Your Money. Personal Finance. Financial Advice. Popular Courses. Login Advisor Login Newsletters. Compare Investment Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Partner Links. As a result, the number of titles we are able to publish for these hardware platforms and our ability to time the release of titles is dependent upon decisions made by third party hardware manufacturers. Effective August 8, , the Company became an approved developer and publisher of games and games-related content for the Microsoft hardware platforms that include: Xbox and the associated Xbox Live , Windows Live, Windows 8, and the Windows Phone.
The New Microsoft Agreement was disclosed as part of an official filing. The Company has obtained confidential treatment for certain terms of the New Microsoft Agreement. In September , the Company became an approved developer and publisher of games and games-related content for the Sony platforms that include: PlayStation3, PlayStation Vita, and the PlayStation Network. The term of the SCEA Agreement was until March 31, , but automatically extends for additional one-year terms thereafter, unless either party provides the other with written notice of its election not to so extend on or before January 31 of the applicable year.
Effective September , Soul entered into a trademark license agreement with Gcom Enterprises, Inc. The foregoing is a summary of the material terms of the GM Agreement and does not purport to be complete. The GM Agreement was disclosed as part of an official filing. The Company has obtained confidential treatment for certain terms of the GM Agreement. Unfortunately, Gcom Enterprises, Inc. Because of the expiration of the license agreement with Gcom Enterprises, the previously announced video game project, The Wheaties Challenge, has been subsequently cancelled.
On May 15, the Company announced the signing of a multi-year licensing agreement to develop and publish new video games, entertainment apps, and digitally-distributed content based on the John Deere brand. The Company also has the rights to develop and publish John Deere-branded virtual apparel and digital items for Avatars, as well as other digitally-distributed content. Market and Industry. The markets and games for the various platforms have often times been as unique as the hardware on which the games were played. But over the last several years, the markets, media, and distribution channels for games have changed.
Personal computer and video game console users also began to experience a convergence of game types. Game genres that historically were played on a dedicated platform began to become platform agnostic, widening the market. This is significantly expanding the number of hardware platforms on which games are played as well as the consumer base who plays them.
The execution of these ideas are expanding play experiences and creating new marketing vehicles and cross-promotional revenue generating mechanisms for games as an entertainment category. General Market Analysis. The video and computer games industry is very mature when it comes to distributing and marketing content at retail since it is more than 30 years old.
However, it is in its infancy when it comes to digitally distributing and marketing the same content. Sony with the PlayStation 3 and Nintendo with the television-based Wii and Wii U and the portable video game consoles such as DS and 3DS have subsequently followed suit with similar content release strategies. Some mobile games are better than others. Few releases feature the hallmark graphical and gameplay polish of traditional portable video game console titles. The App Store is saturated. Everybody has an internal information filter; that filter is becoming more and more refined on a daily basis.
As a result, the challenge for companies such as ours becomes how to break through the clutter and noise, or how to convince consumers that your product is something they need, not just want. As the proliferation of mobile devices continues to grow, the sophistication of the mobile devices themselves, and their users, will exponentially grow. Many of our mobile releases such as interactive book apps are expected to be revenue generating marketing vehicles for our brands both licensed and internally-generated. Marketing Strategy.
Our marketing strategy focuses on direct interaction with the consumer through social media outlets including the likes of Facebook, Twitter, Instagram, direct-to-consumer advertisements on social networks, hardware platform specific cross-promotional partnerships, and a robust user community built around our products through www.
The Company believes that a key to building product and brand awareness is to leverage an array of social networks that includes, but is not limited to, Facebook, Twitter, Pinterest, Instagram, and YouTube. Consumer interest is expected to be generated, and the Company hopes that sales will be generated, at minimal cost to the Company.
The benefits to this cross-promotional effort will include heightened consumer awareness for IP expanding content and monetized consumables for the Windows platform. The above is subject to change, including, but not limited to, the addition of other social media outlets and social networks that may or may not be in existence as of today's date.
The cross-promotional partnerships via social media outlets and social networks are not contemplated in the Company's publisher license agreements. Support is included in the software development kits provided by our license partners and other licensed publishers have previously, and are currently, exploiting cross-promotional partnerships within social media outlets and social networks. Sales and Distribution. Some of our products are based on internally generated, wholly owned intellectual properties.
Some of our products depending upon the license attached or the individual internally generated intellectual property may or may not appeal to select regional territories of the world. It is estimated that licensed-brand and Pick Up products may be good candidates for retail distribution. Whenever possible, and as appropriate, it is anticipated that our video game and interactive book products, and their associated marketing and publicity assets, will be localized into E-F-I-G-S English, French, Italian, German, and Spanish.
As appropriate, through post release product updates, additional languages may be added, starting with Portuguese, Russian, Korean, Japanese, and Chinese. The Company does not have an internal translation staff. Many companies worldwide are dedicated to developing and publishing products for the video and computer games market. We expect more companies to enter this industry. Our competitors vary in size from small companies to very large companies with dominant market shares and substantial financial resources.
Most of our competitors have significantly greater financial, marketing and development resources than we have. As a result, we may not be able to devote adequate resources to develop, acquire or license new technologies, undertake extensive marketing campaigns, adopt aggressive pricing policies or adequately compensate our developers to the same degree as certain of our competitors. As interactive products games in many of our proposed markets are relatively new and rapidly evolving, our current or future competitors may compete more successfully as the industry matures. These products and services may significantly affect the demand for our services.
In addition, any of our current or future competitors may be acquired by, receive investments from or enter into other strategic relationships with larger, longer-established and better-financed companies and therefore obtain significantly greater financial, marketing and technology licensing and development resources than we have. If we are unable to compete effectively in our principal markets, our business, financial condition and results of operations could be materially and adversely affected.
Patents, Trademarks and Intellectual Property. Some of our products are based on internally generated intellectual property, whereas others are based on IP governed by third-party licensing agreements between the Company and licensors that allow the Company to develop and sell products using their usually well known intellectual properties. Nonetheless, all unique intellectual property generated by the Company including all textual, aural and graphical designs for products whether or not under a branded license created by Company employees or its contractors working through work-for-hire agreements executed with the Company, will be owned by the Company.
Each music track is an individual asset identifiable through a proprietary ISRC code. The music content that comprises Soul and Vibe Music releases is recognized by the music identification service, Shazam. Our policy is to require each of our employees, contracted developers, consultants and advisors to execute a confidentiality agreement upon the commencement of employment, development-publishing, work-for-hire, or consulting relationship with us.
These agreements provide that all confidential information developed or made known to the individual during the term of the relationship shall be the exclusive property of the Company and shall be kept confidential and not disclosed to third parties except in specific circumstances. We may elect, depending upon circumstances, to file for additional copyright protection or patent protection for our products.
However, we have not filed for any copyrights or patents in any jurisdiction. We currently do not have registered U. We regard trademarks as valuable assets and intend to vigorously defend them against infringement. As of the date of this annual report, we have one 1 employee, our Chief Executive Officer. The Company is currently compensating these consultants with restricted stock. It is anticipated that these two consultants will become formal employees of the Company upon receipt of appropriate financing. The Company has assembled a Strategic Advisory Board comprised of subject matter experts from the video and computer games industry.
As of December 31, the Company had seven advisory board members. Address and Telephone Number. Our website, www. An investment in our common stock involves significant risks. You should carefully consider the following risks and all other information set forth in this Annual Report before deciding to invest in our common stock. If any of the events or developments described below occurs, our business, financial condition and results of operations may suffer.
In that case, the value of our common stock may decline and you could lose all or part of your investment. Additional risks and uncertainties not presently known to the Company, or that the Company currently considers immaterial, may also impair its business or operations. Risks Relating to Our Company. We have historically incurred significant losses and our financial situation creates doubt whether we will continue as a going concern.
No assurance can be given that additional financing will be available, or if available, will be on acceptable terms.
