area code)
65 IGAL ALON STREET, TEL AVIV, 67443, ISRAEL
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes [_] No [_]
Indicate by check mark whether the registrant is large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definition of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [_] Accelerated filer [_]
Non-accelerated filer [_] Smaller reporting company [X]
(Do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [_] No [X]
The number of shares outstanding of the registrant's Common Stock, $0.001 par
value, was 32,319,031 as of April, 22, 2010.
TABLE OF CONTENTS
PAGE
--------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION:
Item 1. Consolidated Balance Sheets (Unaudited) F-1 - F-2
Consolidated Statements of Operations (Unaudited) F-3
Consolidated Statements of Cash Flows (Unaudited) F-4
Notes to Consolidated Financial Statements (Unaudited) F-5 - F-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk 3
Item 4T. Controls and Procedures 4
PART II - OTHER INFORMATION: 5
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 5
Item 6. Exhibits 5
SIGNATURES 6
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
WIN GAMING MEDIA, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2010
IN U.S. DOLLARS
INDEX
PAGE
----------------
CONSOLIDATED BALANCE SHEETS F-1 - F-2
CONSOLIDATED STATEMENTS OF OPERATIONS F-3
CONSOLIDATED STATEMENTS OF CASH FLOWS F-4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-5 - F-8
WIN GAMING MEDIA, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. DOLLARS, EXCEPT SHARE DATA
MARCH 31, DECEMBER 31,
2010 2009
------------ ------------
UNAUDITED AUDITED
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 491,722 $ 352,800
Other accounts receivable and prepaid expenses 67,295 71,901
Marketable securities 746,171 1,139,299
------------ ------------
TOTAL current assets 1,305,188 1,564,000
------------ ------------
PROPERTY AND EQUIPMENT, NET 38,269 283
============ ============
Total assets $ 1,343,457 $ 1,564,283
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
F - 1
WIN GAMING MEDIA, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. DOLLARS, EXCEPT SHARE DATA
MARCH 31, DECEMBER 31,
2010 2009
------------ ------------
UNAUDITED AUDITED
------------ ------------
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term bank credit $ 3,591 $ 2,210
Accounts payables 11,315 4,137
Accrued expenses and other liabilities 90,377 116,535
------------ ------------
TOTAL current liabilities 105,283 122,882
TOTAL liabilities 105,283 122,882
------------ ------------
EQUITY:
Common stock of $ 0.001 par value:
Authorized: 75,000,000 shares at March 31, 2010 and December 31, 2009; Issued
and outstanding: 32,319,031 shares at March 31, 2010 and December 31, 2009,
respectively 32,319 32,319
Additional paid-in capital 17,399,928 17,377,428
Accumulated other comprehensive income (loss) (18,805) 28,313
Accumulated deficit (16,175,268) (15,996,659)
------------ ------------
Equity 1,238,174 1,441,401
============ ============
TOTAL liabilities and equity $ 1,343,457 $ 1,564,283
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
F - 2
WIN GAMING MEDIA, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
U.S. DOLLARS, EXCEPT SHARE DATA
THREE MONTHS ENDED
-------------------------------
MARCH 31, MARCH 31,
2010 2009
------------ ------------
Revenues from software applications $ 21,664 $ 31,947
------------ ------------
Cost of revenues - 159,761
============ ============
Gross profit (loss) 21,664 (127,814)
------------ ------------
Operating expenses:
General and administrative 241,502 98,674
------------ ------------
TOTAL operating expenses 241,502 98,674
------------ ------------
Operating loss (219,838) (226,488)
Financial expenses, net (4,560) (2,857)
------------ ------------
Net loss before taxes on income (224,398) (229,345)
Taxes on income - (35,163)
------------ ------------
(224,398) (264,508)
Share in profits (losses) of an affiliated company 45,789 (28,183)
------------ ------------
Net loss attributable to the Company (178,609) (292,691)
============ ============
Basic and diluted net loss per share $ (0.01) $ (0.01)
============ ============
Weighted average number of common stock used in computing basic and diluted
net loss per share 32,319,031 32,319,031
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
F - 3
WIN GAMING MEDIA, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. DOLLARS, EXCEPT SHARE DATA
THREE MONTHS ENDED
-------------------------------
MARCH 31, MARCH 31,
2010 2009
------------ ------------
UNAUDITED
-------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (178,609) $ (292,691)
Adjustments required to reconcile net loss to net cash used in operating
activities:
Realized gain on sale of marketable securities (1,051) -
Depreciation and amortization - 210
Decrease in other accounts receivable and prepaid expenses 4,606 61,276
Stock-based compensation 22,500 24,816
Increase (decrease) in trade payables 7,178 (7,774)
Decrease in accrued expenses and other liabilities (26,158) (1,475)
Share in losses of an affiliated company (45,789) 28,183
------------ ------------
Net cash used in operating activities (217,323) (187,455)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of marketable securities 347,061 -
Proceeds from liquidation of affiliated company 45,789 -
Purchase of property and equipment (37,986) -
------------ ------------
Net cash provided in investing activities 354,864 -
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term bank credit, net 1,381 (1,673)
------------ ------------
Net cash provided (used in) by financing activities 1,381 (1,673)
------------ ------------
Increase (decrease) in cash and cash equivalents 138,922 (189,128)
Cash and cash equivalents at the beginning of the year 352,800 529,130
------------ ------------
Cash and cash equivalents at the end of the year $ 491,722 $ 340,002
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest $ 20 $ 9
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
F - 4
WIN GAMING MEDIA, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS
NOTE 1: GENERAL:
a. Win Gaming Media, Inc. ("the Company") was incorporated under the laws
of the State of Nevada on April 23, 2002. The Company's shares are
currently traded on the OTC Bulletin Board under the trading symbol
WGMI.OB. Following the sale of its entire software assets, the Company
no longer offers any gaming applications development work and
currently the Company efforts are devoted to the recent launch of its
new business activity in the field of binary options (see c. below).
The Company conducts its operations and business with and through its
subsidiaries, (1) Win Gaming Media, Inc., a Delaware corporation, (2)
Win Gaming Media (Israel) Ltd., an Israeli company, (3) WGM Services
Ltd., a company registered in Cyprus, (4) Gaming Ventures Plc, a
company incorporated in the Isle of Man and (5) B. Option Ltd., an
Israeli company.
b. Concentration of risk that may have a significant impact on the
Company:
The Company derived 100% of its revenues in the three months ended
March 31, 2010 from 2 customers (see Note 4).
c. Since March 23, 2010 the Company has been offering online trading of
binary options through its two newly organized fully-owned
subsidiaries in Cyprus and in Israel. Worldwide trading is being
offered by Cyprus-based WGM Services Ltd., on www.globaloption.com,
later to expand through localized activities in leading markets around
the world, while in Israel, the same services are featured through B.
Option Ltd., on www.options.co.il. Specifically, the Company markets
online binary options trading business towards investors who are
seeking to realize any profit from their investments within a short
period of time. The Company did not record any revenues from the
binary options business in the first quarter of 2010.
NOTE 2: BASIS OF PRESENTATION:
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. Operating
results for the three months ended March 31, 2010 are not necessarily
indicative of the results that may be expected for the year ended December
31, 2010. For further information, reference is made to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2009.
The interim consolidated financial statements incorporate the financial
statements of the Company and all of its subsidiaries. All significant
intercompany balances and transactions have been eliminated on
consolidation.
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES:
a. The significant accounting policies applied in the annual consolidated
financial statements of the Company as of December 31, 2009 are
applied consistently in these consolidated financial statements.
b. These financial statements should be read in conjunction with the
audited annual financial statements of the Company as of December 31,
2009 and their accompanying notes.
F - 5
WIN GAMING MEDIA, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (CONT.):
c. Accounting for stock-based compensation
The Company accounts for stock based compensation to employees in
accordance with Financial Accounting Standards Board, or FASB, ASC
Topic 718, "Stock Compensation". The Company measures and recognizes
compensation expense for share-based awards based on estimated fair
values on the date of grant using the Black-Scholes option-pricing
model. This option pricing model requires that we make several
estimates, including the option's expected life and the price
volatility of the underlying stock.
The following table shows the total stock-based compensation charge
included in the Consolidated Statements of Operations:
THREE MONTHS ENDED
MARCH 31,
------------------------------
2010 2009
------------ ------------
(UNAUDITED) (UNAUDITED)
------------ ------------
General and administrative expenses $ 22,500 $ 24,816
============ ============
A summary of the Company's share option activity to employees and
directors, and related information is as follows:
THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------
2010 2009
-------------------------- --------------------------
UNAUDITED UNAUDITED
-------------------------- --------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE
OF OPTIONS PRICE OF OPTIONS PRICE
---------- ---------- ---------- ----------
$ $
---------- ----------
Outstanding at the beginning of
the year 7,511,379 0.69 7,511,379 0.69
Granted (*) 500,000 0.06 - -
Forfeited - - - -
---------- ---------- ---------- ----------
Outstanding at the end of the
quarter 8,011,379 0.65 7,511,379 0.69
========== ========== ========== ==========
Options exercisable at the end of
the quarter 6,979,299 0.62 6,129,980 0.68
========== ========== ========== ==========
* The fair value of each option granted in 2010 is $0.04 and is
estimated on the date of grant, using the Black-Scholes
option-pricing model with the following weighted average
assumptions: dividend yield of 0% for all years; expected
volatility - 140%; risk-free interest rate - 5.0%; expected life
6 years; expected forfeiture for options granted to employees -
0%.
F - 6
WIN GAMING MEDIA, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES (CONT.):
d. Fair value of financial instruments:
The Company measures fair value and discloses fair value measurements
for financial assets and liabilities. Fair value is based on the price
that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. On January 1, 2009, the Company adopted a newly
issued accounting standard, ASC 820-10, for fair value measurement of
all non-financial assets and liabilities as well. The adoption did not
have a significant effect on the Company's financial statements.
In April 2009, the FASB issued additional guidance on factors to
consider when estimating fair value consequent to a significant
decrease in market activity for a financial asset. As applicable for
the Company, this guidance became effective for interim and annual
periods starting April 1, 2009, and did not have a material impact on
the Company's consolidated financial statements.
The accounting standard 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: Observable prices that are based on inputs not quoted on
active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is
available. The fair value hierarchy gives the lowest priority to Level
3 inputs.
The Company's financial assets measured at fair value or a recurring
basis, consisted of the following types of instruments as of March 31,
2010:
FAIR VALUE MEASUREMENTS USING INPUT TYPE
-------------------------------------------------------------------
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
------------ ------------ ------------ ------------
Cash and cash equivalents $ 491,722 $ - $ - $ 491,722
Marketable securities 746,171 - - 746,171
------------ ------------ ------------ ------------
$ 1,237,893 $ - $ - $ 1,237,893
============ ============ ============ ============
NOTE 4: SEGMENTS, CUSTOMERS AND GEOGRAPHIC INFORMATION:
Summary information about geographic areas:
The Company manages its business on the basis of one reportable segment
(see Note 1 for a brief description of the Company's business) and follows
the requirements of FASB ASC Topic 280, "Disclosures about Segments of an
Enterprise and Related Information".
