dl10q.htm

10-Q 1 dl10q.htm dl10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 0-53439

DRAGON’S LAIR HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Florida		26-1427633
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)


785 NE 83rd Terrace Miami, Florida		33138
(Address of principal executive offices)		(Zip Code)

(786) 554-2771

(Issuer’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o

Non-accelerated filer o Smaller reporting company x

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at November 16, 2009
Common Stock, no par value per share		8,001,078 shares

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DRAGON’S LAIR HOLDINGS, INC.

TABLE OF CONTENTS


	PAGE
Part I Financial Information		3

Item 1. Financial Statements (unaudited)		3

Balance Sheets		3

Statements of Operations		4

Statements of Cash Flows		5

Notes to Financial Statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		12

Item 3. Quantitative and Qualitative Disclosures About Market Risk		17

Item 4. Controls and Procedures		17

Part II Other Information		19

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
		19
Item 6. Exhibits

Signatures		20
Exhibit 31.1
Exhibit 32.1

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements

DRAGON'S LAIR HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS


ASSETS
	September 30, 2009			December 31, 2008
	(unaudited)			(audited)
CURRENT ASSETS:
Cash and equivalents	$	26,339		$	66,613
Inventory		402			402
Total Current Assets		26,741			67,015

FIXED ASSETS:
Equipment, net		370			445

OTHER ASSETS:
License, net		720			900

Total Assets	$	27,831		$	68,360


LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable & accrued expenses	$	450		$	6,051
Total Liabilities		450			6,051

SHAREHOLDERS' EQUITY:
Preferred stock (15,000,000 authorized;
par value $.001; none issued and outstanding)	$	-			-
Common stock (100,000,000 shares authorized;
no par value; 8,001,078 and 8,001,078 issued and outstanding, respectively)		88,587			84,741
Deficit accumulated during the development stage		(61,206	)		(22,432	)
Total Shareholders' Equity		27,381			62,309

Total Liabilities and Shareholders' Equity	$	27,831		$	68,360

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DRAGON'S LAIR HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
													Cumulative from October 4, 2007 (Inception) through September 30, 2009
	For the three months ended September 30, 2009			For the three months ended September 30, 2008			For the nine months ended September 30, 2009			For the nine months ended September 30, 2008
	For the three months ended September 30, 2009			For the three months ended September 30, 2008			For the nine months ended September 30, 2009			For the nine months ended September 30, 2008

Net Sales	$	-		$	1,242		$	-		$	1,242		$	1,242

Cost of Sales		-			131			-			131			131

Gross Profit		-			1,111			-			1,111			1,111

Expenses:
General and Administrative		6,812			8,815			38,774			18,206			62,317

Total Expenses		(6,812	)		(8,815	)		(38,774	)		(18,206	)		(62,317	)

Net (loss) before Income Taxes		(6,812	)		(7,704	)		(38,774	)		(17,095	)		(61,206	)

Provision for Income Taxes		-			-			-			-			-

Net (loss)	$	(6,812	)	$	(7,704	)	$	(38,774	)	$	(17,095	)	$	(61,206	)

Basic and diluted net loss per common share	$	-		$	-		$	-		$	-

Weighted average number of common shares outstanding		8,001,078			6,138,278			8,001,078			8,001,078

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DRAGON'S LAIR HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
							Cumulative from October 4, 2007 (Inception) through September 30, 2009
	For the nine months ended September 30, 2009			For the nine months ended September 30, 2008
	For the nine months ended September 30, 2009			For the nine months ended September 30, 2008
OPERATING ACTIVITIES:
Net loss	$	(38,774	)	$	(17,096	)	$	(61,206	)
Issuance of common stock for services		3,846			4,008			7,854
Increase in amortization		180			180			480
Increase in prepaid printing		-			-
Increase in depreciation		75			25			125
Increase in inventory		-			131			(402	)
Increase (decrease) in accounts payable		(5,601	)		2,956			450

Net cash used in operating activities		(40,274	)		(9,796	)		(52,699	)

INVESTING ACTIVITIES:
Increase in Equipment		-			(495	)		(495	)

FINANCING ACTIVITIES:
Proceeds from issuance of common stock		-			-			79,533

NET INCREASE (DECREASE) IN CASH		(40,274	)		(10,291	)		26,339

CASH BEGINNING BALANCE		66,613			11,200			-

CASH ENDING BALANCE	$	26,339		$	909		$	26,339

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Taxes paid	$	-		$	-		$	-
Interest paid	$	-		$	-		$	-

CASH TRANSACTIONS AFFECTING OPERATING, INVESTING
AND FINANCING ACTIVITIES:
Issuance of common stock for license	$	-		$	-		$	1,200

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DRAGON’S LAIR HOLDINGS, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited interim financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for the presentation of interim financial information, but do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The audited financial statements for the period October 4, 2007 (Inception) through December 31, 2007 and the year ended December 31, 2008 were filed on March 31, 2009 with the Securities and Exchange Commission and are hereby referenced. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2009 and for the period October 4, 2007 (Inception) through September 30, 2009 are not necessarily indicative of the results that may be expected for the year ended December 31, 2009.

NOTE 2 - DESCRIPTION OF BUSINESS AND DEVELOPMENT STAGE RISK

Description of Business

Dragon’s Lair Holdings, Inc., a Florida corporation (the “Company”, “we”, “us” and “our”), was incorporated on October 4, 2007, and conducts is operations through its sole operating subsidiary, Dragon’s Lair Health Products, Inc., a Florida corporation, which was incorporated on October 5, 2007. