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Document and Entity Information

v2.4.0.8
Document and Entity Information
3 Months Ended
Sep. 30, 2013
Mar. 18, 2014
Document And Entity Information    
Entity Registrant Name ROTATE BLACK INC  
Entity Central Index Key 0001020477  
Document Type 10-Q  
Document Period End Date Sep. 30, 2013  
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 Common Stock, Shares Outstanding   49,489,783
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2014  

Balance Sheets

v2.4.0.8
Balance Sheets (USD $)
Sep. 30, 2013
Jun. 30, 2013
ASSETS    
Cash $ 361 $ 46
Prepaid expenses 105,874 108,023
Total current assets 106,235 108,069
Fixed assets - net 352 872
Deferred development costs 3,843,480 3,831,327
Land purchase deposit 437,688 437,688
Deferred casino development costs 1,902,156 1,902,156
Stock as Loan collateral 400,000 400,000
Security deposit 3,600 3,600
TOTAL ASSETS 6,693,511 6,683,712
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY    
Accounts payable and accrued expenses 5,390,385 5,371,847
Accrued salaries 1,390,564 1,264,371
Accrued ground lease rent 1,902,156 1,902,156
Note payable 80,000 80,000
Loan payable - stockholder 330,653 320,250
Dividends payable      
Mortgage payable - Big Easy vessel 2,975,000 2,975,000
Note payable - Big Easy vessel 600,000 600,000
Accrued interest on mortgage and note payable 3,182,004 2,846,405
Total current liabilities 15,850,762 15,360,029
10% Convertible promissory notes payable 397,015 328,015
Discount on 10% convertible notes payable (227,148) (161,451)
Beneficial conversion feature 480,133 206,053
Warrant liability 327,864 98,814
TOTAL LIABILITIES 16,828,626 15,831,460
STOCKHOLDERS'  (DEFICIT) EQUITY    
Common stock, $0.001 par value, 75,000,000 shares authorized; 46,282,860 and 45,698,938 shares issued and outstanding as of September 30, 2013 and June 30, 2013, respectively 46,284 45,700
Class A Preferred Stock Units, $0.001 par value, 45 Units authorized, issued and outstanding as of September 30, 2013 and June 30, 2013, respectively 1,750,000 1,750,000
Class B Preferred Stock Units, $0.001 par value, 2,687 Units authorized, issued and outstanding as of September 30, 2013 and June 30, 2013, respectively 725,000 725,000
Additional paid-in-capital 22,977,360 22,906,551
Accumulated deficit (32,390,869) (31,514,166)
Noncontrolling Interest (3,242,890) (3,060,833)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (10,135,115) (9,147,748)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY $ 6,693,511 $ 6,683,712

Balance Sheets (Parenthetical)

v2.4.0.8
Balance Sheets (Parenthetical) (USD $)
Sep. 30, 2013
Jun. 30, 2013
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 46,282,860 45,698,938
Common Stock, Shares, Outstanding 46,282,860 45,698,938
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

v2.4.0.8
Consolidated Statements of Operations (USD $)
3 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Operating expenses    
Accrued salary expense $ 149,327 $ 186,785
Stock based compensation 26,000 37,000
General and administrative expenses 100,979 245,236
Dividends on Redeemable Preferred Series A Stock    7,369
Change in fair value of conversion feature 265,772 (4,051)
Amortization of beneficial conversion feature and discount 171,660   
Interest expense 345,022 367,325
Total expenses 1,058,760 839,664
Net Loss (1,058,760) (839,664)
Net Loss Attributable to Noncontrolling Interest 182,057 202,358
Net Loss Attributable to Shareholders $ (876,703) $ (637,306)
Basic and diluted net loss per common share $ (0.02) $ (0.02)
Basic and diluted average common shares outstanding 46,013,244 34,520,314

Consolidated Statement of Cash Flows

v2.4.0.8
Consolidated Statement of Cash Flows (USD $)
3 Months Ended
Sep. 30, 2013
Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (1,058,760) $ (839,664)
Adjustments to reconcile net loss to cash provided by operating activities:    
Stock-based compensation 26,000 37,000
Stock for interest 4,393 6,352
Dividends payable    7,370
Depreciation and amortization 520 (398)
Amortization and changes in beneficial conversion feature and warrant liability 503,130 84,475
Changes in assets and liabilities:    
Prepaid expenses 2,149 6,232
Accounts payable and accrued expenses 144,731 641,138
Accrued interest on mortgage and note payable 335,599 272,520
Net cash (used in) provided by operating activities (42,238) 215,025
CASH FLOWS FROM INVESTING ACTIVITIES    
Casino construction in progress    (154,571)
Deferred development costs - Gulfport Project (12,153) (231,095)
Land deposit    (2,700)
Net cash used in investing activities (12,153) (388,366)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from convertible promissory note payable 110,000 50,000
Discount on 10% convertible promissory notes payable (65,697)   
Increase in loans payable - stockholders 10,403 114,256
Payments of note payable - truck    508
Net cash provided by financing activities 54,706 164,764
Net increase (decrease) in cash 315 (8,577)
Cash, beginning of period 46 8,671
Cash, end of period 361 94
Noncash Transactions:    
Issuance of common stock for compensation, legal and consulting services 26,000   
Issuance of common stock as collateral on note payable 41,000   
Issuance of common stock in payment toward accounts payable    240,000
Issuance of common stock for redemption of Preferred Series A Stock plus interest and dividends    52,265
Issuance of common stock for loan consideration    37,000
Issuance of common stock as interest $ 4,393 $ 6,352

1. Organization and Operations

v2.4.0.8
1. Organization and Operations
3 Months Ended
Sep. 30, 2013
Accounting Policies [Abstract]  
1. Organization and Operations

Rotate Black, Inc. (Company) was incorporated in Nevada on August 2, 2006.  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.

 

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 December 2013, RBMS entered into a term sheet and Summary of Proposed Terms and Conditions Senior Secured Credit Facility 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 $125,000,000 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 loans whereby the Company shall draw down one-half of the Facility at closing and the remaining one-half on the eighth month anniversary of the closing. Full repayment is expected six years after the closing, which is anticipated to occur in late March 2014. Amounts outstanding under the Facility will bear an interest rate of 13% per annum, payable monthly in arrears. Any undrawn amounts under the Facility will bear an interest rate of 6.5% per annum, payable monthly in arrears. Definitive terms, conditions and provisions will be stipulated in the final agreement for the credit facility.

 

Other Projects

 

On December 14, 2011, the Company formed a wholly-owned subsidiary, Rotate Black OK, LLC (OKL) and through the subsidiary, 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. As of June 30, 2013, this contract was completed and the subsidiary is currently inactive.

 

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 the Company.  To date, the Company has secured a contract for the placement of equipment in 2014 as well as an approval of a lender to facilitate the financings of this operation.

 

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.  The project is awaiting final approval from Alberta Liquor and Gaming (Note 10).

2. Summary of Significant Accounting Policies

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2. Summary of Significant Accounting Policies
3 Months Ended
Sep. 30, 2013
Accounting Policies [Abstract]  
2. Summary of Significant Accounting Policies

Basis of Presentation

 

The accompanying unaudited financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and with the rules and regulations under Regulation S-X of the Securities and Exchange Commission for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements presentation. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and cash flows for interim financial statements have been included. These financial statements should be read in conjunction with the financial statements of the Company together with the Company’s management discussion and analysis in Item 2 of this report and in the Company’s Form 10-K for the year ended June 30, 2013. Interim results are not necessarily indicative of the results for a full year.

 

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, 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.

 

Reclassifications

 

Certain amounts for the prior year have been revised or reclassified to conform to 2013 financial statement presentation.

 

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.

Derivative Instruments

 

The Company’s derivative liabilities are related to embedded conversion features of the 10% Convertible Notes Payable.  For derivative instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and is then re-valued at each reporting date, with changes in fair value recognized in operations for each reporting period.  The Company uses the Black-Scholes model to value the derivative instruments at inception and subsequent valuation dates and the value is re-assessed at the end of each reporting period in accordance with Accounting Standards Codification (“ASC”) 815.

 

Beneficial Conversion Charge

 

The intrinsic value of the beneficial conversion feature arising from the issuance of convertible notes payable with conversion rights that are in the money at the commitment date is recorded as debt discount and amortized to interest expense of the term of the note. The intrinsic value of a beneficial conversion feature is determined after initially allocating an appropriate portion of the proceeds received from the sale of the note to any detachable instruments, such as warrants, included in the sale based on relative fair values.

 

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 a contract to operate and manage casino projects are recognized pursuant to terms of the agreement.

 

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 September 30, 2013 and September 30, 2012, they were not included in the calculation of earnings per shares because their inclusion would have been considered anti-dilutive.

 

 

 

 

Leases

 

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

 

Recent Accounting Pronouncements

 

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 provides guidance on the financial statement presentation of an unrecognized tax benefit and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. 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 February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 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 not 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.

 

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

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3. Going Concern
3 Months Ended
Sep. 30, 2013
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 $32,390,869 and negative working capital of $15,744,527 as of September 30, 2013 and further losses are anticipated. These factors raise 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  commence 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 unregistered stock to accredited investors.

 

4. Property and Equipment

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4. Property and Equipment
3 Months Ended
Sep. 30, 2013
Notes to Financial Statements  
4. Property and Equipment

As of September 30, 2013 and June 30, 2013 property and equipment consisted of the following

 

    Sept 30,     June 30,  
    2013     2013  
             
Furniture and fixtures   $ 8,490     $ 8,490  
Office equipment     23,289       23,289  
Total     31,779       31,779  
Less accumulated depreciation     (31,427)       (30,907)  
                 
    $ 352     $ 872  

 

Deferred development costs  - Casino construction totaled $3,843,480 and $3,831,327 as of September 30, 2013 and June 30, 2013, respectively, and represents expenses related to the architectural design, environmental testing  and legal expenses associated with financing and developing the casino.

 

For the three months ended September 30, 2013 and 2012, depreciation expense was $520 and ($398), respectively.

5. RBMS Management Agreement

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5. RBMS Management Agreement
3 Months Ended
Sep. 30, 2013
Notes to Financial Statements  
5. RBMS Management Agreement

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 December 2013, the Company agreed to amend its management agreement with RBMS to facilitate the equity financing for the Gulfport Project and is in the process of negotiating the final terms of this agreement.

 

As of June 30, 2013, and September 30, 2013, in accordance with ASC 810, “Consolidation”, Management evaluated and determined that the variable interest holders of RBMS lacked the direct and indirect ability to make decisions about the entity’s activities and 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

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6. Gulfport Casino Hotel Project
3 Months Ended
Sep. 30, 2013
Notes to Financial Statements  
6. Gulfport Casino Hotel Project

In December 2013, RBMS entered into a term sheet and Summary of Proposed Terms and Conditions, Senior Credit Facility 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 $125,000,000 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 loans whereby the Company shall draw down one-half of the Facility at closing and the remaining one-half on the eighth month anniversary of the closing. Full repayment is expected six years after the closing, which is anticipated to occur in late March 2014. Amounts outstanding under the Facility will bear an interest rate of 13% per annum, payable monthly in arrears. Any undrawn amounts under the Facility will bear an interest rate of 6.5% per annum, payable monthly in arrears. Definitive terms conditions and provisions will be stipulated in the final agreement for the credit facility.

7. Investment in RBMS

v2.4.0.8
7. Investment in RBMS
3 Months Ended
Sep. 30, 2013
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, 2013, and September 30, 2013, Management evaluated and determined that the variable interest holders lacked the direct and indirect ability to make decisions about the entity’s activities and 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.  At June 30, 2012, 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 was 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 equity loss recorded prior to June 30, 2012 by the Company of $568,517.

 

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. Due to delays in gaining approval by the Mississippi Gaming Commission, the Company paid fees to amend and extend the lease.

 

On December 30, 2012 the RBMS received its Approval to Proceed from the Mississippi Gaming Commission.

 

Upon the closing of the anticipated financing in connection with the Gulfport Project, the Company will pay to the lessor an aggregate of $1,902,156 in preliminary rent, interest and taxes under the ground lease.  After the commencement of gaming operations, RBMS will pay an annual minimum base rent of $900,000 under the lease, as defined.

8. The Big Easy Gaming Vessel

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8. The Big Easy Gaming Vessel
3 Months Ended
Sep. 30, 2013
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 Notes were 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 deferred 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 January 30, 2014, 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 September 30, 2013 and June 30, 2013.

 

On December 20, 2012, the Company and 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 with regard to the Guarantor 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. Land Purchase Deposit

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9. Land Purchase Deposit
3 Months Ended
Sep. 30, 2013
Notes to Financial Statements  
9. 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.

 

As of September 30, 2013, the Company has evaluated the fair value of the land deposit and has determined that the fair value is in excess of the book value of the deposit recorded.

 

10. Edmonton Project Management Agreement

v2.4.0.8
10. Edmonton Project Management Agreement
3 Months Ended
Sep. 30, 2013
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 (“Management 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 Management 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 percent of all profits on any amenities or services supporting or related directly or indirectly to the casino. The Company is currently awaiting approval from the Alberta Gaming and Liquor Commission.  The project remains in process, however the Company has written-off the deferred costs as of June 30, 2012.

11. Lease

v2.4.0.8
11. Lease
3 Months Ended
Sep. 30, 2013
Notes to Financial Statements  
11. Lease

On August 8, 2008, the Company entered into a lease for office space, commencing on September 1, 2008 through August 31, 2011.  On July 21, 2013 the Landlord agreed to a final payment offer for all past and current rent due of approximately $157,489, payable at the closing of the Gulfport project RBMS funding.

 

On January 15, 2014, the Company entered into a lease for office space for a term of two years, cancellable by the landlord with sixty days’ notice.  Rent is payable $425, per month, in advance of the first day of each month.

12. Loan Payable-Stockholder

v2.4.0.8
12. Loan Payable-Stockholder
3 Months Ended
Sep. 30, 2013
Notes to Financial Statements  
12. Loan Payable-Stockholder

Loans payable – stockholders consists of advances made by the certain stockholders of the Company and an officer of the Company through a limited liability entity owned by him, and are payable on demand.

13. Employment Agreement

v2.4.0.8
13. Employment Agreement
3 Months Ended
Sep. 30, 2013
Notes to Financial Statements  
13. Employment Agreement

Commencing July 3, 2013, the Company entered into an agreement with its Chief Financial Officer for a term of twelve months subject to earlier termination or renewable upon mutually agreed terms.  Compensation for the officer will be accrued at $5,000, per month, and will not be paid until the earlier that the Company has successfully raised a minimum of $500,000 in working capital for its own operations or the Company has sufficient excess cash reserves to enable payment.  Upon signing the agreement, the officer was issued 100,000 shares of common stock as a signing bonus and is entitled to receive 10,000 additional shares of the Company’s common stock for each month of service provided, issued quarterly.

14. Convertible Promissory Note Payable

v2.4.0.8
14. Convertible Promissory Note Payable
3 Months Ended
Sep. 30, 2013
Notes to Financial Statements  
14. Convertible Promissory Note Payable

May 1, 2012 Convertible Promissory Note Payable

 

On May 1, 2012, the Company issued a two-year, 10% convertible promissory note in the amount of $150,000.  After 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.

 

In connection with this financing, the investment banker received 40,000 shares of the Company’s common stock.

 

Convertible Promissory Note Payable Beneficial Conversion Feature

 

As part of the issuance of the convertible promissory note payable, the Company recorded a liability for the embedded beneficial conversion feature 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 $5,656 and $5,656 in amortization expense for the three months ended September 30, 2013 and 2012, respectively.

 

Pursuant to the terms of this convertible promissory note payable, since the note was not repaid by February 15, 2013, the conversion price of the note payable was reduced from $0.15 to $.10, per share.

 

The Company calculated the value of the conversion feature, recording a loss on the change in fair market value of $120,084 for the three months ended September 30, 2013.

 

In December 2013, $50,000 of the principal of the promissory note, plus interest accrued on a default basis, of $22,271 was converted to 722,711 shares of the Company’s common stock.

 

In February 2014, $50,000 of the principal of the promissory note, plus interest accrued on a default basis, of $25,548 was converted to 755,480 shares of the Company’s common stock.

 

Warrants

 

As part of the issuance of the convertible debentures, the Company recorded a liability 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. Under the terms of the subsequent June 10, 2013 convertible promissory note, the warrant price was reduced to $.15.

 

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.

 

 

For the three months ended September 30, 2013 and 2012, the Company recorded $12,554 and $12,554 in interest expense, respectively.

 

The Company calculated the value of the warrants recording a loss on the change in fair market value of $40,167 as of September 30, 2013.

 

July 17, 2012 Convertible Promissory Notes

 

On July 17, 2012, the Company sold $50,000 of 10% convertible promissory notes.  Warrants to purchase an aggregate of 194,500 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.

 

Convertible Promissory Note Payable Beneficial Conversion Feature

 

The Company calculated the value of the beneficial conversion feature as of July 17, 2012 at $49,288, based upon the Black Scholes model.  Since the fair value of the conversion feature exceeded the remaining proceeds to be allocated, the Company has reflected $2,749, as a discount against the convertible promissory note, amortizable as interest expense over two years. The excess of the value of the conversion feature over the proceeds was $46,539, which was recorded as interest expense on July 17, 2012.  The Company recorded $344 and $282 in amortization expense for the three months ended September 30, 2013 and 2012.

 

Pursuant to the terms of one of the convertible promissory notes payable for $15,000 the note was not repaid by February 15, 2013, and the conversion price of that note payable was reduced from $0.15 to $.10, per share.

 

In September 2013, $20,000 of the principal of the promissory notes, and $2,259 in interest were repaid as a result of converting the debt to 222,574 shares of the Company’s common stock.

 

In September 2013, $6,000 of the principal of the promissory notes   issued to the investment banker, and $667 in interest were repaid as a result of converting the debt to 66,677 shares of the Company’s common stock.

 

In July 2013, $15,000 of the principal of the promissory notes, and $1,467 in interest were repaid as a result of converting the debt to 164,671 shares of the Company’s common stock.

 

The Company calculated the value of the conversion feature at September 30, 2013 of the remaining notes totaling $15,000 and recorded a gain on the change in fair market value of $15,213. In addition, the discount on the $41,000 notes which were converted was fully amortized as of September 30, 2013.

 

Warrants

 

The warrants were valued as of July 17, 2012 at $53,251, using a Black-Scholes Option Pricing Model with the stock price on day of grant, $0.30, per share, the risk free interest rate of .76% and the expected volatility of 148.12%.  This value has been reflected as discount of the convertible promissory note payable, amortizable as interest expense over two years.  The Company recorded $6,656 and $5,456 in interest expense for the three months ended September 30, 2013 and 2012.

 

In connection with the subsequent June 10, 2013 financing, the warrant price was reduced to $0.15.  The Company calculated the value of the warrants at September 30, 2013, recording a loss on the change in fair market value of $16,772 as of September 30, 2013.

 

October 15, 2012 Convertible Promissory Notes

 

On October 15, 2012, the Company sold $39,015, of the 10% convertible promissory notes.  Warrants to purchase an aggregate of 78,030 shares of the Company’s common stock were issued in conjunction with these financings. A $4,000, 10% convertible promissory note, without warrants, was also issued to the investment banker for fees pursuant to this investment.

 

Convertible Promissory Note Payable Beneficial Conversion Feature

 

The Company calculated the value of the beneficial conversion feature as of October 15, 2012 for the $39,015 note at $19,876, based upon the Black Scholes model.   The Company recorded $2,485 in amortization expense of the discount for the three months ended September 30, 2013.

 

The Company calculated the value of the conversion feature at September 30, 2013, recording a loss on the change in fair market value of $19,788.

 

The Company calculated the value of the beneficial conversion feature as of October 15, 2012 for the $4,000 note at $2,038, based upon the Black Scholes model.   The Company recorded $255 in amortization expense of the discount for the three months ended September 30, 2013.

 

The Company calculated the value of the conversion feature at September 30, 2013, recording a loss on the change in fair market value of $1,683.

 

In November 2013, the $4,000, 10% convertible promissory note and interest of $423 were converted into 44,423 shares of the Company’s common stock.

 

Warrants

 

The warrants were valued as of October 15, 2012 at $13,146, using a Black-Scholes Option Pricing Model with the stock price on day of grant, $0.24, per share, the risk free interest rate of .71% and the expected volatility of 105.60%.  This value has been reflected as discount of the convertible promissory note payable, amortizable as interest expense over two years.  The Company recorded $1,643 in interest expense for the three months ended September 30, 2013.

 

The Company calculated the value of the warrants at September 30, 2013, recording a loss on the change in fair market value of $2,697.

 

May 28, 2013 Convertible Promissory Note Payable

 

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.

 

The Company calculated the value of the beneficial conversion feature as of May 28, 2013 at $29,817, based upon the Black Scholes model.  The Company recorded $3,727 in amortization expense for the three months ended September 30, 2013.

 

The Company calculated the value of the conversion feature at September 30, 2013, recording a loss on the change in fair market value of $24,265.

 

No warrants were granted with this convertible promissory note payable.

 

June 10, 2013 Convertible Promissory Note Payable

 

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.  After 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

 

Convertible Promissory Note Payable Beneficial Conversion Feature

 

As part of the issuance of the convertible promissory note payable, the Company recorded a liability for the embedded beneficial conversion feature 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 June 10, 1013 at $9,108, however, the excess of the value of the conversion feature over the proceeds was $3,318, which was recorded as interest expense on June 10, 2013 and $5,790, based upon the Black Scholes model, and has been reflected as a discount against the convertible promissory note, amortizable as interest expense over two years.  The Company recorded $724 in amortization expense for the three months ended September 30, 2013.

 

The Company calculated the value of the conversion feature, recording a loss on the change in fair market value of $2,683 as of September 30, 2013.

 

Warrants

 

As part of the issuance of certain convertible debentures, the Company recorded a liability 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 June 10, 2013 at $14,210, using a Black-Scholes Option Pricing Model with the stock price on day of grant, $0.135, per share, the risk free interest rate of 1.20% and the expected volatility of 111.47%.  This value has been reflected as discount of the convertible promissory note payable, amortizable as interest expense over two years.  For the three months ended September 30, 2013, the Company recorded $1,760 in interest expense.

 

The Company calculated the value of the warrants recording a loss on the change in fair market value of $16,192 as of September 30, 2013.

 

July 2, 2013 Convertible Promissory Note Payable

 

On July 2, 2013, the Company issued four two-year, 10% convertible promissory notes in the amount of $10,000 each.  The investors also were each 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.

 

Convertible Promissory Note Payable Beneficial Conversion Feature

 

As part of the issuance of the convertible promissory note payable, the Company recorded a liability for the embedded beneficial conversion feature 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 July 2, 2013 at $23,243, however, the excess of the value of the conversion feature over the proceeds was $19,630, which was recorded as interest expense on July 2, 2013, and $3,613, based upon the Black Scholes model, and has been reflected as a discount against the convertible promissory note, amortizable as interest expense over two years.  The Company recorded $406 in amortization expense for the three months ended September 30, 2013.

 

The Company calculated the value of the conversion feature, recording a loss on the change in fair market value of $27,292 as of September 30, 2013.

 

Warrants

 

As part of the issuance of the convertible debentures, the Company recorded a liability 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 July 2, 2013 at $36,387, using a Black-Scholes Option Pricing Model with the stock price on day of grant, $0.17, per share, the risk free interest rate of 1.38% and the expected volatility of 109.18%.  This value has been reflected as a discount of the convertible promissory note payable and amortizable as interest expense over two years.  For the three months ended September 30, 2013, the Company recorded $4,094 in interest expense.

 

The Company calculated the value of the warrants recording a loss on the change in fair market value of $19,175 as of September 30, 2013.

 

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.