Major customer data as a percentage of total revenues:
THREE MONTHS ENDED
MARCH 31,
---------------------------
2010 2009
---------- ----------
Customer A 81% 85%
========== ==========
Customer B 19% 15%
========== ==========
F - 7
WIN GAMING MEDIA, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. DOLLARS
NOTE 5: RECENTLY ADOPTED ACCOUNTING STANDARDS:
a. In January 2010, the FASB issued revised authoritative guidance that
requires more robust disclosures about the different classes of assets
and liabilities measured at fair value, the valuation techniques and
inputs used, the activity in Level 3 fair value measurements, and the
transfers between Levels 1, 2 and 3. This guidance is effective for
interim and annual reporting periods beginning after December 15, 2009
(which is January 1, 2010 for the Company) except for the disclosures
about purchases, sales, issuances, and settlements in the roll forward
activity in Level 3 fair value measurements. Those disclosures are
effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years (which is January 1, 2011
for the Company). Early application is encouraged. The revised
guidance was adopted as of January 1, 2010. The adoption of this
guidance did not have a material impact on the Company's consolidated
financial position, results of operations and cash flows.
b. In April 2010, the FASB issued ASU 2010-13, "Compensation - Stock
Compensation (Topic 718) - Effect of Denominating the Exercise Price
of a Share-Based Payment Award in the Currency of the Market in Which
the Underlying Equity Security Trades." ASU 2010-13 provides
amendments to Topic 718 to clarify that an employee share-based
payment award with an exercise price denominated in the currency of a
market in which a substantial portion of the entity's equity
securities trades should not be considered to contain a condition that
is not a market, performance, or service condition. Therefore, an
entity would not classify such an award as a liability if it otherwise
qualifies as equity. The amendments in ASU 2010-13 are effective for
fiscal years, and interim periods within those fiscal years, beginning
on or after December 15, 2010. The adoption of this standard will not
have an effect on our results of operation or our financial position.
F - 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. The
business and operations of Win Gaming Media, Inc., or the Company, we, us, or
our, are subject to substantial risks, which increase the uncertainty inherent
in the forward-looking statements contained in this Quarterly Report on Form
10-Q. Forward-looking statements include our statements regarding our goals,
beliefs, strategies, objectives, plans, including product and service
developments, future financial conditions, results or projections or current
expectations. For example, when we discuss our funding and growth plans and
opportunities, including our expectation that our cash, together with our
Netplay TV plc, or Netplay, shares, should be sufficient to meet our anticipated
requirements for the next 12 months, or when we say that we expect to start
generating revenue from our binary options business in the second quarter of
2010, we are using a forward looking statement. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or
"continue," the negative of such terms, or other comparable terminology. These
statements are subject to known and unknown risks, uncertainties, assumptions
and other factors that may cause actual results to be materially different from
those contemplated by the forward-looking statements. Except as required by law,
we undertake no obligation to release publicly the result of any revision to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Further information on potential factors that could affect
our business is described in Part I, Item 1A, "Risk Factors" of our Annual
Report on Form 10-K for the fiscal year ended December 31, 2009. Readers are
also urged to carefully review and consider the various disclosures we have made
in this Quarterly Report on Form 10-Q.
OVERVIEW
Our financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
You should read the following discussion of our financial condition and results
of operations together with the unaudited financial statements and the notes to
unaudited financial statements included elsewhere in this Quarterly Report on
Form 10-Q.
As of November 2009, we are now focused on offering worldwide online trading of
binary options. Formerly, we were engaged in the business of offering
technology, servicing the interactive gaming industry. Following the sale of our
entire gaming software assets and development activities during 2008 and 2009,
we are no longer a technology company and we now derive our income from revenue
sharing arrangements in the interactive gaming industry, through third parties.
Since March 23, 2010 we have been offering online trading of binary options
through our two newly organized fully-owned subsidiaries in Cyprus and in
Israel. Worldwide trading is being offered by Cyprus-based WGM Services Ltd., or
WGM, on www.globaloption.com, later to expand through localized activities in
leading markets around the world, while in Israel, the same services are
featured through B. Option Ltd., or B. Option, on www.options.co.il.
