Download to XLS

Document and Entity Information

v2.4.0.8
Document and Entity Information (USD $)
12 Months Ended
Jun. 30, 2014
Mar. 16, 2015
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, 2014  
Amendment Flag false  
Current Fiscal Year End Date --06-30  
Entity Well-Known Seasoned Issuer No  
Entity Voluntary Filers No  
Entity Current Reporting Status No  
Entity Filer Category Smaller Reporting Company  
Entity Public Float   $ 4,412,558
Entity Common Stock Shares Outstanding   5,515,698
Document Fiscal Period Focus FY  
Document Fiscal Year Focus 2014  

Consolidated Balance Sheets

v2.4.0.8
Consolidated Balance Sheets (USD $)
Jun. 30, 2014
Jun. 30, 2013
Current Assets    
Cash    $ 46
Prepaid expenses 8,616 108,023
Total current assets 8,616 108,069
Fixed assets - net of accumulated depreciation of $31,779 and $30,907 at June 30, 2014 and June 30, 2013 respectively    872
Deferred development costs - Gulfport Project 3,459,212 3,831,327
Land purchase deposit 109,422 437,688
Deferred casino ground lease rent 3,165,468 1,902,156
Deferred development costs - SlotOne - Project 12,500   
Stock as Loan collateral    400,000
Security deposit 3,600 3,600
TOTAL ASSETS 6,758,818 6,683,712
Current liabilities    
Accounts payable and accrued expenses 4,563,200 5,371,847
Accrued salaries 1,781,636 1,264,371
Accrued ground lease rent 3,165,468 1,902,156
Note payable 121,000 80,000
Loans payable - stockholders 241,943 320,250
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 4,299,415 2,846,405
Total current liabilities 17,747,662 15,360,029
10% Convertible promissory notes payable 779,890 328,015
Discount on 10% convertible notes payable (512,351) (161,451)
Beneficial conversion feature 42,738 206,053
Warrant liability 144,387 98,814
TOTAL LIABILITIES 18,202,326 15,831,460
COMMITMENTS AND CONTINGENCIES      
STOCKHOLDERS' (DEFICIT) EQUITY    
Common stock, $0.01 par value, 75,000,000 shares authorized; 5,316,684 and 4,569,894 shares issued and outstanding as of June 30, 2014 and June 30, 2013, respectively 53,167 45,700
Additional paid-in-capital 23,458,739 22,906,551
Accumulated deficit (33,930,034) (31,514,166)
Noncontrolling Interest (3,500,380) (3,060,833)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (11,443,508) (9,147,748)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY 6,758,818 6,683,712
Class A Preferred Stock [Member]
   
STOCKHOLDERS' (DEFICIT) EQUITY    
Preferred stock value    1,750,000
Class B Preferred Stock [Member]
   
STOCKHOLDERS' (DEFICIT) EQUITY    
Preferred stock value $ 2,475,000 $ 725,000

Consolidated Balance Sheets (Parenthetical)

v2.4.0.8
Consolidated Balance Sheets (Parenthetical) (USD $)
Jun. 30, 2014
Jun. 30, 2013
Fixed assets, accumulated depreciation $ 31,779 $ 30,907
Dividend percentage on convertible notes payable 10.00%  
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 75,000,000 75,000,000
Common stock, shares issued 5,316,684 4,569,894
Common stock, shares outstanding 5,316,684 4,569,894
Preferred stock, shares authorized 5,000,000  
Class A Preferred Stock [Member]
   
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 0 45
Preferred stock, shares issued      
Preferred stock, shares outstanding      
Class B Preferred Stock [Member]
   
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 68,488 2,687
Preferred stock, shares issued      
Preferred stock, shares outstanding      

Consolidated Statement of Operations

v2.4.0.8
Consolidated Statement of Operations (USD $)
12 Months Ended
Jun. 30, 2014
Jun. 30, 2013
Income Statement [Abstract]    
Revenue      
Operating expenses    
Accrued salary expense 583,498 594,363
Stock based compensation 624,734 677,000
General and administrative expenses 180,412 1,703,161
Dividends on Redeemable Preferred Series A Stock    9,619
Loss on impairment of land purchase deposit 328,266   
Change in fair value of conversion feature (1,865,078) (31,159)
Write-off of accounts payable and salary accrual adjustment (18,162) (457,839)
Amortization of beneficial conversion feature and discount 1,396,435 162,746
Interest expense 1,625,310 1,248,455
Total expenses 2,855,415 3,906,346
Net Loss (2,855,415) (3,906,346)
Net Loss Attributable to Noncontrolling Interest 439,547 1,542,683
Net Loss Attributable to Stockholders $ (2,415,868) $ (2,363,663)
Basic and diluted net loss per common share $ (0.58) $ (0.99)
Basic and diluted average common shares outstanding 4,913,000 3,951,332

Consolidated Statement of Changes in Stockholders' (Deficit) Equity

v2.4.0.8
Consolidated Statement of Changes in Stockholders' (Deficit) Equity (USD $)
Common Stock [Member]
Series A Preferred Units [Member]
Series B Preferred Units [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Controlling Interest [Member]
Noncontrolling Interest [Member]
Balance at Jun. 30, 2012 $ 33,229 $ 1,750,000 $ 725,000 $ 21,273,014 $ (29,150,503) $ (6,887,410) $ (1,518,150)
Balance, Shares at Jun. 30, 2012 3,322,890 45 2,687        
Common stock issued in connection with legal services rendered 2,700     297,300   300,000  
Common stock issued in connection with legal services rendered, Shares 270,000            
Common stock issued as compensation 2,800     557,200   560,000  
Common stock issued as compensation, Shares 280,000            
Common stock issued for conversion of Series A Preferred Stock 4,032     259,976   264,008  
Common stock issued for conversion of Series A Preferred Stock, Shares 403,039            
Common stock issued to board members 80     15,920   16,000  
Common stock issued to board members, Shares 8,000            
Common stock issued for payment of accounts payable 100     14,900   15,000  
Common stock issued for payment of accounts payable, Shares 10,000            
Common stock issued in consideration of note payable 185     36,815   37,000  
Common stock issued in consideration of note payable, Shares 18,500            
Common stock issued for consulting services 20     3,980   4,000  
Common stock issued for consulting services, Shares 2,000            
Common stock issued for financing costs 154     (154)      
Common stock issued for financing costs, Shares 15,465            
Common stock issued for investment in Rotate Black, MS LLC 100     19,900   20,000  
Common stock issued for investment in Rotate Black, MS LLC, Shares 10,000            
Common stock sold for cash 300     29,700   30,000  
Common stock sold for cash, Shares 30,000            
Common stock issued for loan collateral 2,000     398,000   400,000  
Common stock issued for loan collateral, Shares 200,000            
Net loss         (2,363,663) (3,906,346) (1,542,683)
Balance at Jun. 30, 2013 45,700 1,750,000 725,000 22,906,551 (31,514,166) (9,147,748) (3,060,833)
Balance, Shares at Jun. 30, 2013 4,569,894 45 2,687        
Common stock issued in connection with legal services rendered 200     19,800   20,000  
Common stock issued in connection with legal services rendered, Shares 20,000            
Common stock issued as compensation 4,220     239,780   244,000  
Common stock issued as compensation, Shares 422,000            
Common stock issued in consideration of note payable 683     135,984   136,667  
Common stock issued in consideration of note payable, Shares 68,333            
Common stock issued for consulting services 945     178,122   179,067  
Common stock issued for consulting services, Shares 94,533            
Common stock issued for loan collateral (2,000)     (398,000)   (400,000)  
Common stock issued for loan collateral, Shares (200,000)            
Common stock issued for conversion of note payable 2,949     291,972   294,921  
Common stock issued for conversion of note payable, Shares 294,939            
Common stock issued for loan incentive 325     64,675   65,000  
Common stock issued for loan incentive, Shares 32,500            
Common stock issued for interest 100     19,900   20,000  
Common stock issued for interest, Shares 10,000            
Common stock issued for exercise of cashless warrants 45     (45)      
Common stock issued for exercise of cashless warrants, Shares 4,485            
Preferred Series A Units converted to Preferred Series B Units   (1,750,000) 1,750,000        
Preferred Series A Units converted to Preferred Series B Units, Shares   (45) 57,801        
Net loss         (2,415,868) (2,855,415) (439,547)
Balance at Jun. 30, 2014 $ 53,167    $ 2,475,000 $ 23,458,739 $ (33,930,034) $ (11,443,508) $ (3,500,380)
Balance, Shares at Jun. 30, 2014 5,316,684    60,488        

Consolidated Statement of Cash Flows

v2.4.0.8
Consolidated Statement of Cash Flows (USD $)
12 Months Ended
Jun. 30, 2014
Jun. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (2,855,415) $ (3,906,346)
Adjustments to reconcile net loss to cash provided by operating activities:    
Stock-based compensation 624,734 677,000
Stock issued for accounts payable    15,000
Stock for interest 94,921 74,075
Stock issued for legal services    300,000
Stock issued for consulting services    4,000
Stock for investment in RBMS    20,000
Loss on impairment of land purchase deposit 328,266   
Depreciation and amortization 872 1,375
Amortization and changes in beneficial conversion feature and warrant liability (117,742) 159,495
Changes in assets and liabilities:    
Prepaid expenses 119,407 (101,522)
Accounts payable and accrued expenses 971,930 3,317,862
Accrued interest on mortgage and notes payable 1,453,010 1,180,791
Net cash provided by operating activities 619,983 1,640,730
CASH FLOWS FROM INVESTING ACTIVITIES    
Deferred development costs - Gulfport Project 372,115 (2,143,457)
Deferred casino ground lease rent (1,263,312)   
Deferred development costs - SlotOne Project (12,500)   
Net cash used in investing activities (903,697) (2,143,457)
CASH FLOWS FROM FINANCING ACTIVITIES    
Common stock sold for cash    30,000
Proceeds from convertible promissory notes payable 671,875 178,015
Proceeds from note payable 41,000 80,000
Discount on 10% convertible promissory notes payable (350,900) (27,909)
(Decrease) Increase in loans payable - stockholders (78,307) 234,404
Payments of note payable - truck    (408)
Net cash provided by financing activities 283,668 494,102
Net increase (decrease) in cash (46) (8,625)
Cash, beginning of period 46 8,671
Cash, end of period    46
Noncash Transactions:    
Issuance of common stock in payment of notes payable 220,000   
Issuance of common stock in payment toward accounts payable    15,000
Issuance of common stock as collateral on note payable    400,000
Issuance of common stock for redemption of Preferred Series A Stock plus interest and dividends    264,008
Issuance of common stock as debt financing fees    37,002
Write-off of accounts payable and accrued expenses    470,501
Issuance of common stock as interest 94,921 74,075
Issuance of common stock in equity investment    20,000
Cancellation of common stock for loan collateral $ (400,000)   

Consolidated Statement of Cash Flows (Parenthetical)

v2.4.0.8
Consolidated Statement of Cash Flows (Parenthetical)
Jun. 30, 2014
Statement of Cash Flows [Abstract]  
Dividend percentage on convertible notes payable 10.00%

Organization and Operations

v2.4.0.8
Organization and Operations
12 Months Ended
Jun. 30, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Operations

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.

 

Gulfport Project

 

The Company’s primary focus will be the management of a casino resort in Gulfport, Mississippi (“the Gulfport Project”) under the Gulfport Project Management Agreement with the Company’s affiliate, Rotate Black MS, LLC (RBMS), a Mississippi limited liability company. (Note 5)

 

Other Projects

 

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 an exclusive license agreement with Global Gaming Group, Inc. for the use if its slot games and gaming content. Currently the Company is assimilating these games and its infrastructure into a new Class II gaming platform. Initial testing of the Company’s new state of the art equipment is contemplated in the fall of 2015.

Summary of Significant Accounting Policies

v2.4.0.8
Summary of Significant Accounting Policies
12 Months Ended
Jun. 30, 2014
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Consolidated Financial Statements

 

The accompanying consolidated financial statements include all of the accounts of the Company, its subsidiary RB OK, LLC and its affiliate, RBMS (Note 6).

