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Document and Entity Information

v2.4.0.6
Document and Entity Information (USD $)
12 Months Ended
Jun. 30, 2012
Jul. 31, 2013
Document And Entity Information    
Entity Registrant Name ROTATE BLACK INC  
Entity Central Index Key 0001020477  
Document Type 10-K  
Document Period End Date Jun. 30, 2012  
Amendment Flag false  
Current Fiscal Year End Date --06-30  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? No  
Entity Filer Category Smaller Reporting Company  
Entity Public Float   $ 4,980,546
Entity Common Stock, Shares Outstanding   45,863,609
Document Fiscal Period Focus FY  
Document Fiscal Year Focus 2012  

Balance Sheets

v2.4.0.6
Balance Sheets (USD $)
Jun. 30, 2012
Jun. 30, 2011
ASSETS    
Cash $ 8,671 $ 0
Prepaid expenses 6,501 23,641
Total current assets 15,172 23,641
Fixed assets - net 2,247 11,104
Casino construction in progress 538,853 0
Land purchase deposit 437,688 8,470,674
Investment in RBMS 0 65,519
Deferred development costs 0 52,278
Deferred casino development costs 1,149,017 0
Security deposit 3,600 3,600
TOTAL ASSETS 2,146,577 8,626,816
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY    
Accounts payable and accrued expenses 2,290,633 950,250
Accrued salaries 1,027,723 351,137
Redeemable Preferred Series A Stock 190,000 190,000
Note payable - insurance 0 2,074
Loan payable - stockholder 85,846 792,455
Dividends payable 36,933 0
Mortgage payable - Big Easy vessel 2,975,000 0
Note payable - Big Easy vessel 600,000 0
Accrued interest on mortgage and note payable 1,665,614 0
Note payable - truck - current portion 408 5,712
Total current liabilities 8,872,157 2,291,628
Mortgage payable - Big Easy vessel 0 2,975,000
Note payable - Big Easy vessel 0 600,000
Accrued interest on mortgage and note payable 0 642,576
Convertible promissory note payable 16,458 0
Beneficial conversion feature 47,000 0
Warrant liability 98,372 0
Note payable - truck 0 2,539
TOTAL LIABILITIES 9,033,987 6,511,743
STOCKHOLDERS'  (DEFICIT) EQUITY    
Common stock, $0.001 par value, 75,000,000 shares authorized; 33,228,896 and 22,138,849 shares issued and outstanding as of June 30, 2012 and 2011, respectively 33,229 22,139
Class A Preferred Stock Units, $0.001 par value, 45 Units authorized, issued and outstanding as of June 30, 2012 1,750,000 0
Class B Preferred Stock Units, $0.001 par value, 2,687 Units authorized, issued and outstanding as of June 30, 2012 725,000 0
Additional paid-in-capital 21,273,014 19,076,687
Accumulated deficit (29,150,503) (16,983,753)
Noncontrolling Interest (1,518,150) 0
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (6,887,410) 2,115,073
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY $ 2,146,577 $ 8,626,816

Balance Sheets (Parenthetical)

v2.4.0.6
Balance Sheets (Parenthetical) (USD $)
Jun. 30, 2012
Jun. 30, 2011
Statement of Financial Position [Abstract]    
Common Stock, par value $ 0.001 $ 0.001
Common Stock, Shares Authorized 75,000,000 75,000,000
Common Stock, Shares Issued 33,228,896 22,138,849
Common Stock, Shares, Outstanding 33,228,896 22,138,849
Class A Preferred stock, par value $ 0.001 $ 0.001
Class A Preferred stock, authorized shares 45 45
Class A Preferred stock, issued shares 45 45
Class A Preferred stock, outstanding shares 45 45
Class B Preferred stock, par value $ 0.001 $ 0.001
Class B Preferred stock, authorized shares 2,687 2,687
Class B Preferred stock, issued shares 2,687 2,687
Class B Preferred stock, outstanding shares 2,687 2,687

Consolidated Statements of Operations

v2.4.0.6
Consolidated Statements of Operations (USD $)
12 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Income Statement [Abstract]    
Revenue $ 180,000 $ 517,980
Operating expenses    
Salary expense 252,850 379,615
Stock based compensation 1,269,417 912,378
General and administrative expenses 1,366,659 713,943
Loss on sale of Rotate Black Gaming, Inc. 0 6,843,246
Loss on sale of Big Easy Gaming Vehicle 0 4,191,891
Write-off investment in joint venture 0 73,938
Write-off of deferred development costs 138,507 0
Write-off of deferred casino development costs 1,073,929 0
Settlement of derivative liability 0 (167,127)
Equity investment loss 0 116,497
Adjustment in fair market value of Preferred Series A Stock 0 91,500
Dividends on Redeemable Preferred Series A Stock 31,233 5,700
Loss on impairment of land purchase deposit 8,032,986 0
Change in fair value of conversion feature (310) 0
Interest expense and amortization of beneficial conversion feature 1,048,151 711,732
Total expenses 13,213,422 13,873,313
Net Loss (13,033,422) (13,355,333)
Net Loss Attributable to Noncontrolling Interest (1,518,150) 0
Net Loss Attributable to Shareholders $ (11,515,272) $ (13,355,333)
Basic and diluted net loss per common share $ (0.47) $ (0.69)
Basic and diluted average common shares outstanding 27,525,464 19,454,298

Consolidated Statement of Changes in Stockholders’ (Deficit) Equity

v2.4.0.6
Consolidated Statement of Changes in Stockholders’ (Deficit) Equity (USD $)
Common Stock
Series A Preferred Units
Series B Preferred Units
Additional Paid-In Capital
Accumulated Deficit
Controlling Interest
Noncontrolling Interest
Ending Balance, Amount at Jun. 30, 2010 $ 16,600 $ 1,625,000 $ 50,000 $ 17,673,413 $ (4,850,386) $ 14,514,627 $ (1,338,178)
Beginning Balance, Shares at Jun. 30, 2010 16,599,829 42 848        
Common stock sold for cash, Shares 20,000            
Common stock sold for cash, Amount 20     4,980    5,000   
Common stock issued in connection with consulting services rendered, Shares 1,129,526            
Common stock issued in connection with consulting services rendered, Amount 1,130     321,145    322,275   
Series A Preferred Common Stock Units sold, Shares   3          
Series A Preferred Common Stock Units sold, Amount   125,000       125,000   
Series B Preferred Common Stock Units sold, Shares     41        
Series B Preferred Common Stock Units sold, Amount     50,000       50,000  
Series B Preferred Common Stock Units issued for services rendered, Shares     246        
Series B Preferred Common Stock Units issued for services rendered, Amount     250,000       250,000  
Common stock issued in connection with legal services rendered, Shares 460,224            
Common stock issued in connection with legal services rendered, Amount 460     153,386    153,845  
Common stock issued in repayment of a loan, Shares 80,000            
Common stock issued in repayment of a loan, Amount 80     15,920    16,000  
Common stock issued as compensation, Shares 2,000,000            
Common stock issued as compensation, Amount 2,000     398,000   400,000  
Common stock issued to board members, Shares 40,000            
Common stock issued to board members, Amount 40     9,560   9,600  
Common stock issued in payment of loan payable - stockholder, Shares 1,600,000            
Common stock issued in payment of loan payable - stockholder, Amount 1,600     318,400   320,000  
Common stock issued for settlement of derivative liability, Shares 139,270            
Common stock issued for settlement of derivative liability, Amount 139     52,784   52,923  
Common stock issued for settlement of accounts payable, Shares 50,000            
Common stock issued for settlement of accounts payable, Amount 50     10,962   11,012  
Warrant granted to investment banker       22,658   22,658  
Shares issued to investment banker, Shares 20,000            
Shares issued to investment banker, Amount 20     3,980   4,000  
Warrants sold with Series A Preferred Stock       91,500   91,500  
Net loss attributable to noncontrolling interest             (25,430)
Sale of Gaming and noncontrolling interest         1,221,966 1,221,966 1,363,608
Net loss attributable to controlling interest         (13,355,333) (13,355,333)  
Ending Balance, Amount at Jun. 30, 2011 22,139 1,750,000 350,000 19,076,687 16,983,753 4,215,073  
Ending Balance, Shares at Jun. 30, 2011 22,138,849 45 1,135        
Series B Preferred Common Stock Units sold, Shares     1,552        
Series B Preferred Common Stock Units sold, Amount     375,000     375,000  
Common stock issued in connection with legal services rendered, Shares 200,000            
Common stock issued in connection with legal services rendered, Amount 200     39,800   40,000  
Common stock issued as compensation, Shares 5,847,089            
Common stock issued as compensation, Amount 5,847     1,163,570   1,169,417  
Common stock issued to board members, Shares 300,000            
Common stock issued to board members, Amount 300     59,700   60,000  
Common stock issued in payment of loan payable - stockholder, Shares 4,240,000            
Common stock issued in payment of loan payable - stockholder, Amount 4,240     843,760   848,000  
Common stock issued for investment in Rotate Black, MS LLC, Shares 430,000            
Common stock issued for investment in Rotate Black, MS LLC, Amount 430     89,570   90,000  
Cashless warrants exercised, Shares 72,958            
Cashless warrants exercised, Amount 73     (73)      
Effect of consolidation of RBMS and elimination of investment loss, Amount         (651,478) (651,478)  
Net loss         (11,515,272) (13,033,422) (1,518,150)
Ending Balance, Amount at Jun. 30, 2012 $ 33,229 $ 1,750,000 $ 725,000 $ 21,273,014 $ (29,150,503) $ (6,887,410) $ (1,518,150)
Ending Balance, Shares at Jun. 30, 2012 33,228,896 45 2,687        