Specifically, we market our online binary options trading business towards
investors who are seeking to realize any profit from their investments within a
short period of time.
1
RESULTS OF OPERATIONS FOR -THREE MONTHS ENDED MARCH 31, 2010 COMPARED TO THREE
MONTHS ENDED MARCH 31, 2009.
REVENUES AND COST OF REVENUES
The Company is entitled to royalties from revenue sharing arrangements upon
sublicensing of the Company's products to end-users. The Company recognizes
royalties from revenue sharing arrangements during the applicable period based
on reports obtained from its customers, on a monthly basis, during such
reporting period.
In the three months ended March 31, 2010 and March 31, 2009 we generated our
revenues from our revenue sharing arrangements with Lodgnet Interactive
Corporation, or Lodgnet, and Cablevision Systems Corporation, or Cablevision.
The total revenues for the three months ended March 31, 2010 decreased by 32% to
$21,664 from $31,947 for the three months ended March 31, 2009. The decrease is
attributable to decrease in revenues at Lodgnet and Cablevision. We have not
generated any revenues in the three months ended March 31, 2010 from our binary
options business which we launched in March 2010.
Cost of revenues for the three months ended March 31, 2010 decreased by 100% to
$0 from $159,761 for the three months ended March 31, 2009. The decrease is
attributable to the sale of certain gaming services, known as Challenge Jackpot,
to Netplay by Two Way Gaming Limited, or TWG, our affiliated company, in April
2009. As a result, we stopped providing support services to TWG.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the three months ended March 31, 2010
increased by 144% to $241,502 from $98,674 for the three months ended March 31,
2009. The increase in general and administrative expenses is primarily
attributable to the launching of our new business activity of binary options.
NET LOSS ATTRIBUTABLE TO THE COMPANY
Net loss attributable to the Company for the three months ended March 31, 2010
was $178,609 compared to a net loss of $292,691 for the three months ended March
31, 2009. Net loss per share from operations for both the three months ended
March 31, 2010 and March 31, 2009 was $0.01. The net loss for the three months
ended March 31, 2010 is primarily attributable to the costs of our new operation
in the binary option services, including hiring new employees. Our weighted
average number of shares of common stock used in computing basic and diluted net
loss per share for the three months ended March 31, 2010 and March 31, 2009 was
32,319,031.
SHARE IN PROFITS/LOSSES OF AFFILIATED COMPANY
Equity profits for the three months ended March 31, 2010 changed to a profit of
$45,789 compared to a loss of $28,183 for the three months ended March 31, 2009.
During the first quarter of 2010 we filed for the dissolution of TWG and
received $45,789 for our portion in the remaining assets of TWG.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2010, our total current assets were $1,305,188 and our total
current liabilities were $105,283. On March 31, 2010, we had an accumulated
deficit of $16,175,268. We currently finance our operations through the sale of
marketable securities of Netplay and revenues from sharing arrangements. During
the first quarter of 2010 we sold 1,000,000 shares of Netplay for a total amount
of $347,061. As of March 31, 2010 we held 1,966,666 shares of Netplay for sale
as marketable securities. The fair value of these shares was $746,171. The fair
value of these shares is subject to fluctuation of Netplay's stock price and
foreign currency rate. We had working capital of $1,199,905 on March 31, 2010
compared with a working capital of $1,441,118 on December 31, 2009. Cash and
cash equivalents on March 31, 2010 were $491,722, an increase of $138,922 from
the $352,800 reported on December 31, 2009. The increase in cash is primarily
attributable to the said sale of 1,000,000 shares of Netplay during the first
quarter of 2010 offset by our cost of operations.
2
Operating activities used cash of $217,323 in the three months ended March 31,
2010. Cash used by operating activities in the three months ended March 31, 2010
resulted primarily from a $26,158 decrease in accrued expenses and other
liabilities and the cost of our operations including the employment of five new
employees.