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These conditions raise substantial doubt about our ability to continue as a going concern. If adequate working capital is not available we may be forced to discontinue operations, which would cause investors to lose their entire investment. Our independent auditors have expressed doubt about our ability to continue as a going concern. If we do not continue as a going concern, investors will lose their entire investment. In their report on our financial statements included in this Annual Report, our independent auditors have expressed doubt about our ability to continue as a going concern.
Our ability to continue as a going concern is an issue raised as a result of ongoing operating losses and a lack of financing commitments then in place to meet expected cash requirements. We have a limited operating history and face many of the risks and difficulties frequently encountered by a development stage company. We are a company in its infancy, and to date, our development efforts have been focused primarily on the development and marketing of our business model and initial product portfolio offerings.
Our operations commenced in the first quarter of , however, we have limited operating history for investors to evaluate the potential of our business development. We have not built our customer base and our brand name. In addition, we also face many of the risks and difficulties inherent in gaining market share as a new company:. Technology changes rapidly in our business, and if we fail to anticipate new technologies, the quality, timeliness and competitiveness of our products will suffer. Therefore, we usually start our product development with a range of technical development goals that we hope to be able to achieve.
We may not be able to achieve these goals, or our competition may be able to achieve them more quickly than we can. In either case, our products may be technologically inferior to competitive products, or less appealing to consumers, or both. If we cannot achieve our technology goals within the original development schedule of our products, then we may delay products until these technology goals can be achieved, which may delay or reduce revenue and increase our development expenses.
Alternatively, we may increase the resources employed in research and development in an attempt to accelerate our development of new technologies, either to preserve our product launch schedule or to keep up with our competition, which would increase our development expenses and adversely affect our operations and financial condition. Our limited operating history makes it difficult to evaluate our future business prospects and to make decisions based on of our historical performance.
We have a very limited operating history in our current form, which makes it difficult to evaluate our business on the basis of historical operations. As a consequence, it is difficult, if not impossible, to forecast our future results based upon our historical data. Reliance on our historical results may not be representative of the results we will achieve. Because of the uncertainties related to our lack of historical operations, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in sales, product costs or expenses.
If we make poor budgetary decisions as a result of unreliable historical data, we could be less profitable or incur losses, which may result in a decline in our stock price. If our games fail to gain market acceptance, we may not have sufficient capital to pay our expenses and to continue to operate.
Our ultimate success will depend on generating revenues from the sale of games and games-related content which is inclusive of virtual apparel and costumes for Avatars, premium downloadable content, and micro-transactions. As a result, if we do not generate enough users, we may be unable to generate sufficient revenues for our games and games-related content.
We may not achieve and sustain market acceptance sufficient to generate revenues to cover our costs and allow us to become profitable or even continue to operate. We must effectively manage the growth of our operations, or our company will suffer. Our ability to successfully implement our business plan requires an effective planning and management process. If funding is available, we may elect to increase the scope of our operations and acquire complimentary businesses. Implementing our business plan will require significant additional funding and resources.
If we grow our operations, we will need to hire additional employees and make significant capital investments. If we grow our operations, it will place a significant strain on our existing management and resources. If we grow, we will need to improve our financial and managerial controls and reporting systems and procedures, and we will need to expand, train and manage our workforce. Any failure to manage any of the foregoing areas efficiently and effectively would cause our business to suffer.
Our business is both seasonal and cyclical. If we fail to deliver our products at the right times, our sales will suffer. Our business is highly seasonal, with the highest levels of consumer demand, and a significant percentage of our revenue, occurring in the months of November, December, and January. If we miss this key selling period, due to product delays or delayed introduction of a new hardware platform for which we have developed products, our sales will suffer disproportionately.
Our industry is also cyclical. Videogame platforms have historically had a life cycle of approximately four to eight years. As one group of platforms is reaching the end of its cycle and new platforms are emerging, consumers often defer game software purchases until the new platforms are available, causing sales to decline.