Consolidated Statement of Cash Flows

v2.4.0.6
Consolidated Statement of Cash Flows (USD $)
12 Months Ended
Jun. 30, 2012
Jun. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (13,033,422) $ (13,355,333)
Adjustments to reconcile net loss to cash provided by operating activities:    
Deconsolidation of Rotate Black Gaming, Inc. (RBG)    6,843,246
Effect of consolidation of RBMS (566,239)   
Sale of Big Easy Gaming Vessel    4,191,891
Stock-based compensation 1,229,417 912,378
Issuance of Series A Preferred  and B Common Stock Units for services 550,000   
Stock issued for legal services 40,000   
Warrants granted with Series A Preferred Stock    91,500
Dividends payable 36,933   
Write-off of investment in joint venture    73,938
Write-off of deferred development costs 52,278   
Write-off of casino deferred development costs 1,073,929   
Loss on impairment of land purchase deposit 8,032,986   
Depreciation and amortization 8,857 214,066
Amortization and changes in beneficial conversion feature and warrant liability 11,830   
Noncontrolling interest    25,430
Changes in assets and liabilities:    
Prepaid expenses (24,640) (3,105)
Accounts payable and accrued expenses 1,611,386 981,760
Accrued interest on mortgage and note payable 1,023,038 642,576
Derivative liability    (167,127)
Contingent liability    102,000
Net cash provided by operating activities 46,353 553,220
CASH FLOWS FROM INVESTING ACTIVITIES    
Purchase of fixed assets (net of notes payable of $2,975,000 and $600,000 in 2010)    (590,408)
Investment In RBMS 155,519 (188,512)
Casino construction in progress (406,219)   
Deferred casino development costs (443,456)   
Proceeds from sale of RBG    15,000
Deferred development costs    (94,585)
Decrease in deferred financing fee    25,000
Net cash used in investing activities (694,156) (833,505)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from loan payable - stockholder 141,391 86,362
Proceeds from sales of  common stock    5,000
Proceeds from note payable 150,000   
Sale of Redeemable Series A Preferred Stock    190,000
Sale of RBMS Series A and B Preferred Units 375,000   
Payment of note payable - insurance (2,074) 2,074
Payments of note payable - truck (7,843) (4,377)
Net cash provided by financing activities 656,474 279,059
Net increase (decrease) in cash 8,671 (1,226)
Cash, beginning of period    1,226
Cash, end of period 8,671   
Noncash Transactions:    
Increase in net assets due to consolidation of RBMS 1,514,041   
Issuance of common stock in equity investment 90,000 166,000
Issuance of common stock in payment of due to stockholder 848,000 320,000
Issurance of Series A and B Preferred Common Stock Units for services 550,000 486,000
Issuance of common stock in payment of accounts payable    149,574
Issuance of common stock in settlement of derivative liability    $ 52,923

1. Organization and Operations

v2.4.0.6
1. Organization and Operations
12 Months Ended
Jun. 30, 2012
Accounting Policies [Abstract]  
1. Organization and Operations

Rotate Black, Inc. (Company) was incorporated in Nevada on August 2, 2006 to be the successor by merger of BevSystems International, Inc. and BevSystems International Ltd. (BevSystems).

 

The Company develops, operates and manages gaming and related properties. On April 1, 2010, the Company commenced operations under the Gulfport Project management agreement and was no longer a development stage company. (Note 6)

 

Gulfport Project

 

On May 28, 2010, the Company, Rotate Black, LLC (RBL), an entity under common control with the Company, and an officer of the Company formed Rotate Black MS, LLC (RBMS), a Mississippi limited liability company, to own, develop and manage the operations of a casino resort to be located on the property adjacent to the Gulfport, MS marina.  RBMS’s initial strategy was to secure an existing gaming vessel, move the vessel to the Gulfport site, and build land assets on that site to support the gaming vessel.  Subsequently, RBMS changed its strategy to an entirely land-based casino. In August 2012, the Company entered into an Indicative Summary of Terms and Conditions with debt and equity investors related to a proposed financing for the Gulfport Casino Hotel Project to be developed by RBMS (Borrower).  The proposed financing is for up to $101,800,000 for the development, design, construction, financing, ownership, operation and maintenance of an approximately 191,000 square foot land based, four star casino, including gaming, restaurant, bar and support space and an adjacent 205-room hotel in Gulfport, Mississippi.

 

Terms of the proposed financing call for senior secured term loans up to an aggregate of $80,900,000 to be provided in one tranche on the closing date, advanced at the rate of 94% of the principal.  Full repayment is expected to be October 2017.  Interest on the outstanding balance will be equal to the sum of the LIBOR rate applicable to the interest period, subject to a floor of 2%, and the applicable margin of 10.5%.

 

The equity investors shall fund the equity contribution to RBMS prior to the closing pursuant to the terms of an equity contribution agreement to be entered into by the equity investors, RBMS, and the Collateral Agent in the aggregate amount of $20,900,000.

 

Other Projects

 

On December 14, 2011, the Company formed a wholly-owned subsidiary, Rotate Black OK, LLC (OKL) and through the subsidiary, on December 12, 2011, the Company entered into an agreement to provide casino management services to an Oklahoma Native American Tribe Casino for a term of ninety days at $30,000, per month, inclusive of all personnel needed to provide the consulting services. The Company plans to leverage this agreement to generate additional Native American gaming consulting agreements.

 

On December 13, 2011, the Company formed a wholly-owned subsidiary, SlotOne, Inc., to provide slot machines on a participation basis in certain casino locations where the replacement of old equipment can enhance earnings for the gaming location and Rotate Black, Inc.  To date, the Company has secured a contract for the placement of equipment in September 2013 as well as an approval of its lender to facilitate the financings of this operation as of June 30, 2012, the entity was inactive.

 

On January 11, 2011, the Company entered into a management agreement whereby a new to-be-formed wholly-owned subsidiary of the Company would act as manager for a proposed casino and entertainment destination on the Louis Bull Indian Reserve near Edmonton, Canada.  As of July 31, 2013, the project is awaiting final approval from Alberta Liquor and Gaming, which is expected in fall 2013 (Note 10).

 

2. Summary of Significant Accounting Policies

v2.4.0.6
2. Summary of Significant Accounting Policies
12 Months Ended
Jun. 30, 2012
Accounting Policies [Abstract]  
2. Summary of Significant Accounting Policies

 

 

Consolidated Financial Statements

 

The accompanying consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiary, Rotate Black, OK, LLC. (OKL).  In addition, at June 30, 2012, the Company has included the financial statements of RBMS in the accompanying consolidated financial statements. (Note 7).

 

Investments in 50% or less owned entities without controlling influence by the Company are accounted for using the equity method. Under the equity method, the Company recognizes its ownership share of the income and losses of the equity entity. Through June 30, 2011, the Company recognized an equity interest in RBMS. (Note 7).

 

All significant intercompany accounts and transactions have been eliminated.

 

Estimates

 

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 revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

 

Financial Instruments

 

The Company considers the carrying amounts of financial instruments, including cash, accounts payable and accrued expenses to approximate their fair values because of their relatively short maturities.

 

Property and Equipment

 

Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method.

 

Maintenance and repairs are charged to operating expenses as they are incurred. Improvements and betterments, which extend the lives of the assets, are capitalized. The cost and accumulated depreciation of assets retired or otherwise disposed of are relieved from the appropriate accounts and any profit or loss on the sale or disposition of such assets is credited or charged to income.

 

Revenue Recognition

 

Revenue is recognized when evidence of an arrangement exists, pricing is fixed and determinable, collection is reasonably assured and delivery or performance of service has occurred. Management fees earned under contract to operate and manage casino projects are recognized pursuant to terms of the agreement.

 

Intra-entity transactions for revenue and expenses earned in connection with an equity investment are eliminated in accordance with guidance in ASC 323-10-35-5.

 

Share-Based Compensation

 

The Company recognizes compensation expense for all share-based payment awards made to employees, directors and others based on the estimated fair values on the date of the grant. Common stock equivalents are valued using the Black-Scholes Option-Pricing Model using the market price of our common stock on the date of valuation, an expected dividend yield of zero, the remaining period or maturity date of the common stock equivalent and the expected volatility of our common stock.

 

The Company determines the fair value of the share-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measureable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either the date at which a commitment for performance to earn the equity instrument is reached or the date the performance is complete.

 

The Company recognizes compensation expense for stock awards with service conditions on a straight-line basis over the requisite service period, which is included in operations.

 

Basic and Diluted Net Income (Loss) per Common Share

 

Basic net income (loss) per share (EPS) is calculated by dividing net income (loss) available to common stockholders (numerator) by the weighted-average number of common shares outstanding during each period (denominator). Diluted loss per share gives effect to all dilutive common shares outstanding using the treasury stock method and convertible preferred stock using the if-converted method.  In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.  Although there were common stock equivalents outstanding as of June 30, 2012 and June 30, 2011, they were not included in the calculation of earnings per shares because their inclusion would have been considered anti-dilutive.  As of June 30, 2012 and June 30, 2011, there were 3,900,000 and 2,021,333, respectively, total common stock equivalents.

 

Leases

 

Rent expense is recognized on the straight-line basis over the term of the lease.

 

Recent Accounting Pronouncements

 

In February 2013, The Financial Accounting Standards Board Issued FASB ASU 2013-02 Comprehensive Income (Topic 220) Reporting of Amounts reclassified Out of Accumulated Other Comprehensive Income.  The amendments in this update seek to obtain that objective by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. generally accepted accounting principles (GAAP) to be reclassified in its entirety to net income.  For other amounts that are note required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross reference other disclosures required under U.S. GAAP that provide additional detail about these amounts.  The amendment is effective prospectively for reporting periods beginning after December 15, 2012.  For non-public entities, the amendments are effective prospectively for reporting periods beginning December 15, 2013.  Early adoption is permitted.  The adoption of this pronouncement is not anticipated to have a material impact on the Company’s financial results or disclosures.

 

In July 2012, The Financial Accounting Standards Board Issued FASB ASU 2012-02 Intangibles-Goodwill and other (Topic 350), Testing indefinite-Lived Intangible Assets and Impairment.  The FASB amended the standards for testing indefinite-lived intangible asset for impairment to guidance that is similar to the guidance for goodwill impairment testing.  An entity will have the option not to calculate annually the fair value of an indefinite-lived intangible asset if an entity determines that it is more likely then not that the asset is impaired.  The objective of the amendment is to reduce the cost and complexity of performing impairment and to improve consistency in the impairment testing guidance among long lived asset categories. These amended standards are to be applied for fiscal years beginning after September 15, 2012, including interim periods with early adoption permitted.  The adoption of this pronouncement is not anticipated to have a material impact on the Company’s financial results or disclosures.

 

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.

3. Going Concern

v2.4.0.6
3. Going Concern
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
3. Going Concern

The financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred losses since inception, resulting in an accumulated deficit of $30,668,653 and negative working capital of $8,856,985, as of June 30, 2012 and further losses are anticipated. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations arising from normal business operations when they come due. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue.

 

The Company’s plan is to resolve this issue with the commencement of management fees from the Gulfport Project Management Agreement and other future sources of revenue. Until these occur in sufficient amounts, the Company plans to sell registered and unregistered stock to accredited investors.

4. Property and Equipment

v2.4.0.6
4. Property and Equipment
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
4. Property and Equipment

As of June 30, 2012 and 2011, property and equipment consisted of the following

 

    2012     2011  
             
Gaming vessel   $ -     $ 4,854,908  
Truck     -       39,761  
Furniture and fixtures     8,490       8,490  
Office equipment     23,289       23,290  
      31,779       4,926,449  
   Less accumulated depreciation     (29,532 )     (263,708 )
   Sale of Gaming Vessel     -       (4,651,637 )
    $ 2,247     $ 11,104  

 

On June 10, 2010, the Company purchased The Big Easy, a gaming vessel for an aggregate purchase price of $4,264,500, payable: (a) by issuance of a secured note payable to the seller of $2,975,000 (the Secured Note), (b) issuance of an unsecured note payable to the seller of $600,000 (Unsecured Note), fees of $414,500 and cash of $275,000. As of September 17, 2010, both notes were in default and the interest rate was increased to 20%, per annum. As of June 30, 2011, the Big Easy was sold at public auction at a loss of $4,191,891 (Note 9).

 

On December 1, 2011, the Company transferred ownership of the Company truck to an officer without consideration.  The vehicle had a net book value of $0 at the date of transfer.

 

Casino construction in progress totals $538,853 and represents expenses related to the architectural design of the casino.

 

For the years ended June 30, 2012 and 2011, depreciation expense was $8,857 and $214,066, respectively.

5. RBMS Management Agreement

v2.4.0.6
5. RBMS Management Agreement
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
5. RBMS Management Agreement

 

On May 28, 2010, the Company, RBL and an officer of the Company formed RBMS, a Mississippi limited liability company, to own, develop and manage the operations of a dockside vessel-based casino in Gulfport, Mississippi. RBMS’s initial strategy was to secure an existing gaming vessel, move the vessel to a Gulfport site, and build land assets on that site to support the gaming vessel.

 

On October 27, 2010, RBMS and the Company, as manager, entered into a management agreement, effective as of April 1, 2010 for a period of 99 years.  The Company, as manager, would manage all of the operations of the gaming facility.  The management fee was payable;  (1) $200,000, per month, (2) then upon commencement of the gaming operations, $250,000, per month, and (3) then achieving certain earnings, as defined, $300,000, per month.  The Manager is entitled to appoint two directors of the five directors on the RBMS Board of Directors.

 

In response to the equity investor, RBMS changed its strategy toward the construction of an entirely land-based casino.  On June 20, 2011, the Company agreed to amend its management agreement with RBMS to facilitate a $15.0 million equity financing for the Gulfport Project.  Under the new terms of the proposed agreement, the Company will receive from the closing of the equity financing to the opening date of the casino, a management fee of $200,000, per month, not to exceed $1,000,000, in total, prior to the opening of the casino.

 

As of June 30, 2011, in conjunction with the sale of the Big Easy Gaming Vessel (Note 9) and commencement of the Gulfport Project, the Company made an adjustment related to its investment in RBMS. The Company recognized 46.6% of the loss of RBMS as of June 30, 2011, reclassified the accrual of approximately seven months of management fees due from RBMS, and eliminated intra-entity revenues and expenses totaling $452,020.  As a result, the Company reported $517,980 in management revenue for the year ended June 30, 2011. 

 

As of June 30, 2012, in accordance with ASC 810, “Consolidation”, Management evaluated and determined that the variable interest holders of RBMS now lack the direct and indirect  ability to make decisions about the entity’s activities and have determined that that the Company is the primary beneficiary of RBMS.  As a result, the financial statements of RBMS have been included in the accompanying consolidated financial statements of the Company.

6. Gulfport Casino Hotel Project

v2.4.0.6
6. Gulfport Casino Hotel Project
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
6. Gulfport Casino Hotel Project

In August 2012, the Company entered into an Indicative Summary of Terms and Conditions with an equity investor related to a proposed financing for the Gulfport Casino Hotel Project to be developed by RBMS (Borrower).  The proposed financing is for up to $101,800,000 for the development, design, construction, financing, ownership, operation and maintenance of an approximately 191,000 square foot land based four star casino, including gaming, restaurant, bar and support space and an adjacent 205-room hotel in Gulfport, Mississippi.

 

Terms of the proposed financing call for senior secured term loans up to an aggregate of $80,900,000 to be provided in one tranche on the closing date, advanced at the rate of 94% of the principal. Full repayment is expected to be October 2017. Interest on the outstanding balance will be equal to the sum of the LIBOR rate applicable to the interest period, subject to a floor of 2%, and the applicable margin of 10.5%

 

The equity investors shall fund the equity contribution to RBMS prior to the closing pursuant to the terms of an equity contribution agreement to be entered into by the equity investors, RBMS, and the Collateral Agent in the aggregate amount of $20,900,000.

 

RBMS shall enter into a warrant agreement with respect to the issuance of detachable warrants in favor of the lender to purchase 7.5% of the fully diluted membership interests of the RBMS at an exercise price of $0.01, per membership interest, with anti-dilution provisions.

7. Investment in RBMS

v2.4.0.6
7. Investment in RBMS
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
7. Investment in RBMS

 

Upon formation of RBMS and the commencement of the management agreement, the Company, RBL and an officer of the Company owned an aggregate 46.6% of the voting interests of RBMS and the remaining units were sold to outside investors. Through June 30, 2011, the Company accounted for its investment in RBMS on the equity method in accordance with ASC 810-10; as it did not meet all the requirements of a variable interest entity to consolidate; the outside equity investors were not protected from the losses of the entity nor were they guaranteed a return by the legal entity; the outside equity investors expected residual returns that were not capped by any arrangements or documents with other holders;  and the percent of ownership will be diluted by future financing of RBMS. 

