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FUEG > SEC Filings for FUEG > Form 10-Q on 19-Nov-2012All Recent SEC Filings

Show all filings for FACE UP ENTERTAINMENT GROUP, INC.

Form 10-Q for FACE UP ENTERTAINMENT GROUP, INC.


19-Nov-2012

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis and results of operations should be read in conjunction with the unaudited consolidated financial statements and accompanying notes and the other financial information appearing elsewhere in this Report and reports included herein by reference. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. For this purpose, any statements contained in this Report that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking information includes statements relating to future actions, prospective products, future performance or results of current or anticipated products, sales and marketing efforts, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management, and other matters. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as "may," "will," "should," "expects," "anticipates," "contemplates," "estimates," "believes," "plans," "projected," "predicts," "potential," or "continue" or the negative of these similar terms. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as that information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information.

These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In evaluating these forward-looking statements, you should consider various factors, including the following: (a) those risks and uncertainties related to general economic conditions, (b) whether we are able to manage our planned growth efficiently and operate profitable operations, (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations, and (d) whether we are able to successfully fulfill our primary requirements for cash, which are explained below under "Liquidity and Capital Resources". We assume no obligation to update forward-looking statements, except as otherwise required under the applicable federal securities laws.

Plan of Operation

We are in the business of operating a non-wagering, non-games of chance (such as poker, chess and backgammon), multi-platform, multiplayer and social software company. The Company has developed and recently began marketing and operating a non wagering internet gaming website by incorporating proprietary technologies that will provide players with streaming video, audio and messaging capabilities. We believe that these enhancements will dramatically enhance the players' online gaming experiences. Management is not aware of any online games sites which offer players the ability to see one another and speak live during game play.


Results of Operations

Comparison of Three Months Ended September 30, 2012 and 2011:

Revenues

During the three months ended September 30, 2012, we had revenues of $43,976 compared to no revenues for the three months ended September 30, 2011.

Selling, general and administrative expenses

Our selling, general and administrative expenses for the three months ended September 30, 2012 increased by $153,959, or approximately 78%, to $350,350, as compared to selling, general and administrative expenses for the three months ended September 30, 2011 of $196,391. These expenses are comprised mainly of general and administrative expenses of $349,564 and depreciation expense of $786.

Net loss

As a result of the foregoing, for the three months ended September 30, 2012, net loss was $1,496,609.
Net loss for the three-month period ended September 30, 2011 was $471,659. The increase was primarily due to financing costs and an increase in selling, general and administrative expenses. We had a derivative liability of $1,064,933 for the three-month period ended September 30, 2012.

Comparison of Nine Months Ended September 30, 2012 and 2011:

Revenues

During the nine months ended September 30, 2012, we had revenues of $79,809 compared to revenues of $105,000 for the nine months ended September 30, 2011.

Selling, general and administrative expenses

Our selling, general and administrative expenses for the nine months ended September 30, 2012 increased by $503,801, or approximately 99%, to $1,012,110, as compared to selling, general and administrative expenses for the nine months ended September 30, 2011 of $508,309. These expenses are comprised mainly of general and administrative expenses of $1,009,753and depreciation expense of $2,357.

Net loss

As a result of the foregoing, our net loss for the nine months ended September 30, 2012 was $3,006,985.
Net loss for the nine-month period ended September 30, 2011 was $680,826. The increase was primarily due to financing costs and an increase in selling, general and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

Our balance sheet as of September 30, 2012 reflects that we had $4,114 cash on hand. On September 30, 2012, our total current liabilities was $3,567,417. We had a stockholders' deficiency of $3,273,342 at September 30, 2012.

We currently have a total of $1,566,000 owed to nine entities and individuals, of which $416,000 are due upon demand and $825,000 have specific due dates, ranging from September 15, 2012 through March 11, 2013. During the quarter ended September 30, 2012 the Company borrowed an additional $225,000 of funds.


Going Concern Consideration

For the period December 24, 2009 (date of inception) through September 30, 2012 the Company has had a net loss of $4,005,173. As of September 30, 2012, the Company has not emerged from the development stage. In view of these matters, recoverability of any asset amounts shown in the accompanying financial statements is dependent upon the Company's ability to begin operations and to achieve a level of profitability. Since inception, the Company has financed its activities from the sale of equity securities, and obtaining loans. The Company intends on financing its future development activities and its working capital needs largely from notes, loans and the sale of public equity securities, until such time that funds provided by operations, if ever, are sufficient to fund working capital requirements.

The Company believes that it will need approximately $3,600,000 to fund its expenses over the next twelve months. On a monthly basis, if the Company had these funds it would utilize, among other uses, approximately $125,000 for advertising and marketing, $100,000 for salaries and office expenses and $60,000 for software development. There can be no assurance that additional capital will be available to the Company. The Company currently has no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources of capital.

We cannot be certain that the required additional financing will be available or available on terms favorable to us. If additional funds are raised by the issuance of our equity securities, such as through the issuance and exercise of warrants, then existing stockholders will experience dilution of their ownership interest. If additional funds are raised by the issuance of debt or other equity instruments, we may be subject to certain limitations in our operations, and issuance of such securities may have rights senior to those of the then existing holders of common stock. If adequate funds are not available or not available on acceptable terms, we may be unable to fund expansion, develop or enhance services or respond to competitive pressures.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities as of the date of the financial statements and during the applicable periods. We base these estimates on historical experience and on other factors that we believe are reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions and could have a material impact on our financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations or liquidity.

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