 

On February 28, 2015, our board of directors approved, and submitted a proposal to our stockholders for approval of a 1 for 10 reverse split of our common stock (the “Reverse Stock Split”) The Reverse Stock Split was intended to increase the market price of our common stock to make our common stock more attractive to a broader range of institutional and other investors. We filed a Certificate of Change with the Secretary of State of the State of Nevada to effect the Reverse Stock Split on March 12, 2015. Upon the effectiveness of the Reverse Stock Split, every ten shares of issued and outstanding common stock of the Company were automatically combined into one share of common stock with any fractional shares rounded up to the next whole share and the par value of the common stock increased rom $0.001 to $0.01, per share. The Reverse Stock Split reduced the number of outstanding shares of the Company’s common stock from approximately 55.0 million shares to approximately 5.5 million shares. The authorized shares of the Company’s common stock remain at 75,000,000.

 

Unless otherwise indicated, all share amounts, per share data, share prices, exercise prices and conversion rates set forth in these notes and the accompanying consolidated financial statements have, where applicable, been adjusted retroactively to reflect the Reverse Stock Split.

 

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 accounted for its investment in RBMS on the equity method (Note 6).

 

All significant intercompany accounts and transactions have been eliminated.

 

Reclassifications

 

Certain amounts for the prior year have been revised or reclassified to conform to 2014 financial statement presentation.

 

Estimates

 

The preparation of consolidated 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 consolidated 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. For the years ended June 30, 2014 and 2013, the Company had no revenue.

 

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 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, 2014 and June 30, 2013, 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. 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 August 2014, FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtropi 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”) The guidance in ASU 2014-15 sets forth management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing interim and annual financial statements, management should evaluate whether conditions or events, in aggregate, raise substantial doubt about an entity’s ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, and, if applicable, whether it is probable that management’s plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted. The Company does not expect the adoption to have a material impact on the Company’s consolidated financial statements.

 

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.

Going Concern

v2.4.0.8
Going Concern
12 Months Ended
Jun. 30, 2014
Going Concern  
Going Concern

3. GOING CONCERN

 

The consolidated 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 $37,430,414 and negative working capital of $17,739,046 as of June 30, 2014 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 consolidated 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.

RBMS Management Agreement

v2.4.0.8
RBMS Management Agreement
12 Months Ended
Jun. 30, 2014
Rbms Management Agreement  
RBMS Management Agreement

4. 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, 2014, and June 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 consolidated financial statements of RBMS have been included in the accompanying consolidated financial statements of the Company.

Gulfport Casino Hotel Project (Hemingway Resort and Casino)

v2.4.0.8
Gulfport Casino Hotel Project (Hemingway Resort and Casino)
12 Months Ended
Jun. 30, 2014
Property, Plant and Equipment [Abstract]  
Gulfport Casino Hotel Project (Hemingway Resort and Casino)

5. GULFPORT CASINO HOTEL PROJECT (HEMINGWAY RESORT AND CASINO)

 

Pursuant to the new regulatory requirements imposed by Mississippi Gaming Commission, the Company amended its project plans to a 250,000 square-foot land-based casino featuring gaming, restaurants, bars, and support space, as well as an adjacent 300-room four-star hotel. Subject to obtaining the necessary financing (Note 17), the Company expects the completion and grand opening of the Project in Fall 2016. When completed, the $170 million project will feature:

 

  Casino – approximately 53,000 square feet of gaming space, including 1,388 slot machines, 33 table games, including blackjack, craps, roulette, and pai-gow;
     
  Hotel – a 300-room four star hotel including 40 suites and 260 traditional rooms;
     
  Food and Beverage – 3 distinctive and diverse dining options, including a 120-seat steakhouse, a 240-seat buffet, and a casual dining café;
     
  Bars – 3 bars, including a Hemingway Bar featuring views of the marina and outdoor seating; and
     
  Parking – a parking garage and lot that can accommodate approximately 1,200 vehicles.

 

On November 12, 2014, the Company entered into an exclusive engagement agreement with a financial advisor for the seeking, arranging, negotiating and general advising of the Company with respect to the placement, in one or a series of transactions, of debt and/or equity securities for the purpose of funding the development of the Hemingway Resort and Casino. Consideration for the services under this agreement include a contingent placement fee equal to 3% of the principal amount of any first lien debt and 6% of any subordinated debt or equity like portion.

 

The financing of this $170 million project is contemplated to include:

 

  $115,000,000 of Senior Secured Notes
  $25,000,000 of Vendor Finance
  $25,000,000 of New Rotate Black, Inc. Equity
  $5,000,000 Equity invested to Date

 

Rotate Black, Inc.’s equity investment is contemplated to come from the sale of $25.8 Million of Rotate Black, Inc. Senior Notes. (Note 17)

Investment in RBMS

v2.4.0.8
Investment in RBMS
12 Months Ended
Jun. 30, 2014
Equity Method Investments and Joint Ventures [Abstract]  
Investment in RBMS

6. 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, 2014, and June 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.

 

Ground Lease

 

RBMS has entered into one of two necessary ground leases with regard to the site. It is currently a party to a ninety-nine (99) year ground lease (the “Private Lease”) for approximately five (5) acres of land in Gulfport located in the Bert Jones Yacht Basin. RBMS anticipates entering into a fifty-nine (59) year ground lease with the Gulfport Redevelopment Commission for approximately four and one-half (4.5) acres of adjacent and contiguous land (the “GRC Lease”). The GRC Lease will allow RBMS to control more than the minimum seven (7) acres of contiguous land required to have a gaming eligible site in Gulfport, Mississippi.

 

  Private Lease – The Private Lease provides that the Company will pay a percentage rent with a minimum rent guarantee. The percentage rent is equal to four percent (4%) of the gross gaming revenues (as defined in the Private Lease). The minimum rent guarantee is $110,000 per month with an annual consumer price index adjustment of the minimum rent on the annual anniversary of the Private Lease.
     
  ●  GRC Lease – The current proposed terms for the GRC Lease call for the Company to pay an initial base rent of $50,000 to the GRC upon commencement of construction of the initial gaming operations. After commencement of the gaming operations, it is anticipated that the rent payable to the GRC will be a percentage rent with a minimum rent guarantee. The rent is anticipated to be equal to one percent (1%) of the gross gaming revenues, and the current proposed minimum rent guarantee will be $600,000 per annum. There can be no assurance that the GRC will grant a lease to RBMS or on these terms.