Investing activity provided in the three months ended March 31, 2010 amounted to
$354,864 and resulted from the selling of marketable securities in the amount of
$347,061 offset by $37,986 for the purchase of property and equipment.
Financing activities provided cash of $1,381 in the three months ended March 31,
2010 which is due to short-term bank credit.
OFF-BALANCE SHEET ARRANGEMENTS
According to the Services and License Agreement (the "License Agreement") with
ParagonEX Limited, or Paragon EX, two of our subsidiaries, WGM and B. Option,
are obligated together to invest, in marketing activity of the binary options
sites, a total amount of $500,000 during the first 8 months from the go live
date of March 23, 2010; otherwise a fee of $50,000 is owed to ParagonEX jointly
by WGM and B. Option. In addition, if B. Option and WGM collectively generate
revenues lower than $250,000 per month, B. Option and WGM would be obligated to
pay to ParagonEX a 12% per month processing fee calculated from B. Option's and
WGM's collective profits. For more information on the License Agreement or our
off-balance sheet arrangement with ParagonEX, please see "Item 1. Business -
Recent Developments" of our Annual Report on Form 10-K for the year ended
December 31, 2009.
OUTLOOK
We expect that our current cash, together with our Netplay shares should be
sufficient to meet our anticipated requirements for the next 12 months. Our
efforts are devoted to the recent launch of our binary options business, which
is expected to generate revenue starting from the second quarter of 2010, and to
leverage our wholly owned subsidiary, Gaming Ventures Plc, that is registered
with the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, or the Exchange Act, by either an outright sale or by
incorporating new activities which will generate revenues. There is no assurance
that our efforts will be successful.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
3
ITEM 4T. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this Quarterly Report on Form 10-Q, we
carried out an evaluation, under the supervision and with the participation of
our management, our Chief Executive Officer and our Chief Financial Officer, of
the effectiveness of our disclosure controls and procedures as defined in Rule
13a-15(e) of the Exchange Act. These disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure. Based on that evaluation and the material weakness
described below, our management concluded that we did not maintain effective
disclosure controls and procedures as of March 31, 2010. Our management has
identified control deficiencies regarding a lack of segregation of duties, an
insufficient qualification and training of employees, and a need for a stronger
internal control environment. Our management believes that these deficiencies,
which in the aggregate constitute a material weakness, are due to the small size
of our staff, which makes it challenging to maintain adequate controls.
The ineffectiveness of disclosure controls and procedures as of March 31, 2010
continued in large part from several significant changes in the Company's
executive officers, and personnel cutbacks. Although we continue to strive to
provide improved disclosure controls and procedures in the future, in the
interim, these changes have caused control deficiencies, which in the aggregate
resulted in a material weakness.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There has been no change in our internal control over financial reporting during
the first quarter of 2010 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
4
PART II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On February 25, 2010, we issued options to purchase 500,000 shares of our common
stock, at an exercise price per share of $0.595, to a consultant of the Company
in recognition of eight years of service to us. The options are exercisable at
any time from the issuance date until August 19, 2014, and were issued pursuant
to an exemption under Regulation S under the Securities Act of 1933, as amended,
or the Act, and/or Section 4(2) of the Act.
ITEM 6. EXHIBITS.
* 31.1 Rule 13a-14(a) Certification of Principal Executive Officer.
* 31.2 Rule 13a-14(a) Certification of Principal Financial Officer.
** 32.1 Certification of Principal Executive Officer Pursuant to
18 U.S.C. Section 1350.
** 32.2 Certification of Principal Financial Officer Pursuant to
18 U.S.C. Section 1350.
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* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized:
WIN GAMING MEDIA, INC.
Dated: May 3, 2010 By: /s/ Shimon Citron
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Shimon Citron
Chief Executive Officer
By: /s/ Shlomi Zedkia
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Shlomi Zedkia
Chief Financial Officer
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