This decline may not be immediately offset by increased sales of products for the new platform as the installed base of the new platform needs adequate time to grow. Our results of operations may fluctuate from quarter to quarter, which could affect our business, financial condition and results of operations. Our results of operations may fluctuate from quarter to quarter depending upon several factors, some of which are beyond our control.
These factors include, but are not limited to,. These, as well as other factors, could affect our business, financial condition and results of operations, and this makes the prediction of our financial results on a quarterly basis difficult. Also, it is possible that our quarterly financial results may be below the expectations of public market analysts. We are heavily dependent on our senior management, and a loss of a member of our senior management team could cause our stock price to suffer.
If we lose the services of Peter Anthony Chiodo, our sole director and Chief Executive Officer and certain key employees, we may not be able to find appropriate replacements on a timely basis, and our business could be adversely affected. Our existing operations and continued future development depend to a significant extent upon the performance and active participation of Mr. Chiodo and certain key employees. Although we entered into an employment agreement with Mr.
Chiodo in January and although we may enter into employment agreements with additional key employees in the future, we cannot guarantee that we will be successful in retaining the services of these individuals.
If we were to lose any of these individuals, we may not be able to find appropriate replacements on a timely basis and our financial condition and results of operations could be materially adversely affected. We may be unable to maintain an effective system of internal control over financial reporting, and as a result we may be unable to accurately report our financial results. Our reporting obligations as a public company place a significant strain on our management, operational and financial resources and systems.
We do not at the moment have a chief financial officer, a chief accounting officer, or any employee with a financial or accounting background, though we are actively conducting a search for such an individual. At present, we would be unable to conclude that we maintain an effective system of internal control over financial reporting. If we fail to maintain an effective system of internal control over financial reporting, we could experience delays or inaccuracies in our reporting of financial information, or non-compliance with the Commission, reporting and other regulatory requirements.
This could subject us to regulatory scrutiny and result in a loss of public confidence in our management, which could, among other things, cause our stock price to drop. Risks Relating to Our Business and Industry. We operate in a highly competitive industry and compete against many large companies that could harm our business. Unexpected network interruptions, security breaches or computer virus attacks could harm our business.
The Company may be required to develop and maintain a substantial computer network infrastructure in order to protect our games, intellectual properties, and proprietary technologies. Major risks relating to any such future network infrastructure include:. We rely upon third parties to provide web and email hosting, networking and distribution for our games, and disruption in these services could harm our business.
We currently utilize, and plan on continuing to utilize over the current fiscal year, third party networking providers and distribution partnerships through companies including, but not limited to, Sony Computer Entertainment, Apple, Google, Amazon, and Microsoft, to network and distribute our games and other proprietary technologies. In addition, we utilize a third party web hosting service for our company website and email communications. If disruptions or capacity constraints occur, the Company may have no means of replacing these services, on a timely basis or at all.
This could cause a material adverse condition for our operations and financial earnings. Despite certain precautions taken by us, it may be possible for third parties to obtain and use our intellectual property without authorization. If any of our proprietary rights are misappropriated or we are forced to defend our intellectual property rights, we will have to incur substantial costs. Such litigation could result in substantial costs and diversion of our resources, including diverting the time and effort of our senior management, and could disrupt our business, as well as have a material adverse effect on our business, prospects, financial condition and results of operations.
Management will from time to time determine whether applying for patent, trademark and copyright protection is appropriate for us. We have no guarantee that, if filed, any applications will be granted or, if awarded, whether they will offer us any meaningful protection from other companies in our business.
Furthermore, any patents, trademarks or copyrights that we may be granted may be held by a court to infringe on the intellectual property rights of others and subject us to awards for damages. We cannot be certain that our games and proprietary technologies will not infringe upon patents, trademarks, copyrights or other intellectual property rights held by third parties.
While we know of no basis for any claims of this type, the existence of and ownership of intellectual property can be difficult to verify and we have not made an exhaustive search of all patent filings. Additionally, most patent applications are kept confidential for twelve to eighteen months, or longer, and we would not be able to be aware of potentially conflicting claims that they make.
We may become subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, and we may incur licensing fees or be forced to develop alternative technology or obtain other licenses.
In addition, we may incur substantial expenses in defending against these third party infringement claims and be diverted from devoting time to our business and operational issues, regardless of the merits of any such claim. Successful infringement or licensing claims against us may result in substantial monetary damages, which may materially disrupt the conduct of our business and have a material adverse effect on our reputation, business, financial condition and results of operations.
Our ability to obtain favorable terms from our suppliers may impact our financial results. Our financial results depend significantly upon the business terms we can obtain from our suppliers, primarily competitive prices and consistent availability. Because substantially all of our purchases are already cash in advance we do not have risk associated with loss of favorable payment terms.
The two 2 aforementioned scenarios could depress our profit margins.
Soul & Vibe Interactive Inc. - FORM K - April 1,
Our sales and profitability may be affected by changes in economic, business and industry conditions. If the economic climate in the United States or abroad deteriorates, customers or potential customers could reduce or delay their technology and entertainment investments. Reduced or delayed technology and entertainment investments could decrease our sales and profitability. In this environment, our customers may experience financial difficulty, cease operations and fail to budget or reduce budgets for the purchase of our products and professional services.
This may lead to longer sales cycles, delays in purchase decisions, payment and collection, and can also result in downward price pressures, causing our sales and profitability to decline. In addition, general economic uncertainty and general declines in capital spending in the information technology sector make it difficult to predict changes in the purchasing requirements of our customers and the markets we serve. There are many other factors which could affect our business, including:. These trends and factors could adversely affect our business, profitability and financial condition and diminish our ability to achieve our strategic objectives.
Risks Related to an Investment in Our Securities. There is a limited market for our common stock, which may make it more difficult to dispose of your stock. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell shares of our common stock, or the prices at which holders may be able to sell their common stock.
Because our principal stockholder controls a significant number of shares of our common stock, he has effective control over actions requiring stockholder approval. Accordingly, he has the ability to control the Company and the outcome of issues submitted to our stockholders. The trading price of our Common Stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.
The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with securities traded in those markets. All of these factors could adversely affect your ability to sell your shares of Common Stock or, if you are able to sell your shares, to sell your shares at a price that you determine to be fair or favorable.
The relative lack of public company experience of our management team could adversely impact our ability to comply with the reporting requirements of U. Our management team lacks public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by the Sarbanes-Oxley Act of Our senior management has little experience in managing a publicly traded company. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis.
Our senior management may not be able to implement programs and policies in an effective and timely manner that adequately respond to such increased legal, regulatory compliance and reporting requirements, including the establishing and maintaining of internal controls over financial reporting. If we were to fail to fulfill those obligations, our ability to continue as a U. The penny stock rules require a broker-dealer buying our securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities given the increased risks generally inherent in penny stocks.
Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. Thus, the FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our Common Stock, which may limit your ability to buy and sell our shares of Common Stock, have an adverse effect on the market for our shares of Common Stock, and thereby depress our price per share of Common Stock.
The elimination of monetary liability against our directors, officers and employees under Nevada law and the existence of indemnification rights for or obligations to our directors, officers and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers and employees. Our Articles of Incorporation contain a provision permitting us to eliminate the personal liability of our directors to us and our stockholders for damages for the breach of a fiduciary duty as a director or officer to the extent provided by Nevada law.
We may also have contractual indemnification obligations under any future employment agreements with our officers. The foregoing indemnification obligations could result in us incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and the resulting costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit us and our stockholders.
We may issue additional shares of Common Stock or preferred stock in the future, which could cause significant dilution to all stockholders. As of March 25, , we had ,, shares of Common Stock and , shares of Series B Preferred Stock issued and outstanding; however, we may issue additional shares of Common Stock or preferred stock in the future in connection with a financing, whether or not in connection with the Purchase Agreement, or an acquisition.
Such issuances may not require the approval of our stockholders. In addition, certain of our outstanding rights to purchase additional shares of Common Stock or securities convertible into our Common Stock are subject to full-ratchet anti-dilution protection, which could result in the right to purchase significantly more shares of Common Stock being issued or a reduction in the purchase price for any such shares or both.
Any issuance of additional shares of our Common Stock, or equity securities convertible into our Common Stock, including but not limited to, preferred stock, warrants and options, will dilute the percentage ownership interest of all stockholders, may dilute the book value per share of our Common Stock, and may negatively impact the market price of our Common Stock. Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of us. Certain provisions of the Nevada Revised Statutes have anti-takeover effects and may inhibit a non-negotiated merger or other business combination.
These provisions are intended to encourage any person interested in acquiring us to negotiate with, and to obtain the approval of, our board of directors in connection with such a transaction. However, certain of these provisions may discourage a future acquisition of us, including an acquisition in which the stockholders might otherwise receive a premium for their shares. As a result, stockholders who might desire to participate in such a transaction may not have the opportunity to do so.
Because we do not intend to pay any cash dividends on our Common Stock, our stockholders will not be able to receive a return on their shares unless they sell them. We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future.
Declaring and paying future dividends, if any, will be determined by our Board, based upon earnings, financial condition, capital resources, capital requirements, restrictions in our Articles of Incorporation, contractual restrictions, and such other factors as our Board deems relevant. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. There is no assurance that stockholders will be able to sell shares when desired.
Through December 31, , our Chief Executive Officer supplied office space to the Company at no charge. Effective January 1, , the Company entered into a lease for professional office space. The Company subsequently cancelled its virtual office space and is no longer incurring any expenses associated with the virtual office space. In the ordinary course of business, we may be involved in legal proceedings from time to time.
As of the date hereof, except as set forth herein, there are no known legal proceedings against the Company. No governmental agency has instituted proceedings, served, or threatened the Company with any complaints. Our shares of common stock first began trading on October 17, As of March 25, , there were approximately 29 holders of record of our common stock, which excludes those shareholders holding stock in street name. Dividend Policy. We have not declared or paid cash dividends or made distributions in the past, and we do not anticipate that we will pay cash dividends or make distributions in the foreseeable future.
We currently intend to retain and reinvest future earnings, if any, to finance our operations. Sales of Unregistered Securities. During the three months ended December 31, , there were no sales of unregistered securities. The following discussion and analysis of the results of operations and financial condition for the year ended December 31, , should be read in conjunction with the financial statements and related notes and the other financial information that are included elsewhere in this Annual Report.
This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclaim any obligation to update forward-looking statements. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Note Regarding Forward-Looking Statements and Business sections in this Annual Report.
All statements that express expectations, estimates, forecasts or projections are forward-looking statements. In addition, other written or oral statements, which constitute forward-looking statements, may be made by us or on our behalf. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. We undertake no obligation to update or revise any of the forward-looking statements after the date of this Annual Report to conform forward-looking statements to actual results.
Important factors on which such statements are based are assumptions concerning uncertainties, including but not limited to, uncertainties associated with the following:. The following discussion should be read in conjunction with the financial statements and the notes thereto which are included in this Annual Report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ substantially from those anticipated in any forward-looking statements included in this discussion as a result of various factors.
Overview and Outlook. Victory LG, Inc. The Company sells its products through digital distribution channels. The Company's products are a mix of licensed brand and internally generated, wholly owned intellectual properties. The Company has adopted a fiscal year end of December Completion of Share Exchange. Pursuant to the Agreement, the former stockholder of Soul transferred all of the issued and outstanding shares of common stock to us in exchange for , newly issued shares of our common stock. As a result of the Exchange, Soul became our wholly owned subsidiary.
As of March 8, , the dietary supplement business sector of the Company was discontinued entirely. The Company expects to generate its corporate revenue from the sale of video and computer games. We develop, publish, and digitally distribute interactive entertainment for video game consoles, mobile devices, and personal computers.
Our music products are also anticipated to be accessible on internet-enabled video game consoles for example: Spotify via the PlayStation Network and Microsoft Groove via the Xbox One. Results of Operations. Working Capital. Cash Flows.