The Big Easy Gaming Vessel

v2.4.0.8
The Big Easy Gaming Vessel
12 Months Ended
Jun. 30, 2014
Big Easy Gaming Vessel  
The Big Easy Gaming Vessel

7. 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 gaming vessel collateralized the Secured Notes 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 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. The Company has not repaid the principal and accrued interest by the dates stipulated in the extension and 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, 2014 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. 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.

Land Purchase Deposit

v2.4.0.8
Land Purchase Deposit
12 Months Ended
Jun. 30, 2014
Land Purchase Deposit  
Land Purchase Deposit

8. 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 140,983 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 63,074 shares of common stock and Rotate Black, LLC transferred, on behalf of the Company, 77,909 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, $50.00, per share. In October 2009, the Company issued 77,909 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 7,000 (valued at $350,000, $50.00, per share), 20,861 (valued at $521,532, $25.00, per share) and 50,000 (valued at $550,000 $11.00, 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 218,844 shares of the common stock of the Company provided as a deposit on the land is 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 June 30, 2014, the Company has evaluated the fair value of the land deposit and has determined that the book value of the deposit recorded is in excess fair value and has recorded an impairment loss of $328,266.

Loans Payable - Stockholders

v2.4.0.8
Loans Payable - Stockholders
12 Months Ended
Jun. 30, 2014
Debt Disclosure [Abstract]  
Loans Payable - Stockholders

11. LOANS PAYABLE – STOCKHOLDERS

 

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.

Employment Agreement

v2.4.0.8
Employment Agreement
12 Months Ended
Jun. 30, 2014
Compensation Related Costs [Abstract]  
Employment Agreement

12. EMPLOYMENT AGREEMENT

 

Commencing July 3, 2013, the Company entered into an agreement with its Chief Financial Officer for a term of twelve months and extended on a month-to-month basis, 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 1,000 additional shares of the Company’s common stock for each month of service provided, issued quarterly.

Convertible and Promissory Notes

v2.4.0.8
Convertible and Promissory Notes
12 Months Ended
Jun. 30, 2014
Debt Disclosure [Abstract]  
Convertible and Promissory Notes

13. CONVERTIBLE AND PROMISSORY NOTES

 

Beginning on May 1, 2012 and continuing through June 30, 2014, the Company issued an aggregate of $999,890 in two-year, 10% convertible promissory notes. The notes are convertible into the Company’s common stock as defined at $0.90 a share. There is a total of $779,890 in convertible notes outstanding as of June 30, 2014.

 

In December 2014 the Company changed the exchange price on the convertible promissory notes and warrant to $0.90 (in effect with the reverse stock split).

 

The convertible note holders were also issued a five year common stock purchase warrant for the purchase of up to 517,337 shares of the Company’s common stock, at a price per share of $0.90, 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 notes 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. For the years ended June 30, 2014 and 2013, the Company recorded a gain on change of fair market value of $1,865,078 and $31,159, respectively.

 

The Company calculates the value of the conversion features using upon the Black Scholes model, and has reflected this as a discount against the convertible promissory note, amortizable as interest expense over two years.

 

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 financings, therefore the warrant issuance was deemed a liability for financial reporting purposes under the accounting guidance.

  

The warrants were valued using a Black-Scholes Model with the stock price on day of grant, the risk free interest rate and the expected volatility. This value has been reflected as discount of the convertible promissory note payable, amortizable as interest expense over two years.

 

As of June 30, 2014 and June 30, 2013, the 10% Convertible Notes Payable were as follows:

 

    June 30, 2014     June 30, 2013  
             
10% Convertible Promissory Note Payable   $ 779,890     328,015  
Less:                
Beneficial Conversion Feature Discount   $ (50,630 )   $ (69,642 )
Warrant Discount   $ (461,721   $ (91,809
                 
10% Convertible Promissory Note Payable - Net   $ 267,539     $ 166,564  

 

For the years ended June 30, 2014 and 2013 respectively, the Company recorded $1,396,435 and $162,746 for amortization of the beneficial conversion feature and discount.

 

On September 6, 2012, the Company received $65,000 in loan proceeds. A promissory note was issued in the amount of $121,000, which includes interest payments of $56,000. In addition, 18,500 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 the date of the accompanying consolidated financial statements, no payments have been made on the promissory note.

Common and Preferred Stock

v2.4.0.8
Common and Preferred Stock
12 Months Ended
Jun. 30, 2014
Equity [Abstract]  
Common and Preferred Stock

14. COMMON AND PREFERRED STOCK

 

In 2014 the Company issued:

 

The Company issued 20,000 shares of common stock for legal services valued at $1.00 per share.

 

The Company issued an aggregate of 222,000 shares of common stock as officer compensation valued at $144,000.

 

The Company issued an aggregate of 294,939 shares of common stock for were issued for the conversion of 10% Convertible Promissory Notes and accrued interest valued at $294,921.

 

The Company issued an aggregate of 68,333 shares of common stock in consideration of notes payable valued at $136,667.

 

The Company issued 32,500 shares of common stock as additional consideration to note holders.

 

The Company issued an aggregate of 94,533 shares of common stock for consulting services valued at an aggregate of $179,067.

 

The Company issued 10,000 shares of common stock for interest valued at $20,000.

 

The Company issued 4,485 shares of common stock for the exercise of cashless warrants.

  

In 2013 the Company issued:

 

The Company issued an aggregate of 270,000 shares of common stock for legal services valued at $300,000.

 

The Company issued an aggregate of 280,000 shares of common stock as officer compensation valued at $560,000.

 

The Company issued an aggregate of 403,039 shares of common stock for the conversion of Series A Preferred Stock valued at $264,008

 

The Company issued 8,000 shares of common stock to a board member for services rendered valued at $16,000.

 

The Company issued 10,000 shares of common stock in payment of accounts payable valued at $15,000.

 

The Company issued 18,500 shares of common stock in consideration of notes payable valued at $37,000.

 

The Company issued 2,000 shares of common stock for consulting services valued at $4,000.

 

The Company issued an aggregate of 15,465 shares of common stock for financing costs.

 

The Company sold an aggregate of 30,000 shares of common stock valued at $30,000.

 

RBMS Equity

 

RBMS equity consists of 68,488 Series B Common Units and 16,075 warrants to purchase B Common 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. Pursuant to these transactions Series A Preferred Unit holders converted into Common B Units.

 

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, 2014 and June 30, 2013 no options were granted under the Plan.

 

Preferred Stock

 

At June 30, 2014 and 2013 the Company has 5,000,000 shares of Preferred Stock authorized which has no designation. 

 

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 95,000 warrants to purchase common stock for an aggregate of $190,000. Each warrant is exercisable at $4.00, per share, for five years. As of June 30, 2013, none of the warrants have been exercised.

 

The fair value of the 95,000 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, $1.90, 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 fees, have been converted to an aggregate of 403,039 shares of the Company’s common stock.

 

During the years ended June 30, 2014 and 2013 there were no issuances of Preferred Stock.

 

Warrants

 

As of June 30, 2014, the Company has the following warrants outstanding.

 

    Warrants Issued     Exercise Price     Term  
Series A warrants     95,000     $ 0.90     5 years  
10% Convertible Promissory Notes Payable     517,337     $ 0.90     5 years  
Officers and Affiliates     128,000     $ 0.90     5 years  
Investment Banker Fees     17,730     $ 0.90     5 years  
Total     758,067                

Commitments and Contingencies

v2.4.0.8
Commitments and Contingencies
12 Months Ended
Jun. 30, 2014
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

15. 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 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”). On November 6, 2014, the Company terminated this agreement and agreed to a success-based fee of up to $250,000 contingent upon the close of the Gulfport transaction.

 

On November 12, 2014, the Company agreed to engage an exclusive financial advisor and 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 term of twelve months and the scope of the engagement agreement calls for a nonrefundable transaction fee, as defined, equal to the sum of (i) 3.00% 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) 6.00% 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 $1,500,000 provided that the project is financed or the Company enters into an agreement whereby there is change of control.

 

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. 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 the Nevada Supreme Court would hear its appeals to the default judgment. On September 14, 2014 the Supreme Court upheld the default, but overturned the default judgment and remanded the case back down to the District Court. The Company will continue to 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 it’s 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 has accrued a liability of $150,000 against the claim.

Income Taxes

v2.4.0.8
Income Taxes
12 Months Ended
Jun. 30, 2014
Income Tax Disclosure [Abstract]  
Income Taxes

16. INCOME TAXES

 

The Company and its subsidiaries file separate tax returns. As of June 30, 2014, management has evaluated and concluded that there are no significant uncertain tax positions requiring recognition in the Company’s consolidated financial statements.

 

As of June 30, 2014, the Company had net operating loss carry forwards of approximately $16,640,000 to reduce future Federal and state taxable income through 2034.

 

    2014     2013  
             
Impairment of intangible asset   $ 125,000     $ -  
Write-off of investment in joint venture, intangible assets and deferred expenses     -       180,000  
Net operating loss     785,000       710,000  
                 
      910,000       890,000  
Allowance     (910,000 )     (890,000 )
    $ None     $ None  

  

As of June 30, 2014, realization of the Company’s deferred tax asset of $12,953,825 was not considered more likely than not and, accordingly, a valuation allowance of $12,953,825 has been provided. There was an increase of $910,000 in the valuation allowance.

 

For the years ended June 30, 2014 and 2013, deferred income tax expense consisted of the following:

 

    2014     2013  
             
Impairment of intangible asset   $ 5,974,525     $ 5,749,525  
Write-off of investment in joint venture, intangible assets and deferred expenses     565,000       565,000  
Other     29,300       29,300  
Net operating loss     6,485,000       5,700,000  
                 
      12,953,825       12,043,825  
Valuation allowance     (12,953,825 )     (12,043,825 )
    $ None     $ None  

Subsequent Events

v2.4.0.8
Subsequent Events
12 Months Ended
Jun. 30, 2014
Subsequent Events [Abstract]  
Subsequent Events

17. SUBSEQUENT EVENTS

 

Common Stock

 

In August and November 2014, the Company issued 132,814 shares of common stock at $0.90, per share for the conversion of $119,712 of 10% Convertible Promissory Notes.

 

From July 2014 to February 2015 the Company issued an aggregate of 8,000 shares of common stock as compensation to an employee valued at $0.90.

 

In November and December 2014, the Company issued an aggregate 59,000 shares of common stock at $0.90, per share for consulting services.

  

Convertible Notes and Warrants

 

On July 1, 2014 and August 28, 2014, the Company sold a combined $65,000 of the nine month 8% convertible promissory notes. As of the date of the consolidated financial statements, the Company repaid both notes in full.

 

Beginning on October 7, 2014 and continuing through March 1, 2015, the Company issued an aggregate of $378,800 in two-year, 10% convertible promissory notes. The notes are convertible into the Company’s common stock at $0.90 a share. Warrants to purchase an aggregate of 354,667 shares of the Company’s common stock were issued in conjunction with these financings.

 

Financing

 

On November 12, 2014, the Company entered into an exclusive engagement agreement with a financial advisor for the seeking, arranging, negotiating and general advising of the Company with respect to the placement, in one or a series of transactions, of debt and/or equity securities for the purpose of funding the development of the Hemingway Resort and Casino. Consideration for the services under this agreement include a contingent placement fee equal to 3% of the principal amount of any first lien debt and 6% of any subordinated debt or equity like portion.

 

The total financing of this project is contemplated to be $170 million and is anticipated to structured in the following way:

 

  $115,000,000 of Senior Secured Notes
     
  $25,000,000 of Vendor Finance
     
  $25,000,000 of New Rotate Black, Inc. Equity
     
  $5,000,000 of Equity invested to Date

 

Rotate Black, Inc.’s equity investment is contemplated to come from the direct sale of $25.8 Million of Rotate Black, Inc. Senior Notes.

Summary of Significant Accounting Policies (Policies)

v2.4.0.8
Summary of Significant Accounting Policies (Policies)
12 Months Ended
Jun. 30, 2014
Accounting Policies [Abstract]  
Consolidated Financial Statements

Consolidated Financial Statements

 

The accompanying consolidated financial statements include all of the accounts of the Company, its subsidiary RB OK, LLC and its affiliate, RBMS (Note 6).

 

On February 28, 2015, our board of directors approved, and submitted a proposal to our stockholders for approval of a 1 for 10 reverse split of our common stock (the “Reverse Stock Split”) The Reverse Stock Split was intended to increase the market price of our common stock to make our common stock more attractive to a broader range of institutional and other investors. We filed a Certificate of Change with the Secretary of State of the State of Nevada to effect the Reverse Stock Split on March 12, 2015. Upon the effectiveness of the Reverse Stock Split, every ten shares of issued and outstanding common stock of the Company were automatically combined into one share of common stock with any fractional shares rounded up to the next whole share and the par value of the common stock increased rom $0.001 to $0.01, per share. The Reverse Stock Split reduced the number of outstanding shares of the Company’s common stock from approximately 55.0 million shares to approximately 5.5 million shares. The authorized shares of the Company’s common stock remain at 75,000,000.

 

Unless otherwise indicated, all share amounts, per share data, share prices, exercise prices and conversion rates set forth in these notes and the accompanying consolidated financial statements have, where applicable, been adjusted retroactively to reflect the Reverse Stock Split.

 

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 accounted for its investment in RBMS on the equity method (Note 6).

 

All significant intercompany accounts and transactions have been eliminated.

Reclassifications

Reclassifications

 

Certain amounts for the prior year have been revised or reclassified to conform to 2014 financial statement presentation.

Estimates

Estimates

 

The preparation of consolidated 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 consolidated financial statements and revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

Financial Instruments

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

 

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

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

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 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. For the years ended June 30, 2014 and 2013, the Company had no revenue.

Share-Based Compensation

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 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 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, 2014 and June 30, 2013, they were not included in the calculation of earnings per shares because their inclusion would have been considered anti-dilutive.

Leases

Leases

 

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

Recent Accounting Pronouncements

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. 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 August 2014, FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtropi 205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”) The guidance in ASU 2014-15 sets forth management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing interim and annual financial statements, management should evaluate whether conditions or events, in aggregate, raise substantial doubt about an entity’s ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, and, if applicable, whether it is probable that management’s plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted. The Company does not expect the adoption to have a material impact on the Company’s consolidated financial statements.

 

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.

Convertible and Promissory Notes (Tables)

v2.4.0.8
Convertible and Promissory Notes (Tables)
12 Months Ended
Jun. 30, 2014
Debt Disclosure [Abstract]  
Schedule of Convertible Notes Payable

As of June 30, 2014, the Company has the following warrants outstanding.

 

    Warrants Issued     Exercise Price     Term  
Series A warrants     95,000     $ 0.90     5 years  
10% Convertible Promissory Notes Payable     517,337     $ 0.90     5 years  
Officers and Affiliates     128,000     $ 0.90     5 years  
Investment Banker Fees     17,730     $ 0.90     5 years  
Total     758,067                

Common and Preferred Stock (Tables)

v2.4.0.8
Common and Preferred Stock (Tables)
12 Months Ended
Jun. 30, 2014
Equity [Abstract]  
Schedule of Warrants Outstanding

As of June 30, 2014, the Company has the following warrants outstanding.

 

    Warrants Issued     Exercise Price     Term  
Series A warrants     95,000     $ 0.90     5 years  
10% Convertible Promissory Notes Payable     517,337     $ 0.90     5 years  
Officers and Affiliates     128,000     $ 0.90     5 years  
Investment Banker Fees     17,730     $ 0.90     5 years  
Total     758,067                

Income Taxes (Tables)

v2.4.0.8
Income Taxes (Tables)
12 Months Ended
Jun. 30, 2014
Income Tax Disclosure [Abstract]  
Schedule of Net Operating Loss Carryforwards

    2014     2013  
             
Impairment of intangible asset   $ 125,000     $ -  
Write-off of investment in joint venture, intangible assets and deferred expenses     -       180,000  
Other                
Net operating loss     785,000       710,000  
                 
      910,000       890,000  
Allowance     (910,000 )     (890,000 )
    $ None     $ None  

Schedule of Deferred Tax Expense

For the years ended June 30, 2014 and 2013, deferred income tax expense consisted of the following:

 

    2014     2013  
             
Impairment of intangible asset   $ 5,974,525     $ 5,749,525  
Write-off of investment in joint venture, intangible assets and deferred expenses     565,000       565,000  
Other     29,300       29,300  
Net operating loss     6,485,000       5,700,000  
                 
      12,953,825       12,043,825  
Valuation allowance     (12,953,825 )     (12,043,825 )
    $ None     $ None  

Summary of Significant Accounting Policies (Details Narrative)

v2.4.0.8
Summary of Significant Accounting Policies (Details Narrative) (USD $)
12 Months Ended
Jun. 30, 2014
Jun. 30, 2013
Stockholders reverse stock split 1 for 10 reverse split of common stock  
Common stock, par value $ 0.01 $ 0.01
Common stock, shares outstanding 5,316,684 4,569,894
Common stock, shares authorized 75,000,000 75,000,000
Percentage of ownership investments 50.00%  
Dividend percentage on convertible notes payable 10.00%  
Revenue      
Expected dividend yield 0.00%  
Minimum [Member]
   
Common stock, par value $ 0.001  
Common stock, shares outstanding 5,500,000  
Maximum [Member]
   
Common stock, par value $ 0.01  
Common stock, shares outstanding 55,000,000  

Going Concen (Details Narrative)

v2.4.0.8
Going Concen (Details Narrative) (USD $)
Jun. 30, 2014
Jun. 30, 2013
Going Concern    
Accumulated deficit $ 33,930,034 $ 31,514,166
Working capital $ 17,739,046  

RBMS Management Agreement (Details Narrative)

v2.4.0.8
RBMS Management Agreement (Details Narrative) (USD $)
0 Months Ended
Apr. 01, 2010
Oct. 27, 2010
Rbms Management Agreement    
Management agreement period 99 years  
Management fee payable per month   $ 200,000
Management fee payable after commencement of the gaming operations   250,000
Management fee payable on achieving certain earnings   $ 300,000

Gulfport Casino Hotel Project (Hemingway Resort and Casino) (Details Narrative)

v2.4.0.8
Gulfport Casino Hotel Project (Hemingway Resort and Casino) (Details Narrative) (USD $)
12 Months Ended
Jun. 30, 2014
sqft
Number
Area of land 250,000
Value of casino hotel project $ 170,000,000
Number of rooms in hotel 300
Percentage of principal amount on first lien debt 3.00%
Percentage on subordinated debt 6.00%
Proceeds from sale of senior notes 25,800,000
Senior Secured Notes [Member]
 