 

August 28, 2013 Convertible Promissory Note Payable

 

On August 28, 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.  The Company issued four 10% convertible promissory notes under this Agreement for an aggregate of $70,000 and warrants to purchase 469,000 shares of the Company’s common stock.

 

Convertible Promissory Note Payable Beneficial Conversion Feature

 

As part of the issuance of the convertible promissory note payable, the Company recorded a liability for the embedded beneficial conversion feature 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 August 28, 2013 at $75,175, however, the excess of the value of the conversion feature over the proceeds was $75,175, which was recorded as interest expense on July 2, 2013.

 

The Company calculated the value of the conversion feature, recording a gain on the change in fair market value of $4,920 as of September 30, 2013.

 

Warrants

 

As part of the issuance of the convertible debentures, the Company recorded a liability 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 August 28, 2013 at $102,553, using a Black-Scholes Option Pricing Model with the stock price on day of grant, $0.26, per share, the risk free interest rate of 1.62% and the expected volatility of 109.18%.  $32,553 of this value has been recorded as interest expense and $70,000 has been reflected as discount of the convertible promissory note payable, amortizable as interest expense over two years.  For the three months ended September 30, 2013, the Company recorded $3,293 in interest expense.

 

The Company calculated the value of the warrants recording a gain on the change in fair market value of $4,894 as of September 30, 2013.

 

As of September 30, 2013 and June 30, 2013, the 10% Convertible Notes Payable were as follows:

 

   

Sept 30

2013

   

June 30,

2013

 
             
10% Convertible Promissory Note Payable   $ 397,015     $ 328,015  
Less:                
Beneficial Conversion Feature Discount     (59,953)       (69,642)  
Warrant Discount     (168,195)       (91,809)  
                 
10% Convertible Promissory Note Payable - Net   $ 169,867     $ 166,564  
                 

 

 

Promissory Note Payable

 

On September 6, 2012, the Company received $65,000 in loan proceeds. A promissory note was issued in the amount of $80,000, which includes interest payments of $15,000. In addition,  185,000 shares of common stock were issued as additional 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 March 18, 2014, no payments have been made on the promissory note.

15. Common Stock

v2.4.0.8
15. Common Stock
3 Months Ended
Sep. 30, 2013
Notes to Financial Statements  
15. Common Stock

Common and Preferred Shares

 

In July 2012, the Company issued an aggregate of 1,200,000 shares of common stock at $0.10, per share, for legal services.

 

In July and August 2012, the Company converted an aggregate of 40 shares of the 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 shares of the Series A Preferred 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 1,600,000 shares of common stock, at $0.20, per share, for compensation to employees valued at $320,000.

 

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 $0.10, per share for legal services.

 

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

 

In June 2013, the Company issued 50,000 shares of common stock at $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 common 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 of common stock at $0.10, per share for the conversion of $15,000 of the 10% Convertible Promissory Notes 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 and 100,000 shares of common stock at $0.15, per shares, to the investment banker for fees totaling $30,000.

 

In September 2013, the Company issued an aggregate of 30,000 shares of common stock, at $0.20, per share, for compensation to an employee valued at $6,000.

 

In September 2013, the Company issued 289,251 shares of common stock at $.10, per share for the conversion of $26,000 of the 10% Convertible Promissory Notes and accrued interest.

 

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 in Units were sold for cash from 2010 through 2012 and $550,000 in 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 of June 30, 2013 and March 18, 2014 no options were granted under the Plan.

 

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 June 30, 2013, 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 classified the Series A Preferred Stock as a liability in accordance with guidance under ASC 480-10-65.

 

As of June 30, 2013, all of the 190 shares of Series A Preferred Stock, including accrued interest, dividends and penalty, have been converted to an aggregate of 4,030,389 shares of the Company’s common stock.

16. Commitments and Contingencies

v2.4.0.8
16. Commitments and Contingencies
3 Months Ended
Sep. 30, 2013
Notes to Financial Statements  
16. Commitments and Contingencies

The Company has guaranteed certain notes payable of RBL in the amount to $250,000. (Note 8)

 

On March 15, 2011, April 16, 2012 and January 14, 2013 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 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 stock 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 February 19, 2013, as amended on June 3, 2013 and December 2, 2013, the Company agreed to engage a non-exclusive placement agent in connection with the possible private placement of equity, equity-linked or debt securities in connection with the financing of the Gulfport casino hotel project (“Agreement”). The Agreement is for an initial terms of five months and the scope of the engagement agreement calls for a nonrefundable transaction fee, as defined,  equal to the sum of (i) 2.00% of the aggregate principal amount of all unsecured, non-senior, second lien or subordinated debt securities, senior notes, capital leases, operating eases and/or bank debt raised or committed from a financing partner introduced to the Company by the agent and (ii) 5.00% of the aggregate amount of all equity and equity-linked securities, as defined, placed or committed from a financing partner introduced to the Company by the agent.  The transaction fee shall be subject to an aggregate minimum fee of $1,350,000 provided that the Agreement is not terminated by the Company and shall be payable regardless of whether any financing partners introduced by the agent participate in the financing transaction.

 

Litigation

 

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.

 

On January 18, 2012, an investment banker filed a civil lawsuit against the Company in the Circuit Court of Harrison County, Mississippi, First Judicial District, alleging breach of a fee letter agreement in the amount of $150,000, plus attorney’s fees and costs.  The Plaintiff filed a motion for summary judgment on November 21, 2013 which was heard on January 9, 2014, whereupon the motion was granted with regard to the Company’s liability for $25,000.  The Court has not entered an order confirming its ruling and has not reached a determination as to the Company’s liability on the remaining $125,000. The Company will vigorously defend this action but can provide no assurance as to the likelihood of the outcome of the matter. As of June 30, 2013, the Company accrued a liability of $150,000 against the claim.

17. Income Taxes

v2.4.0.8
17. Income Taxes
3 Months Ended
Sep. 30, 2013
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, 2009 through 2013 but anticipate no significant income tax expenses as a result of these filings.

 

The Company’s policy is to classify tax assessments, if any, for interest in interest expense and for penalties in general and administrative expenses.

 

As of September 30, 2013, management has evaluated and concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements

18. Subsequent Events

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18. Subsequent Events
3 Months Ended
Sep. 30, 2013
Notes to Financial Statements  
18. Subsequent Events

Common Stock

 

In October 2013, the Company issued 200,000 shares of common stock at $.15, per share as fees to the investment banker totaling $30,000.

 

In  December 2013, the Company issued an aggregate of 30,000 shares of common stock, at $0.20, per share, for compensation to an employee valued at $6,000.

 

In October and December 2013, an aggregate of 822,777 shares of common stock were issued for the conversion of $59,000 of the 10% Convertible Promissory Notes and accrued interest.

 

In November 2013, the Company issued 150,000 shares of common stock at $0.20, per share, to a consultant for investor relations services.

 

In November 2013, the Company issued 100,000 shares of common stock at $0.20, per share, to its chief financial officer pursuant to an employment agreement.

 

In December 2013, the Company issued 200,000 shares of common stock at $0.10, per share, for legal fees.

 

In January and February 2014, the Company issued an aggregate of 20,000 shares of common stock, at $0.20, per share, for compensation to an employee valued at $4,000.

 

In February 2014, 755,480 shares of common stock were issued for the conversion of $50,000 of the 10% Convertible Promissory Notes and accrued interest

 

Convertible Notes and Warrant

 

On October 29, 2013, the Company issued a two-year, 10% convertible promissory note in the amount of $15,000. After 121 days from the issue date, the holder can convert any unpaid principal and accrued interest into common shares of the Company at $0.15, per share. After 210 days 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 100,000 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. The Company issued 25,000 shares of common stock to the investor as an incentive.

 

On December 12, 2013, the Company issued a two-year, 10% convertible promissory note in the amount of $30,000. After 121 days from the issue date, the holder can convert any unpaid principal and accrued interest into common shares of the Company at $ .15, per share. After 210 days, the conversion price shall be $0.10, per share, subject to adjustment as defined. The investor also was issued a five year common stock purchase warrant for the purchase of up to 200,000 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. In addition, the Company issued 50,000 shares of common stock to the investor as an incentive to the note.

 

On December 17, 2013, the Company issued a two-year, 10% convertible promissory notes in the amount of $50,000.  Warrants to purchase an aggregate of 333,334 shares of the Company’s common stock were issued in conjunction with these financings.  If the Company has not redeemed the notes by the 120th day after the issuance of the notes the note holders may convert at a price of $0.15 a share.  If the Company has

not redeemed the notes by the 210th day after the issuance of the notes the note holders may convert at a price of $0.10 a share.  In addition, the Company issued 83,333 shares of common stock to the investor as an incentive to the note.  In addition, the investment banker received 245,333 shares of the Company’s common stock and a five year common stock purchase warrant for the purchase of up to 77,300 shares of the Company’s common stock, at a price per share of $0.15 as commission.

 

On December 31, 2013, the Company sold $270,000, of the two-year 10% convertible promissory notes.  Warrants to purchase an aggregate of 1,800,000 shares of the Company’s common stock were issued in conjunction with these financings.  If the Company has not redeemed the notes by the 120th day

after the issuance of the notes the note holders may convert at a price of $0.15 a share.  If the Company has not redeemed the notes by the 210th day after the issuance of the notes the note holders may convert at a price of $0.10 a share.  In addition, the Company issued 450,000 shares of common stock to the investors as an incentive to the note.

 

On January 1, 2014, the Company sold $60,000, of the two-year 10% convertible promissory notes.  Warrants to purchase an aggregate of 400,000 shares of the Company’s common stock were issued in conjunction with these financings.   If the Company has not redeemed the notes by the 120th day after the issuance of the notes the note holders may convert at a price of $0.15 a share.  If the Company has not redeemed the notes by the 210th day after the issuance of the notes the note holders may convert at a price of $0.10 a share.  In addition, the Company issued 100,000 shares of common stock to the investors as an incentive to the note.

 

In connection with the financings, the investment banker received 200,000 shares of the Company’s common stock as a fee totaling $30,000.

 

On March 3, 2014, a stockholder advanced the Company $33,475 and will be issued a 10% convertible promissory note for this amount, plus any additional advances through the time of the Gulfport financing.

 

Commitments

 

On October 14, 2013, the Company entered into an agreement with a consultant for a period of three months to provide investor relations services in exchange for 150,000 shares of the Company’s common stock, valued at $30,000. The agreement was not renewed by the Company.

 

 

2. Summary of Significant Accounting Policies (Policies)

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2. Summary of Significant Accounting Policies (Policies)
3 Months Ended
Sep. 30, 2013
Summary Of Significant Accounting Policies Policies  
Basis of Presentation

The accompanying unaudited financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and with the rules and regulations under Regulation S-X of the Securities and Exchange Commission for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements presentation. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position, results of operations and cash flows for interim financial statements have been included. These financial statements should be read in conjunction with the financial statements of the Company together with the Company’s management discussion and analysis in Item 2 of this report and in the Company’s Form 10-K for the year ended June 30, 2013. Interim results are not necessarily indicative of the results for a full year.

 

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, 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.

Reclassifications

Certain amounts for the prior year have been revised or reclassified to conform to 2013 financial statement presentation.

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.

Derivative Instruments

The Company’s derivative liabilities are related to embedded conversion features of the 10% Convertible Notes Payable.  For derivative instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and is then re-valued at each reporting date, with changes in fair value recognized in operations for each reporting period.  The Company uses the Black-Scholes model to value the derivative instruments at inception and subsequent valuation dates and the value is re-assessed at the end of each reporting period in accordance with Accounting Standards Codification (“ASC”) 815.

Beneficial Conversion Charge

The intrinsic value of the beneficial conversion feature arising from the issuance of convertible notes payable with conversion rights that are in the money at the commitment date is recorded as debt discount and amortized to interest expense of the term of the note. The intrinsic value of a beneficial conversion feature is determined after initially allocating an appropriate portion of the proceeds received from the sale of the note to any detachable instruments, such as warrants, included in the sale based on relative fair values.

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 a contract to operate and manage casino projects are recognized pursuant to terms of the agreement.

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 September 30, 2013 and September 30, 2012, they were not included in the calculation of earnings per shares because their inclusion would have been considered anti-dilutive.

Leases

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

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 provides guidance on the financial statement presentation of an unrecognized tax benefit and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. 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 February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 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 not 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.

 

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.

 

4. Property and Equipment (Tables)

v2.4.0.8
4. Property and Equipment (Tables)
3 Months Ended
Sep. 30, 2013
Property And Equipment Tables  
Schedule of property and equipment
    Sept 30,     June 30,  
    2013     2013  
             
Furniture and fixtures   $ 8,490     $ 8,490  
Office equipment     23,289       23,289  
Total     31,779       31,779  
Less accumulated depreciation     (31,427)       (30,907)  
                 
    $ 352     $ 872  

14. Convertible Promissory Note Payable (Tables)

v2.4.0.8
14. Convertible Promissory Note Payable (Tables)
3 Months Ended
Sep. 30, 2013
Convertible Promissory Note Payable Tables  
Schedule of convertible promisory note payable
   

Sept 30

2013

   

June 30,

2013

 
             
10% Convertible Promissory Note Payable   $ 397,015     $ 328,015  
Less:                
Beneficial Conversion Feature Discount     (59,953)       (69,642)  
Warrant Discount     (168,195)       (91,809)  
                 
10% Convertible Promissory Note Payable - Net   $ 169,867     $ 166,564  
                 

4. Property and Equipment (Details)

v2.4.0.8
4. Property and Equipment (Details) (USD $)
Sep. 30, 2013
Jun. 30, 2013
Property And Equipment Details    
Furniture and fixtures $ 8,490 $ 8,490
Office equipment 23,289 23,289
Subtotal 31,779 31,779
Less accumulated depreciation (31,427) (30,907)
Total $ 352 $ 872

4. Property and Equipment (Details Narrative)

v2.4.0.8
4. Property and Equipment (Details Narrative) (USD $)
3 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Property And Equipment Details Narrative    
Depreciation Expense $ 520 $ (398)

14. Convertible Promissory Note Payable (Details)

v2.4.0.8
14. Convertible Promissory Note Payable (Details) (USD $)
Sep. 30, 2013
Jun. 30, 2013
Convertible Promissory Note Payable Details    
10 % Convertible Promissory Note Payable $ 397,015 $ 328,015
Beneficial Conversion Feature Discount (59,953) (69,642)
Warrant Discount (168,195) (91,809)
10% Convertible Promissory Note Payable - Net $ 169,867 $ 166,564