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Balance Sheet. The assets are mainly comprised of cash and capitalized development costs. The increase in total liabilities is mainly attributable to an increase in the derivative liability. Operating Expenses. The decrease in operating expenses is mainly attributable to a decrease in general and administrative expenses as a result of initial operations commencing in the prior year.
The increase in net loss was primarily due to a loss on derivative instruments offset by a decrease in operating expense and a gain on extinguishment of debt. Plan of Operations. We plan to engage in product development, product release and marketing. Assuming approval is granted, the title s will either be propped to their servers for consumer purchase download or sent to a replicator for physical product.
As part of executing this plan, the Company expects to invest, subject to being able to raise the requisite financing, in capital equipment that will be needed to bring the products to market. This is inclusive of development and testing equipment and general hardware for marketing and production management. As the number of products the Company publishes increases, the staff of the Company is expected to increase commensurately. In addition, the Company intends to undertake and execute marketing and PR initiatives for the Company and the products it intends to release from its newly established professional office space in Salt Lake City, Utah.
The decrease in working capital is mainly due to an increase in the derivative liability and accrued expenses. Cash Flows from Operating Activities. The decrease in the use of cash for operating activities is mainly attributable to an increase in accrued expenses. Cash Flows from Investing Activity. The decrease in cash used in investing activities is mainly due to a decrease in cash paid for capitalized development costs.
Cash Flows from Financing Activities. The cash provided by financing activities is mainly due to proceeds from issuance of common stock and warrants for cash as well as the issuance of convertible debentures.
2018 Annual Report
The Company is using proceeds received from the issuance of common stock and convertible debentures to fund product development costs, product marketing and product publicity costs, and general and administrative expenses. The note also stipulates a conversion limitation, whereby the holder may not convert more than The note also stipulates two conversion limitations. The first conversion limitation stipulates that the new exchange note holder has an exclusive option to purchase the remaining balance of the original exchange note.
During the exclusivity period, the original exchange note holder may not convert the outstanding balance of its note with the Company for 90 days. Subsequent to year-end, the holder of the note reduced the equity amount from 9. The note was fully converted into approximately 8,, shares. There is no outstanding balance on the note as of December 31, Note principal was converted into approximately , shares during There is no outstanding balance as of December 31, Note principal was fully converted into approximately , shares during The amount was unsecured and bore no interest.
The note is personally guaranteed by the chief executive officer of the Company. Going Concern. We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing. Our intended source of future cash flow to fund our growth model until we are able to establish profitable operations will be through additional debt and equity offerings.
Off-Balance Sheet Arrangements.
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders. Future Financings. We will continue to rely on the issuance of debt and equity in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.
We intend to raise additional capital through equity and debt financing as needed, though there cannot be any assurance that such funds will be available to us on acceptable terms, on an acceptable schedule, or at all. We will be required to raise additional funds through public or private financing, additional collaborative relationships or other arrangements until we are able to raise revenues to a point of positive cash flow.
We believe our existing and available capital resources will be sufficient to satisfy our funding requirements through the second quarter of We are evaluating various options to further reduce our cash requirements to operate at a reduced rate, as well as options to raise additional funds, including obtaining loans and selling common stock. The issuance of additional securities may result in a significant dilution in the equity interests of our current stockholders.
Obtaining loans, assuming these loans would be available, will increase our liabilities and future cash commitments. There is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing will be available to use when needed or, if available, that it can be obtained on commercially reasonable terms.
If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations. Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included a paragraph in their report on our financial statements for the year ended December 31, regarding concerns about our ability to continue as a going concern.
There is substantial doubt about our ability to continue as a going concern as the continuation and expansion of our business is dependent upon obtaining further financing, successful and sufficient market acceptance of our products, and achieving a profitable level of operations.
The condensed consolidated financial statements do not include any adjustments relating to the recoverability or classification of recorded assets and liabilities that might result should the Company be unable to continue as a going concern. We have no off-balance sheet arrangements. We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations.
The list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management's judgment in their application.