Value of casino hotel project 115,000,000
Vendor Finance [Member]
 
Value of casino hotel project 25,000,000
New Rotate Black Inc Equity [Member]
 
Value of casino hotel project 25,000,000
Equity Invested To Date [Member]
 
Value of casino hotel project $ 5,000,000
Vehicles [Member]
 
Number of vehicles 1,200
Food And Beverage [Member]
 
Number of dining options 3
Number of steakhouse seats 120
Number of seat buffet 240
Bars [Member]
 
Number of bars 3
Casino [Member]
 
Area of land 53,000
Number of slot machines 1,388
Number of table games 33
Suites [Member]
 
Number of rooms in hotel 40
Traditional Rooms [Member]
 
Number of rooms in hotel 260

Investment in RBMS (Details Narrative)

v2.4.0.8
Investment in RBMS (Details Narrative) (USD $)
12 Months Ended
Jun. 30, 2014
Percentage of owned aggregate of voting interest 50.00%
Private Lease [Member]
 
Percentage of rent from gross gaming revenues 4.00%
Minimum rent guarantee $ 110,000
Gulfport Redevelopment Commission Lease [Member]
 
Percentage of rent from gross gaming revenues 1.00%
Minimum rent guarantee 600,000
Payment of initial base rent $ 50,000
Rotate Black MS, LLC [Member] | Private Lease [Member]
 
Ground lease term 99 years
Area of land to ground lease 5
Rotate Black MS, LLC [Member] | Gulfport Redevelopment Commission Lease [Member]
 
Ground lease term 59 years
Area of land to ground lease 4.5
Rotate Black MS, LLC [Member] | Gulfport Redevelopment Commission Lease [Member] | Minimum [Member]
 
Area of land to ground lease 7
Rotate Black MS, LLC [Member] | RBL and Officer [Member]
 
Percentage of owned aggregate of voting interest 46.60%

The Big Easy Gaming Vessel (Details Narrative)

v2.4.0.8
The Big Easy Gaming Vessel (Details Narrative) (USD $)
26 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended
Jun. 30, 2014
Jun. 30, 2013
Jun. 30, 2012
Dec. 20, 2012
Rotate Black MS, LLC [Member]
Maximum [Member]
Series B Subordinated Participating Preferred Stock [Member]
Dec. 20, 2012
Rotate Black MS, LLC [Member]
Settlement Agreement [Member]
Series B Subordinated Participating Preferred Stock [Member]
Within First Three Months of Closing [Member]
Dec. 20, 2012
Rotate Black MS, LLC [Member]
Settlement Agreement [Member]
Series B Subordinated Participating Preferred Stock [Member]
Within First Fifteen Months of Closing [Member]
Dec. 20, 2012
Rotate Black MS, LLC [Member]
Settlement Agreement [Member]
Series B Subordinated Participating Preferred Stock [Member]
Within First Twenty Seven Months of Closing [Member]
Dec. 20, 2012
Rotate Black MS, LLC [Member]
Settlement Agreement [Member]
Series B Subordinated Participating Preferred Stock [Member]
Within First Thirty Nine Months of Closing [Member]
Dec. 20, 2012
Rotate Black MS, LLC [Member]
Settlement Agreement [Member]
Series B Subordinated Participating Preferred Stock [Member]
Within First Fifty One Months of Closing [Member]
Dec. 20, 2012
Rotate Black MS, LLC [Member]
Settlement Agreement [Member]
Series B Subordinated Participating Preferred Stock [Member]
After Fifty One But Before Fifty Nine Months Of Closing [Member]
Dec. 20, 2012
Rotate Black MS, LLC [Member]
Settlement Agreement [Member]
Maximum [Member]
Dec. 20, 2012
Trustee [Member]
Rotate Black MS, LLC [Member]
Settlement Agreement [Member]
Dec. 20, 2012
Trustee [Member]
Rotate Black MS, LLC [Member]
Settlement Agreement [Member]
Series B Subordinated Participating Preferred Stock [Member]
Jun. 30, 2011
Gulfport, MS and the Trustee of the Cruise Holdings bankruptcy estate [Member]
Secured Notes and Unsecured Note [Member]
Sep. 17, 2010
THE BIG EASY GAMING VESSEL [Member]
Officer [Member]
Secured Notes and Unsecured Note [Member]
Jun. 10, 2010
THE BIG EASY GAMING VESSEL [Member]
Secured Note [Member]
Officer [Member]
Jun. 10, 2010
THE BIG EASY GAMING VESSEL [Member]
Unsecured Note [Member]
Officer [Member]
Jun. 10, 2010
THE BIG EASY GAMING VESSEL [Member]
Gulfport Project [Member]
Jun. 10, 2010
THE BIG EASY GAMING VESSEL [Member]
Gulfport Project [Member]
Secured Note [Member]
Jun. 10, 2010
THE BIG EASY GAMING VESSEL [Member]
Gulfport Project [Member]
Unsecured Note [Member]
Notes payable                               $ 35,000   $ 4,264,500 $ 2,975,000 $ 600,000
Fees paid                           0       414,500    
Cash    46 8,671                             275,000    
Debt due date                           Oct. 01, 2012   Jun. 11, 2011        
Debt interest rate per annum 10.00% 10.00%                   12.00%       14.50% 14.50%      
Debt commencing date                               Jun. 11, 2010        
Deferred and interest rate increased                             20.00%          
Debt extended due date                           Jul. 01, 2013            
Debt financing                     100,000,000                  
Issuance of preferred stock, shares                         250,000              
Preferred stock redeemed amount       $ 2,500,000 $ 2,000,000 $ 2,500,000 $ 3,000,000 $ 3,500,000 $ 4,000,000 $ 5,000,000   $ 5,000,000 $ 5,000,000              
Debt term 2 years                     5 years                

Land Purchase Deposit (Details Narrative)

v2.4.0.8
Land Purchase Deposit (Details Narrative) (USD $)
0 Months Ended 12 Months Ended 1 Months Ended 0 Months Ended
May 11, 2009
Jun. 30, 2014
Jun. 30, 2013
Jun. 30, 2012
Oct. 31, 2009
Rotate Black MS, LLC [Member]
May 21, 2010
Land Purchase Agreement [Member]
Mar. 16, 2010
Land Purchase Agreement [Member]
Nov. 09, 2009
Land Purchase Agreement [Member]
May 26, 2009
Land Purchase Agreement [Member]
May 11, 2009
Land Purchase Agreement [Member]
Rotate Black MS, LLC [Member]
Issuance of common stock to purchase of property, shares           50,000 20,861 7,000 140,983  
Cash on escrow                 $ 1,750,000  
Cash      46 8,671         1,750,000  
Issuance of common stock, shares 63,074                 77,909
Issuance of common stock                   7,049,142
Common stock price per shares   $ 1.00       $ 11.00 $ 25.00 $ 50.00   $ 50.00
Issuance of common stock to repayment of advance         77,909          
Issuance of common stock to purchase of property           550,000 521,532 350,000    
Land deposit value   218,844                
Loss on impairment land purchase deposit   $ (328,266)    $ 8,032,986            

Employment Agreement (Details Narrative)

v2.4.0.8
Employment Agreement (Details Narrative) (USD $)
12 Months Ended 0 Months Ended
Jun. 30, 2014
Jun. 30, 2013
Jul. 03, 2012
Employment Agreement [Member]
Chief Financial Officer [Member]
Agreement termination term     12 months
Officer compensation accrued     $ 5,000
Working capital $ 17,739,046   $ 500,000
Issuance of common stock as a signing bonus, shares 222,000 280,000 100,000
Additional common stock shares issued for service provided 20,000 270,000 1,000

Convertible and Promissory Notes (Details Narrative)

v2.4.0.8
Convertible and Promissory Notes (Details Narrative) (USD $)
0 Months Ended 12 Months Ended 26 Months Ended
Sep. 06, 2012
Jun. 30, 2014
Jun. 30, 2013
Jun. 30, 2014
Proceeds from issuance of promissory note $ 121,000     $ 999,890
Convertible promissory notes   779,890 328,015 779,890
Convertible promissory notes term       2 years
Convertible promissory notes interest rate   10.00% 10.00% 10.00%
Exchanged price for convertible promissory notes and warrant   $ 0.90    
Gain or change in fair value of conversion feature   1,865,078 31,159  
Convertible promissory note amortizable as interest expense over period   2 years    
Debt amortization of beneficial conversion feature and discount   1,396,435 162,746  
Proceeds from loan 65,000      
Interest payments 56,000      
Issuance of common stock for additional interest 18,500 10,000    
February 17, 2015 [Member]
       
Payment of promissory note   $ 0    
Warrant [Member]
       
Convertible promissory note amortizable as interest expense over period   2 years    
Convertible Note Holders [Member]
       
Issuance of common stock period       5 years
Issuance of common stock to purchase of warrant   517,337   517,337
Common stock price per share   $ 0.90   $ 0.90

Convertible and Promissory Notes - Schedule of Convertible Notes Payable (Details)

v2.4.0.8
Convertible and Promissory Notes - Schedule of Convertible Notes Payable (Details) (USD $)
Jun. 30, 2014
Jun. 30, 2013
Debt Disclosure [Abstract]    
10% Convertible Promissory Note Payable $ 779,890 $ 328,015
Less: Beneficial Conversion Feature Discount (50,630) (69,642)
Less: Warrant Discount (461,721) (91,809)
10% Convertible Promissory Note Payable - Net $ 267,539 $ 166,564

Convertible and Promissory Notes - Schedule of Convertible Notes Payable (Details) (Parenthetical)

v2.4.0.8
Convertible and Promissory Notes - Schedule of Convertible Notes Payable (Details) (Parenthetical)
Jun. 30, 2014
Jun. 30, 2013
Debt Disclosure [Abstract]    
Convertible promissory notes interest rate 10.00% 10.00%

Common and Preferred Stock (Details Narrative)

v2.4.0.8
Common and Preferred Stock (Details Narrative) (USD $)
0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended
Sep. 06, 2012
Jun. 30, 2014
Jun. 30, 2013
Jun. 10, 2011
Securities Purchase Agreement [Member]
Jul. 06, 2011
Stock Option Plan [Member]
Jun. 30, 2014
2010 through 2012 [Member]
Jun. 30, 2014
Series B Common Units [Member]
Jun. 10, 2011
Class A 12% Preferred Stock [Member]
Jun. 30, 2011
Series A Common Stock [Member]
Jun. 30, 2014
Series A Common Stock [Member]
Jun. 30, 2014
Series A Common Stock [Member]
Detachable Warrants [Member]
Jun. 30, 2013
Series A Preferred Stock [Member]
Jun. 30, 2013
Board Member [Member]
Common stock issued in connection with legal services rendered, shares   20,000 270,000                   8,000
Common stock issued in connection with legal services rendered     $ 300,000     $ 550,000             $ 16,000
Common stock price per share   $ 1.00                      
Common stock issued as officers compensation, shares   222,000 280,000                    
Common stock issued as officers compensation   144,000 560,000                    
Common stock issued for conversion of 10% Convertible Promissory Notes and accrued interest, shares   294,939 403,039                 190  
Common stock issued for conversion of 10% Convertible Promissory Notes and accrued interest   294,921 264,008                 403,039  
Common stock issued in consideration of note payable, shares   68,333 18,500                    
Common stock issued in consideration of note payable   136,667 37,000                    
Common stock for additional consideration to note holders, shares   32,500                      
Common stock issued for consulting services, shares   94,533 2,000                    
Common stock issued for consulting services   179,067 4,000                    
Common stock issued for interest, shares 18,500 10,000                      
Common stock issued for interest   20,000                      
Common stock issued for exercise of cashless warrants, shares   4,485                      
Common stock issued for payment of accounts payable, shares     10,000                    
Common stock issued for payment of accounts payable     15,000                    
Common stock sold for cash, shares     30,000           190        
Common stock sold for cash     30,000     1,925,000              
Equity authorised units             68,488            
Issuance of warrant purchase of common stock, shares             16,075   95,000        
Common stock issued for employees to purchase of stock option