 

As of June 30, 2012, Management evaluated and determined that,  at the present time, the variable interest holders lack the direct and indirect ability to make decisions about the entity’s activities and has determined that that the Company is the primary beneficiary of RBMS.   As a result, the financial statements of RBMS have been included in the accompanying consolidated financial statements of the Company.  The Company owned an aggregate of 24.81% of the voting interest of RBMS, therefore a non-controlling interest representing 75.19% of the net loss of RBMS has been reflected on the Statement of Operations as of June 30, 2012.  In consolidation, the Company recorded an adjustment to retained earnings of $651,478; the difference between the opening balance of retained earnings of RBMS of $1,219,995 and the prior equity loss recorded by the Company of $568,517.

 

In connection with the proposed terms of the funding of the Gulfport Casino Hotel Project (Note 6), holders of Class A Units of RBMS have agreed to convert their units into B Units to facilitate the financing of the Gulfport project.  Upon closing, the equity investor will own 60,000 B Units out of 100,000 authorized and 70,588 outstanding, or 85% of RBMS. In addition, upon closing, RBMS will issue 29,412 warrants at an exercise price of $0.01, to all other investors based on pre-negotiated percentages. Assuming all warrants are exercised, the equity investor will be diluted to a 60% ownership. The Company will own at closing, B units and warrants that represent approximately 10% of the fully diluted RBMS shares. Closing is anticipated to be on or before December 15, 2013.

 

Ground Lease

 

Effective October 20, 2010, RBMS entered into a ground lease for the nine and a half acre site for the Gulfport Project.  The Preliminary Term, as defined, remains in effect until the earliest of the ninth month following the effective date or the date gaming operations begin on the leased property.  During the Preliminary Term, rent would be equal to $20,000, per month with no payment required until the earlier of the date the Lessee commences construction on the premises or February 1, 2011. RBMS did not receive approval to proceed with the development of the casino from the Mississippi Gaming Commission on or prior to March 1, 2011, and the lease terminated with no obligations due.

 

Due to delays, the lease was amended on October 21, 2011 for a term through October 31, 2069, with a fee payable of $25,000 to enter into the amended and restated lease and $50,000 as the initial base rent payment.  After the commencement of gaming operations, RBMS will pay an annual minimum base rent of $600,000, as defined. On March 13, 2012 this ground lease was amended and extends the date for RBMS to obtain approval to proceed to April 30, 2012.  In consideration of this extension, RBMS agreed to pay a fee of $50,000. An additional extension was entered into May 1, 2012 extending the approval date to August 31, 2012 and RBMS agreed to pay a fee for the extension of $110,000.  On August 18, 2012 the RBMS received its Approval to Proceed from the Mississippi Gaming Commission.

 

On April 9, 2012, the Mississippi Gaming Commission granted to RBMS approval as a legal gaming site for a 9.5 acre site located in Gulfport Mississippi, however, on May 17, 2012 the Commission denied the application to proceed with construction of the casino resort.

 

On August 16, 2012, the Commission voted to grant RBMS approval to proceed with the Gulfport Project.

 

8. The Big Easy Gaming Vessel

v2.4.0.6
8. The Big Easy Gaming Vessel
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
8. The Big Easy Gaming Vessel

On June 10, 2010, the Company purchased The Big Easy, a gaming vessel for the Gulfport Project, for an aggregate purchase price of $4,264,500, payable: (a) by issuance of a secured note payable to the seller of $2,975,000 (the Secured Note), (b) issuance of an unsecured note payable to the seller of $600,000 (Unsecured Note), fees of $414,500 and cash of $275,000. The Secured Note is collateralized by the gaming vessel and both notes are guaranteed by an officer of the Company. The Secured Note was payable on June 11, 2011 and bears interest at 14.5%, per annum, payable $35,000, per month, commencing June 11, 2010. The Unsecured Note

bears interest at 14.5%, per annum, and is payable monthly, in an amount equal to 2% of the monthly gross gaming revenue generated from operations, as defined, until June 2012 when all principal and interest are due. Since September 17, 2010, both notes have been in default and the interest rate was increased to 20%, per annum.

 

As of June 30, 2011, the due dates of both notes were extended in support of the Company’s current project in Gulfport, MS and the Trustee of the Cruise Holdings bankruptcy estate, holding the mortgage and promissory note payable has consented;  (1) to require no payments through June 30, 2012; (2) that the collection fees and accrued interest be paid on or before October 1, 2012; (3) extend the due date of the balance of the obligation for the principal and accrued interest to July 1, 2013.  As of August 16, 2013, the Company has not repaid the principal and accrued interest by the dates stipulated in the extension and, therefore, is currently in default.  As a result, the balances as of the mortgage payable, note payable and accrued interest have been reflected as current liabilities in the Company’s balance sheet as of June 30, 2012.

 

In May 2011, the equity investor informed RBMS it would not move forward with the financing of the Gulfport Project unless the casino was land based.  As a result, it was decided the vessel be sold at a public auction, however, the public sale did not yield sufficient funds to eliminate the fees and mortgage debt.  The Company received $459,746 in the reduction of accounts payable from the public sale which was paid directly to vendors of the Company. June 30, 2011, the Company recorded a loss of $4,191,891 on the sale of the gaming vessel.  The Company is currently in discussions with the mortgage holder and the trustee to reach an agreement to extinguish the mortgage of $2,975,000 and note payable of $600,000 through the issuance of equity.

 

On December 20, 2012 the Company, an officer of the Company as Guarantor entered into a Settlement Agreement (Agreement) with the Trustee for the estate of the gaming vessel which set forth terms related to the consideration to be paid by the Company to the Trustee in exchange for the release of all claims against the Company and the Guarantor, including all promissory notes, penalties, fees and interest. The Agreement is subject to the order of approval by the US Bankruptcy Court, Southern District of Florida, West Palm Division and will become effective upon the first business day of RBMS’s closing on primary equity and debt financing for not less than $100,000,000 for the design, construction and opening of a casino resort in Gulfport, MS. Pursuant to the terms of the Agreement, upon closing, the Company shall deliver to the Trustee 250,000 shares of Series B Subordinated Participating Preferred Stock in Rotate Black, to be designated  These Series B Preferred shares will be fully redeemed through payments to the Trustee totaling $5,000,000 and will be determined as a percentage of the Company’s gross cash receipts each year, as defined. The payments will be due on a monthly basis.  The Series B shares will be subordinated to a maximum of $2,500,000 of Series A Preferred shares.  The Series B are fully redeemable by the Company in part or in full based upon a schedule whereby the balance will be adjusted; (1) within the first three months of the closing to $2,000,000; (2) within the first 15 months of closing to $2,500,000; (3) within the first 27 months of closing to $3,000,000; (4) within the first 39 months of closing to $3,500,000; (5) within the first 51 months of closing to $4,000,000; and (5) after 51 but before 59 months of closing the Company is obligated to pay $5,000,000.  If the Series B Preferred is not redeemed on an accelerated basis or in accordance with the terms of the Agreement, the Company shall pay the Trustee the sum of $5,000,000, plus 12% interest, per annum, over the five years, with default provisions as defined.

 

9. Rotate Black, Gaming, Inc.

v2.4.0.6
9. Rotate Black, Gaming, Inc.
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
10. Rotate Black, Gaming, Inc.

Development Agreement

 

On June 22, 2007, Gaming entered into a Development Agreement with the Seneca Nation of Indians (Nation), a Federally-recognized Indian tribal government, to act as the Developer to provide managerial expertise and financial resources to assist the Nation in acquiring land and developing and constructing a gaming facility (Facility).

 

   

Under the terms of the Development Agreement, the Company was responsible for arranging a limited recourse loan or other arrangements to finance the Facility in an aggregate principal amount of up to $350,000,000. The proceeds of the loan were to be used exclusively for the development, design, construction, furnishing and equipping of the Facility, for start-up and working capital and reimbursing the Company for development advances. Development advances are the funds advanced by the Company for necessary costs in advance of the facility loan. In accordance with the Development Agreement, development costs include the costs of the design, construction, furnishing and equipping of the Facility and such other costs incurred by the Company or by the Nation to advance the conclusion of the project, including consultant and attorney fees and costs. According to the Agreement, funds advanced as development costs, together with the development fee, would constitute the initial principal of the development loan and the funds advanced by the Company, as developer will be reimbursed from the proceeds of the Facility Loan.

 

A development fee of 2.5% of total development costs was to be paid to the Company for services rendered pursuant to the Development Agreement and are in addition to the amounts advanced to cover the development costs.

 

Management Agreement

 

On June 14, 2008, Gaming entered into a Management Agreement with the Nation for an exclusive right and obligation to manage, operate and maintain the gaming facility to be developed in Sullivan County, New York, commencing on the effective date, as defined, and continuing for a period of seven years after the date on which gaming commences in the facility. The term would be automatically extended for a period of seven years unless terminated under the provisions of the agreement.

 

Under the Management Agreement, the Nation would have paid the Company a fee based on a percent of gaming revenues, as defined.

 

Contract Rights

 

Contract rights consisted of the various rights acquired under the Development and Management Agreements. It is composed of contract rights acquired by Rotate Black, LLC and draws from an asset-backed lending agreement used to finance the expenses associated with acquiring the Development and Management Agreements.

 

 Sale of Gaming

 

On July 1, 2010, as amended, the Company and RBL entered into an agreement to sell 100% of the common stock of Gaming to Catskills Gaming and Development, LLC (Catskill) in exchange for an aggregate contingent consideration of $21,000,000 in cash and the assumption of indebtedness of approximately $6,300,000. According to the Agreement, the consideration is to be paid in installments as follow:

 

$15,000 at closing

 

$2 million on or before the first anniversary of the date of the opening for business to the public of a gaming facility under a management agreement between Catskills, as manager, and the Seneca Nation of Indians, in or near the Counties of Ulster and Sullivan in the State of New York (the “Opening Date”);

 

$2 million on the second anniversary of the Opening Date;

  

$3.4 million on the third anniversary of the Opening Date:

 

$3.4 million on the fourth anniversary of the Opening Date;

 

$3.4 million on the fifth anniversary of the Opening Date;

 

$3.4 million on the sixth anniversary of the Opening Date; and

 

$3.4 million on the seventh anniversary of the Opening Date.

 

As of June 30, 2011, the Company received the payment of $15,000 and, since the balance of the compensation is contingent upon the opening for business of a gaming facility under a management agreement between Catskills, as manager, and the Seneca Nation of Indians, the Company has not recorded a receivable for the balance of the sales agreement.

 

The Company has recorded the deconsolidation of Gaming in accordance with ASC 810-10-40 and has recorded a loss on the sale of Gaming of $6,843,246, by calculating the difference between the sum of the consideration received and the carrying amount of the noncontrolling interest and the carrying amount of the entity’s assets and liabilities as follows:

 

Intangible assets – Contract rights   $ 6,323,884  
Developer loan receivable     2,397,834  
Noncontrolling interest     (1,363,608 )
Accounts payable & accrued expenses     (1,508,209 )
Accumulated deficit – noncontrolling entity     1,221,966  
Deferred revenue     (49,621 )
Contingent liability     (164,000 )
    $ 6,858,246  
Less consideration on sale:     (15,000 )
Loss on sale of Gaming   $ 6,843,246  

 

Land Purchase Deposit

 

On May 26, 2009, the Company entered into an agreement to acquire real property in Sullivan County, New York. The purchase price for the property was 1,409,828 shares of common stock of the Company, $1,750,000 in cash on escrow and $1,750,000 in cash upon closing. On May 11, 2009, the Company issued 630,735 shares of common stock and Rotate Black, LLC transferred, on behalf of the Company, 779,093 shares of the Company’s common stock to the seller, both being held in escrow, as a deposit under the agreement. The shares were valued at $7,049,142, $5.00, per share.

 

In October 2009, the Company issued 779,093 shares of common stock to Rotate Black, LLC as repayment of the advance.

 

On November 9, 2009, March 16, 2010 and May 21, 2010, the Company issued 70,000 (valued at $350,000, $5.00, per share), 208,613 (valued at $521,532, $2.5, per share) and 500,000 (valued at $550,000 $1.10, per share) shares of common stock in satisfaction of anti-dilution rights of the land purchase agreement.

 

The Company has evaluated the fair value of the land deposit and has determined that the acreage of land has a fair value in excess of the book value of the deposit recorded, however,  the value of the 2,188,441 shares of the common stock of the Company provided as a deposit on the land is not in excess of its fair value and, therefore, has recorded a loss on impairment of the land purchase deposit of $8,032,986 as of June 30, 2012. The remaining value of the deposit of $437,688 represents the current fair value of the shares at $0.20, per share.

10. Edmonton Project Management Agreement

v2.4.0.6
10. Edmonton Project Management Agreement
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
10. Edmonton Project Management Agreement

On January 11, 2011, the Company, through an officer of the Company, entered into a management agreement (Agreement), whereby a newly to-be-formed wholly-owned subsidiary of the Company would act as manager, with the Bear Hills Charitable Foundation, Bear Hills Casino Inc., the Louis Bull Tribe and 677626 Alberta Ltd. (Tribe Companies) for a proposed casino and entertainment destination on the Louis Bull Indian Reserve, near Edmonton, Canada. The term of the Agreement commences on the date the Tribe Companies receive a license for the proposed casino and all related necessary approvals from the Alberta Gaming and Liquor Commission and then shall continue for the greater of twenty years or until all monies advanced by the Company to the Tribe Companies relating directly or indirectly to the casino project are repaid or for such other term agreed.

 

The Company, as manager, will be entitled to receive thirty percent of the revenues distributed to the Tribe Companies from the operations of the slot revenue and live games. In addition, the Company is entitled to thirty percent of all profits from any other businesses or activities on the property provided by Tribe Companies and thirty of all profits on any amenities or services supporting or related directly or indirectly to the casino. As of July 2013, the project is awaiting direction from Alberta Liquor and Gaming. The project remains in process, however, the Company has written-off the deferred costs in connection with the project totaling $138,507.

 

11. Panama Project

v2.4.0.6
11. Panama Project
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
11. Panama Project

On March 17, 2011, the Company entered into an agreement (Agreement) for a proposed joint venture (Blue Water Gaming and Entertainment S.A.) (Blue Water), with Ocean Point Development Corp. (Ocean Point) to develop and manage an approximately 52,000 square foot Las Vegas style casino at the Trump Ocean Club International Hotel and Tower, in Panama City, Panama (Trump Ocean Club).  As of June 30, 2011, due to the market conditions in Panama, the Company put this

project on hold and wrote off deferred costs of $73,938.  The Company is now focusing its development efforts on its Gulfport Project and is no longer pursuing this development opportunity

12. Lease

v2.4.0.6
12. Lease
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
12. Lease

On August 8, 2008, the Company entered into a lease for office space, commencing on September 1, 2008 through August 31, 2011.  Rent is payable in advance, in annual installments.  The initial year’s rent was $46,200, increasing as defined.  The Company had an option to extend the lease for an additional three-year period.

 

An Agreed Judgment was filed against the Company in the 57th Circuit Court, Judicial District, State of Michigan, in the amount of $38,668 on February 25, 2011 by the landlord of the real estate lease dated August 8, 2008. On July 21, 2013 the Landlord agreed to a final payment offer for all past and current rent due through August 31, 2013 of $157,489, plus interest at 12%, payable by September 30, 2013.

13. Loan Payable-Stockholder

v2.4.0.6
13. Loan Payable-Stockholder
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
13. Loan Payable-Stockholder

Loan payable –stockholder primarily consists of advances by RBL, the majority stockholder of the Company and is payable on demand, with interest at 12%.

14. Convertible Promissory Note Payable

v2.4.0.6
14. Convertible Promissory Note Payable
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
14. Convertible Promissory Note Payable

On May 1, 2012, the Company issued a two-year, 10% convertible promissory note in the amount of $150,000.  121 days from the issue date, the holder can convert any unpaid principal and accrued interest into common shares of the Company. Between 121 days and 150 days from the issue date, the conversion price per share shall be $0.25; from 151 days to 180 days from the issue date, the conversion price shall be $0.20; anytime thereafter the conversion price shall be $0.15, subject to adjustment as defined. . The investor also was issued a five year common stock purchase warrant for the purchase of up to 480,000 shares of the Company’s common stock, at a price per share of $0.40, that permits a cashless exercise in the event that the underlying shares of common stock to be issued upon exercise are not registered pursuant to an effective registration statement at the time of the exercise.

 

Convertible Promissory Note Payable Beneficial Conversion Feature

 

As part of the issuance of the convertible promissory note payable, the Company recorded a derivative for the embedded beneficial feature conversion on the convertible debentures. Since the conversion feature of the note payable may be reset based upon subsequent financing, the derivative was reflected as a liability.  The Company records changes in fair value at each reporting period in its consolidated statements of operations as a gain or loss associated with the change in fair market value.

 

The Company calculated the value of the conversion feature as of May 1, 2012 at $45,251, based upon the Black Scholes model, and has reflected this as a discount against the convertible promissory note, amortizable as interest expense over two years.  The Company recorded $3,771 in amortization expense as of June 30, 2012.

 

The Company calculated the value of the conversion feature at June 30, 2012, recording a loss on the change in fair market value of $1,749 as of June 30, 2012.

 

Warrants

 

As part of the issuance of certain convertible debentures, we recorded a derivative for the issuance of detachable warrants.    Although such warrants are typically considered equity instruments, the warrant agreement allows for resets of the conversion price based upon subsequent financing, therefore the warrant issuance was deemed a liability for financial reporting purposes under the accounting guidance.

 

The warrant was valued as of May 1, 2012 at $100,431, using a Black-Scholes Option Pricing Model with the stock price on day of grant, $0.22, per share, the risk free interest rate of .84% and the expected volatility of 108.93%.  This value has been reflected as discount of the convertible promissory note payable, amortizable as interest expense over two years.  As of June 30, 2012, the Company recorded $8,369 in interest expense.

 

The Company calculated the value of the conversion feature at June 30, 2012, recording a gain on the change in fair market value of $2,059 as of June 30, 2012.

 

The Company has reflected the value of the convertible promissory note payable in its consolidated balance sheet as follows:

 

    May 1, 2012     June 30, 2012  
             
Convertible Promissory Note Payable   $ 150,000     $ 150,000  
Less:     -          
   Beneficial Conversion Feature Discount     (45,251 )     (41,480 )
   Warrant Discount     (100,431 )     (92,062 )
                 
Total Discount     (145,682 )     (133,542 )
                 
Convertible Promissory Note Payable - Net   $ 4,318     $ 16,458  

 

 

In July 2013, $15,000 of the principal of the promissory note, and $1,467 in interest were repaid as a result of converting the debt to 164,671 shares of the Company’s common stock.  In connection with this financing, the investment banker received 40,000 shares of the Company’s common stock.

 

On July 17, 2012 and October 15, 2012, the Company sold an additional $50,000 and $39,015, respectively, of the 10% convertible promissory notes.  Warrants to purchase an aggregate of 272,530 shares of the Company’s common stock were issued in conjunction with these financings. In connection with these financings, the investment banker received a 10% promissory note for $6,000 and a warrant to purchase 34,500 shares of the Company’s common stock, under the same terms as the other notes sold, as payment for commissions on the financing. In addition, the investment banker received 22,253 shares of the Company’s common stock as commission.

 

On May 28, 2013, the Company sold an additional $59,000 of the 10% convertible promissory notes. In connection with this note, the Company agreed to hold 2,000,000 of its common stock as collateral for the note payable.

15. Common Stock

v2.4.0.6
15. Common Stock
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
15. Common Stock

Common and Preferred Shares

 

On April 20, 2011, the Stockholders authorized an increase the number of authorized common shares from 20,000,000 to 75,000,000, $0.001, par value, and authorized 5,000,000 preferred shares, $.01, par value.

 

For the year ended June 30, 2011, the Company issued an aggregate of 460,224 shares of common stock for legal services rendered, valued at $153,845, an average of $0.31, per share, the value of the service provided.

 

For the year ended June 30, 2011, the Company issued an aggregate of 779,526 shares of common stock for consulting services rendered under an extended contract, valued at $213,275, an average of $0.24, per share, the value of the service provided.

  

For the year ended June 30, 2011, the Company issued 40,000 shares of common stock to board members for services rendered, valued at $9,600, an average of $0.24, per share, the value of the service provided.

 

For the year ended June 30, 2011, the Company issued 1,600,000 shares of common stock as payment for loan payable - stockholder, valued at $320,000, $0.20, per share.

 

For the year ended June 30, 2011, the Company issued 139,270 shares of common stock as settlement of the derivative liability, valued at $52,923, $0.38, per share.

 

For the year ended June 30, 2011, the Company issued 50,000 shares of common stock in settlement of an account payable, valued at $11,012, $0.22, per share.

 

On June 10, 2011, in connection with the sale of the Series A Preferred stock, the Company issued 20,000 shares of common stock, valued at $4,000, $0.20, per share, to the investment banker.

 

In September 2011, the Company issued 7,900 shares of common stock for the cashless exercise of warrants.

 

In September 2011, the Company issued an aggregate of 400,000 shares of common stock for payment of loan payable – stockholder, valued at $80,000, $0.20, per share.

 

In November 2011, the Company issued 65,058 shares of common stock for the cashless exercise of warrants.

 

In December 2011, the Company issued an aggregate of 500,000 shares of common stock for payment of loan payable - stockholder, valued at $100,000, $0.20, per share.

 

In December 2011, the Company issued an aggregate of 5,847,089 shares of common stock as compensation to employees and consultants, valued at $1,169,417, $0.20, per share.

 

In December 2011, the Company issued 300,000 shares of common stock to board members for services rendered, valued at $60,000, $0.20, per share.

 

In February 2012, the Company issued an aggregate of 3,340,000 shares of common stock for payment of loan payable - stockholder, valued at $668,000, $0.20, per share.

 

In March 2012, the Company issued 200,000 shares of common stock as repayment of accounts payable on behalf of RBMS, valued at $40,000, $0.20, per share.

 

In March 2012. The Company issued 80,000 shares of common stock as payment for accounts payable valued at $20,000, $0.25, per share.

 

In April 2012, the Company issued 150,000 shares of common stock as repayment of loans on behalf of RBMS, valued at $30,000, $0.20, per share

 

In April 2012, the Company issued 200,000 shares of common stock for legal services rendered valued at $40,000, $0.20, per share.

 

RBMS Equity

 

RBMS equity consists of 45 Series A Preferred Common Stock Units and 2,687 Series B Preferred Common Stock Units. $1,925,000 Units were sold for cash from 2010 through 2012 and $550,000 Units were issued for services rendered to the Company.

 

Stock Option Plan

 

On July 6, 2011, the Company’s stockholders approved the Rotate Black, Inc. Stock Option Plan (Plan) under which the Chief Executive Officer of the Company may grant incentive stock options to certain employees to purchase up to 25,000,000 shares of common stock of the Company. The option price shall be no less than the fair market value of the stock, as defined. The Plan shall terminate after ten years.  As June 30, 2012, no options were granted under the Plan.


Warrants

 

On May 28, 2010, the Company granted a warrant to purchase 100,000 shares of the Company's common stock to a consultant for services rendered. The warrant is exercisable at $0.17 and was valued at $11,610 using a Black-Scholes Option Pricing Model with the stock price on day of grant, $0.19, the risk free interest rate, 2.10% and the expected volatility of 69.81%. 7,900 shares of stock were issued pursuant to a cashless exercise of the warrant on December 31, 2011.

 

On June 23, 2011, in connection with the sale of Series A Preferred Stock, the Company granted a five-year warrant to purchase 158,000 shares of the Company’s common stock to the investment banker.  The warrant was exercisable at $0.10, per share and was valued at $22,658 using a Black-Scholes Option Pricing Model with

the stock price on day of grant, $0.19, per share, the risk free interest rate of 1.48% and the expected volatility of 81.13%. 65,058 shares were subsequently issued pursuant to a cashless exercise of the warrant on November 14, 2011.

 

Class A 12% Preferred Stock

 

On June 10, 2011, the Board of Directors designated 500 shares of Class A 12% Preferred stock (Series A), stated value of $1,000, per share. Each share is convertible at any time from and after the issue date into shares of common stock determined by dividing the stated value of the shares of Series A by the conversion price of $.10, as defined. Holders of the Series A are entitled to receive cumulative dividends at 12%, per annum, payable quarterly, subject to periodic increases, as defined, and a late fee of 18%, per annum. The Series A have certain anti-dilution rights, as defined. In addition, upon the occurrence of any triggering event, as defined, the holder of the Series A shall have the right to: (A) require the Company to redeem all of the Series A held by the holder for a redemption price, in cash, equal to the an amount as defined, or (B) redeem all of the Series A held by the holder for a redemption price, in shares of common stock of the Company, equal to a number of shares equal to the redemption amount, as defined. Upon liquidation of the Company, the Series A holders are entitled to receive an amount equal to the stated value, plus accrued and unpaid dividends. The Series A have no voting rights.

  

On June 10, 2011, the Company entered into a Securities Purchase Agreement to sell up to an aggregate of 500 shares of Preferred Stock with an aggregate value of $500,000.

 

As of June 30, 2011 the Company sold 190 Series A shares with 950,000 warrants to purchase common stock for an aggregate of $190,000. Each warrant is exercisable at $0.40, per share, for five years. As of March 31, 2012, none of the warrants have been exercised.

 

The fair value of the 950,000 detachable warrants sold with the Series A for an aggregate of $190,000, was valued at $91,500 and recorded as additional paid-in capital using a Black Scholes Option Pricing Model using the stock price on day of grant, $0.19, per share, the risk free interest rate of 1.48% and the expected volatility of 81.13%.

 

Since the Series A embodies an obligation to repurchase the issuer’s equity shares in response to a triggering event, as defined, the Company has re-classified the Series A Preferred Stock as a liability in accordance with guidance under ASC 480-10-65 and has recorded an expense of $91,500 to adjust the fair value of the Series A Preferred Stock as a liability to $190,000.

 

As of June 30, 2012, dividends on the Series A Preferred Stock of $36,933 were accrued.

 

In connection with the sale of the Series A Preferred Stock, the Company paid fees of $15,200, issued 20,000 shares of common stock, valued at $4,000, $0.20, per share, and granted warrants to purchase 158,000 shares of common stock, valued at $22,658, to the investment banker.

 

16. Commitments and Contingencies

v2.4.0.6
16. Commitments and Contingencies
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
16. Commitments and Contingencies

The Company has guaranteed certain notes payable of RBL in the amount to $250,000. (Note 9)

 

On March 15, 2011, and April 16, 2012, the Company entered into non-exclusive agreements with an investment banker, financial advisor and consultant.  The agreements each become exclusive for 14 days following execution and then non-exclusive for a term of six months.  The Company a agreed to pay to the investment banker a cash placement fee of 8% of the total purchase price of the Company’s securities sold, adjusted by the exercise of any investor warrants, in connection with a placement resulting from the investment banker’s introduction.  In addition, the banker shall receive warrants to purchase common shares of the Company equal to 8% of the funds raised, as defined.  If the investment banker introduces the Company during the term to a transaction which becomes a merger, acquisition, joint venture or

similar transaction, the Company shall pay the banker a fee in combination of stock and cash that reflects the exact percentage of stock and or cash used for the transaction, as defined.

  

Financing Agreement

 

On August 31, 2010, the Company entered into an agreement to engage Citadel Securities, LLC (Citadel) as its non-exclusive financial advisor to provide certain financial advisory services in connection with the financing of its Gulfport, Mississippi casino development project.  The Company will pay fees to Citadel, as follows:

 

●           4.00% of the gross proceeds of any equity financing received by the Company or its affiliates in connection with the development project introduced to the Company by Citadel;

 

●           3.00% of the gross proceeds of any debt financing received by the Company or its affiliates in connection with the development project introduced to the Company by Citadel;

 

●           2.00% of the gross proceeds of any equity or debt financing received by the Company or its affiliates in connection with the development project introduced to Citadel by the Company as not defined by the agreement;

 

●           1.00% of the gross proceeds of any equity financing received by the Company or its affiliates in connection with the development project introduced to Citadel by the Company as defined by the agreement.

 

On August 31, 2011, the Company agreed to an assignment of this engagement to Wells Fargo Securities, LLC.

 

Litigation

 

On October 25, 2010, a Complaint was filed in the United States District Court for the Western District of Michigan by The Sandesh Limited, a company incorporated in the Republic of India, against the Company, RBL and a former employee. The Plaintiff alleges that as a condition to their purchase of 1,200,000 shares of the common stock of the Company, the Plaintiff had the right to require the Defendants to repurchase all or any portion of the shares. Plaintiffs also allege that a subsequent agreement was entered into with RBL, whereby RBL would purchase the Plaintiff’s 1,200,000 shares of common stock.  Plaintiff further alleges that this repurchase also did not occur and that the Defendants breached other terms of the agreements. Plaintiffs are seeking the return of $1,200,000 and additional unspecified amounts as compensatory, actual and punitive and/or exemplary damages, restitution for unjust enrichment, prejudgment interest, attorney’s fees and costs and other relief as the court deems appropriate.

 

On November 23, 2011, a settlement agreement was entered into dismissing the litigation and ordering that RBL pay Sandesh $1,500,000 as settlement, in payments of $35,000, per month, as defined, with interest at 8%, per annum. Sandesh is holding 480,000 common shares of the Company’s stock owned by RBL as collateral and is entitled to receive 350 units of RBMS from RBI.

 

On February 23, 2010, a Complaint was filed in the Third Judicial District Court of the State of Nevada in and For the County of Lyon against the Company, RBL, and others in the amount of $5,000,000 pursuant to the termination of a development agreement for the Dayton Project.  On July 16, 2010, the Company and Defendants filed an answer and counterclaim. A default Judgment was filed in the Third Judicial District Court of the State of Nevada In and For the County of Lyon on August 8, 2011 against the Company, Rotate Black, LLC, two officers of the Company, and others in the amount of $9,674,057 for exemplary and punitive damages.    In connection with this matter, a Request for Enrollment of Foreign Judgment was filed in the Circuit Court of Harrison County, Mississippi, First Judicial District on December 23, 2011.  On June 6, 2012, the Company filed a Motion for Leave to Seek District Court’s Correction of Clerical Error Appearing on the Face of the Judgment, Subject Matter of Current Appeal in the Supreme Court of the State of Nevada.  On June 7, 2012 the company was notified that its appeals to the default judgment will be heard by the Nevada Supreme Court. The Company will vigorously defend this action but can provide no assurance as to the likelihood of the outcome of the matter.

17. Income Taxes

v2.4.0.6
17. Income Taxes
12 Months Ended
Jun. 30, 2012
Income Tax Disclosure [Abstract]  
17. Income Taxes

The Company and its subsidiaries file separate tax returns and have not filed income tax returns for the years ended June 30, 2012, 2011, 2010 and 2009 but anticipate no significant income tax expenses as a result of these filings.

 

On July 1, 2010, as amended, the Company and RBL entered into an agreement to sell 100% of the common stock of Gaming to Catskills Gaming and Development, LLC (Catskill).  As a result, the Company has recorded the deconsolidation of Gaming and recorded a loss of $6,843,246.

 

As of June 30, 2012, management has evaluated and concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements.

 

As of June 30, 2012, the Company had net operating loss carryforwards of approximately $14,200,000 to reduce future Federal and state taxable income through 2032.  However, as a result of the changes in the share ownership of the Company, future utilization of the net operating losses may be limited pursuant to Section 382 of the Internal Revenue Code.

 

As of June 30, 2012, realization of the Company’s deferred tax asset of $11,746,825 was not considered more likely than not and, accordingly, a valuation allowance of $11,746,825 has been provided.  There was an increase of $5,082,000 in the valuation allowance.

 

As of June 30, 2012 and 2011, components of deferred tax assets were as follows:

 

    2012     2011  
             
Sale and deconsolidation of RBG   $ -     $ 2,669,000  
Impairment of intangible asset     3,133,000          
Write-off of investment in joint venture, intangible assets and deferred expenses     54,000       28,800  
Other     -       225  
Net operating loss     1,895,000       2,477,800  
                 
      5,082,000       5,175,825  
Allowance     (5,082,000 )     (5,175,825 )
    $ None     $ None  

 

 

For the years ended June 30, 2012 and 2011, deferred income tax expense consisted of the following:

 

    2012     2011  
             
Sale and deconsolidation of RBG   $ -     $ 2,669,000  
Impairment of intangible asset     5,760,000          
Write-off of investment in joint venture, intangible assets and deferred expenses     375,000       320,600  
Other     29,300       29,300  
Net operating loss     5,582,525       3,645,925  
                 
      11,746,825       6,664,825  
Valuation allowance     (11,746,825 )     (6,664,825 )
    $ None     $ None  

 

18. Subsequent Events

v2.4.0.6
18. Subsequent Events
12 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
18. Subsequent Events

Common stock

 

In July 2012, the Company issued an aggregate of 1,200,000 shares of common stock at $0.20, per share, for legal services.

 

In July and August 2012, the Company converted an aggregate of 40 shares of Series A Preferred stock to 526,253 shares of common stock at a conversion rate of $.10, per share, including accrued dividends, penalty and interest.

 

In October 2012, the Company converted 100 preferred shares of stock to 2,780,602 shares of common stock at a conversion rate of $0.05, per share, including accrued dividends, penalty and interest, pursuant to an agreement with the investor.

 

In October 2012, the Company sold an aggregate of 300,000 shares of the Company’s common stock and a warrant to purchase 249 shares of Class B common stock of RBMS to three investors of the Company for $30,000.

 

On October 15, 2012, the Company issued 300,000 shares of common stock at $0.20, per share, for legal services pursuant to an agreement dated April 23, 2012.

 

In October, 2012, the Company issued an aggregate of 62,253 shares of common stock at $0.30, per share, to the investment banker in connection with financings.

 

On November 8, 2012, the Company issued 100,000 shares of common stock at $0.15, per share, in settlement of accounts payable.

 

In December 2012, the Company issued an aggregate of 1,400,000 shares of common stock, at $0.20, per share, for compensation to employees valued at $280,000.

 

In December 2012, the Company issued 20,000 shares of common stock at $0.20, per share for consulting services.

 

In January 2013, the Company issued 1,200,000 shares of common stock at $0.20, per share for legal services.

 

In February 2013, the Company the Company converted 50 shares of Series A Preferred stock to 723,534 shares of common stock at a conversion rate of $.10, per share, including accrued dividends, penalty and interest.

 

In March 2013, the Company issued 50,000 shares of common stock at $0.20, per share, for repayment of loans on behalf of RBMS.

 

In May 2013, the Company issued 2,000,000 shares of common stock at $0.20, per share, as loan collateral.

 

In June 2013, the Company issued 92,400 shares of common stock @ $0.20, per share, for fees to the investment banker.

 

In June 2013, the Company issued 50,000 shares of common stock @ $0.20, per share for repayment of loan on behalf of RBMS.

 

In June 2013, the Company issued an aggregate of 1,280,000 shares of stock and a warrant to purchase 1,280,000 shares of common stock as compensation to officers and affiliates of the Company.  The warrant is exercisable at $0.20, per share, for 5 years.

 

In July 2013, the Company issued 164,671 shares common stock @ $0.10, per share for repayment of note payable and accrued interest.

 

In July 2013, the Company issued a warrant to purchase 100,000 shares of common stock exercisable at $0.15, per share for 5 years.

 

On September 6, 2012, the Company issued a promissory note in the amount of $80,000, with 185,000 shares of common stock as interest. Pursuant to the terms of the note, if the promissory note is not repaid by May 20, 2013 the Company is to use its best efforts to liquidate shares of its common stock to repay the loan.  As of July 15, 2013, no payments have been made on the promissory note.

 

On January 14, 2013 the Company entered into a non-exclusive agreement with an investment banker, financial advisor and consultant for a term of six months.  The investment banker is entitled to a cash placement fee of 8% of the total purchase price of the Company’s securities sold, adjusted by the exercise of any investor warrants, in connection with a placement resulting from the investment banker’s introduction.  In addition, the banker shall receive a placement fee equal to 4% of the total purchase price of the Company’s securities sold and a warrant to purchase common shares of the Company equal to 8% of the funds raised, as defined. If the investment banker introduces the Company during the term to a transaction which becomes a merger, acquisition, joint venture or similar transaction, the Company shall pay the banker a fee in combination of stock and cash that reflects the exact percentage of stock and or cash used for the transaction, as defined.

 

On June 10, 2013, the Company agreed to sell up to an aggregate of $250,000 in convertible promissory notes under a securities purchase agreement (Agreement) with an aggregate stated value equal to the purchaser’s subscription amount and a warrant to purchase up to a number of shares of common stock equal to 100% of the purchaser’s subscription amount divided by $0.15 with an exercise price of $0.15 exercisable immediately with a term of five years.

 

 On June 10, 2013, under the Agreement, the Company issued a two-year, 10% convertible promissory note in the amount of $20,000 to an investor.  121 days from the issue date, the holder can convert any unpaid principal and accrued interest into common shares of the Company. Between 121 days and 210 days from the issue date, the conversion price per share shall be $0.15; after 210 days from the issue date, the conversion price shall be $0.10; subject to adjustment as defined. . The investor also was issued a five year common stock purchase warrant for the purchase of up to 133,334 shares of the Company’s common stock, at a price per share of $0.15, that permits a cashless exercise in the event that the underlying shares of common stock to be issued upon exercise are not registered pursuant to an effective registration statement at the time of the exercise.   In addition, if while the warrant is outstanding, the Company effects a merger or consolidation, sells all of its assets or enters into other specifically defined transactions, the warrant will be exercisable into shares of the surviving entity as defined.

 

On July 2, 2013, under the Agreement, the Company issued four two-year, 10% convertible promissory notes in the amount of $10,000 each.  The investors also were issued a five year common stock purchase warrant for the purchase of up to 67,000 shares of the Company’s common stock, at a price per share of $0.15, that permits a cashless exercise in the event that the underlying shares of common stock to be issued upon exercise are not registered pursuant to an effective registration statement at the time of the exercise.  

 

On July 2, 2013 the Company issued a five year warrant to purchase of up to 100,000 shares of the Company’s common stock, at a price per share of $0.15, to the investment banker in payment for commissions due.

 

 

 

 

4. Property and Equipment (Tables)

v2.4.0.6
4. Property and Equipment (Tables)
12 Months Ended
Jun. 30, 2012
Property And Equipment Tables  
Schedule of property and equipment
    2012     2011  
             
Gaming vessel   $ -     $ 4,854,908  
Truck     -       39,761  
Furniture and fixtures     8,490       8,490  
Office equipment     23,289       23,290  
      31,779       4,926,449  
   Less accumulated depreciation     (29,532 )     (263,708 )
   Sale of Gaming Vessel     -       (4,651,637 )
    $ 2,247     $ 11,104  

9. Rotate Black, Gaming, Inc. (Tables)

v2.4.0.6
9. Rotate Black, Gaming, Inc. (Tables)
12 Months Ended
Jun. 30, 2012
Rotate Black Gaming Inc. Tables  
Schedule of sale of gaming
Intangible assets – Contract rights   $ 6,323,884  
Developer loan receivable     2,397,834  
Noncontrolling interest     (1,363,608 )
Accounts payable & accrued expenses     (1,508,209 )
Accumulated deficit – noncontrolling entity     1,221,966  
Deferred revenue     (49,621 )
Contingent liability     (164,000 )
    $ 6,858,246  
Less consideration on sale:     (15,000 )
Loss on sale of Gaming   $ 6,843,246  

14. Convertible Promissory Note Payable (Tables)

v2.4.0.6
14. Convertible Promissory Note Payable (Tables)
12 Months Ended
Jun. 30, 2012
Convertible Promissory Note Payable Tables  
Schedule of convertible promisory note payable
    May 1, 2012     June 30, 2012  
             
Convertible Promissory Note Payable   $ 150,000     $ 150,000  
Less:     -          
   Beneficial Conversion Feature Discount     (45,251 )     (41,480 )
   Warrant Discount     (100,431 )     (92,062 )
                 
Total Discount     (145,682 )     (133,542 )
                 
Convertible Promissory Note Payable - Net   $ 4,318     $ 16,458  

17. Income Taxes (Tables)

v2.4.0.6
17. Income Taxes (Tables)
12 Months Ended
Jun. 30, 2012
Income Taxes Tables  
Schedule of deferred tax assets
    2012     2011  
             
Sale and deconsolidation of RBG   $ -     $ 2,669,000  
Impairment of intangible asset     3,133,000          
Write-off of investment in joint venture, intangible assets and deferred expenses     54,000       28,800  
Other     -       225  
Net operating loss     1,895,000       2,477,800  
                 
      5,082,000       5,175,825  
Allowance     (5,082,000 )     (5,175,825 )
    $ None     $ None  
Schedule of deferred income tax expenses
    2012     2011  
             
Sale and deconsolidation of RBG   $ -     $ 2,669,000  
Impairment of intangible asset     5,760,000          
Write-off of investment in joint venture, intangible assets and deferred expenses     375,000       320,600  
Other     29,300       29,300  
Net operating loss     5,582,525       3,645,925  
                 
      11,746,825       6,664,825  
Valuation allowance     (11,746,825 )     (6,664,825 )
    $ None     $ None  

4. Property and Equipment (Details)

v2.4.0.6
4. Property and Equipment (Details) (USD $)
Jun. 30, 2012
Jun. 30, 2011
Property And Equipment Details    
Gaming vessel    $ 4,854,908
Truck    39,761
Furniture and fixtures 8,490 8,490
Office equipment 23,289 23,290
Subtotal 31,779 4,926,449
Less accumulated depreciation (29,532) (263,708)
Sale of Gaming Vessel    (4,651,637)
Total $ 2,247 $ 11,104

9. Rotate Black, Gaming, Inc. (Details)

v2.4.0.6
9. Rotate Black, Gaming, Inc. (Details) (USD $)
Jun. 30, 2012
Rotate Black Gaming Inc. Details  
Intangible assets – Contract rights $ 6,323,884
Developer loan receivable 2,397,834
Noncontrolling interest (1,363,608)
Accounts payable & accrued expenses (1,508,209)
Accumulated deficit – noncontrolling entity 1,221,966
Deferred revenue (49,621)
Contingent liability (164,000)
Rotate Black, Subtotal 6,858,246
Less consideration on sale: (15,000)
Loss on sale of Gaming $ 6,843,246

14. Convertible Promissory Note Payable (Details)

v2.4.0.6
14. Convertible Promissory Note Payable (Details) (USD $)
Jun. 30, 2012
May 01, 2012
Convertible Promissory Note Payable Details    
Convertible Promissory Note Payable $ 150,000 $ 150,000
Less:     
Beneficial Conversion Feature Discount (41,480) (45,251)
Warrant Discount (92,062) (100,431)
Total Discount (133,542) (145,682)
Convertible Promissory Note Payable - Net $ 16,458 $ 4,318

17. Income Taxes (Details)

v2.4.0.6
17. Income Taxes (Details) (USD $)
Jun. 30, 2012
Jun. 30, 2011
Income Taxes Details    
Sale and deconsolidation of RBG    $ 2,669,000
Impairment of intangible asset 3,133,000  
Write-off of investment in joint venture, intangible assets and deferred expenses 54,000 28,800
Other    225
Net operating loss 1,895,000 2,477,800
Income Taxes, Subtotal 5,082,000 5,175,825
Allowance (5,082,000) (5,175,825)
Income Taxes, Total $ 0 $ 0

17. Income Taxes (Details 1)

v2.4.0.6
17. Income Taxes (Details 1) (USD $)
12 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Income Taxes Details 1    
Sale and deconsolidation of RBG    $ 2,669,000
Impairment of intangible asset 5,760,000  
Write-off of investment in joint venture, intangible assets and deferred expenses 375,000 320,600
Other 29,300 29,300
Net operating loss 5,582,525 3,645,925
Taxes, Subtotal 11,746,825 6,664,825
Valuation allowance (11,746,825) (6,664,825)
Taxes, Total $ 0 $ 0

4. Property and Equipment (Details Narrative)

v2.4.0.6
4. Property and Equipment (Details Narrative) (USD $)
12 Months Ended
Jun. 30, 2012
Jun. 30, 2011
Property And Equipment Details Narrative    
Depreciation Expense $ 8,857 $ 214,066