The impact and any associated risks related to these policies on our business operations is discussed throughout management's Discussion and Analysis or Plan of Operation where such policies affect our reported and expected financial results. Note that our preparation of the financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.
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Use of Estimates. 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash Equivalents. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
Revenue Recognition. For the purposes of digital distribution, customer is equivalent to end consumer. Ownership of product is transferred to the customer with a no refund, no return policy, as set by the online portal service s. For retail distributed products pick-ups and select licensed-brand games , the Company recognizes revenue through traditional retail "sell-in" and "sell-through.
Based on the distributor, product sales are tracked on a monthly basis. On average, between thirty 30 to forty-five 45 days following the end of a month, the distributor remits payment to the Company. Ownership of product is transferred to the customer end user with a no refund, no return policy, as set by individual retailers. Impairment of Long-Lived Assets. The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts.
Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. Net Income Loss per Common Share. Basic net income loss per common share is computed by dividing net income loss by the weighted average number of shares of common stock outstanding during the period.
Diluted net income loss per common share is computed by dividing net income loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. Stock Based Compensation Expense. Under FASB ASC , all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. Derivative Instruments. The Company accounts for derivative instruments in accordance with ASC Topic , Derivatives and Hedging , all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet.
The Company uses estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. Transaction costs are not included in the determination of fair value. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable.
The Company categorizes its fair value estimates in accordance with ASC based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments at fair value as discussed above. Internal-Use Software Development Costs. In accordance with ASC , Intangibles - Goodwill and Other Internal-Use Software, the Company capitalizes all game software development costs once upon reaching the application development stage, management has authorized and committed funding to the project and it is probable that the project will be completed.
Costs that are capitalized are mainly in the form of fees paid to consultants in the form of cash and common stock of the Company. General and administrative costs and overhead are not capitalized as cost of internal-use software. Capitalization ceases no later than the point at which the project is substantially complete and ready for its intended use, generally after all substantial testing is completed. Two projects, Timeless Gems and Striker Rush: Championship Edition, were developed, completed, and placed into service as of December 31, Three packages of expansion content were developed, and released, for Timeless Gems throughout and A third game, SirVival, was acquired by the Company in the fourth quarter of A third interactive storybook, which has not been formally announced as of December 31, , entered active development during the fourth quarter of Fair Value of Financial Instruments.
It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. It prioritizes the inputs into three levels that may be used to measure fair value:. Level 1 - Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 2 - Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions less active markets ; or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 - Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The recorded values of financial instruments other than derivative liabilities approximate their current fair values because of their nature and respective maturity dates or durations. Derivative liabilities are measured at fair value. December 31, Going concern. Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business.
In addition, we do not currently have the cash resources to meet our operating commitments for the next twelve months. These factors, among others, indicate that we may be unable to continue as a going concern for a reasonable period of time. Recently Issued Accounting Standards. Management does not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.
Salt Lake City, Utah. We have audited the accompanying consolidated balance sheet of Soul and Vibe Interactive, Inc. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. 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. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Soul and Vibe Interactive, Inc. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. We have audited the accompanying balance sheet of Soul and Vibe Interactive, Inc. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
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. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Soul and Vibe Interactive, Inc.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As disclosed in Note 2 to the financial statements, the Company has negative cash flow from operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Consolidated Balance Sheets. The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statements of Operations. Consolidated Statement of Changes in Shareholder's Deficit. Consolidated Statements of Cash Flows. Notes to Financial Statements.
Nature of Business. The Company primarily sells its products through digital distribution channels. To date, the Company's products have been a mix of licensed brand and internally generated, wholly owned intellectual properties. Principles of Consolidation. The accompanying consolidated financial statements included herein have been prepared by Soul and Vibe Interactive Inc.
We believe that all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations presented have been reflected herein and that the disclosures made are adequate to make the information not misleading. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
Cash and Cash Equivalents. Advertising and Promotion. All costs associated with advertising and promoting products are expensed as incurred. Basic and Diluted Loss Per Share. The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding.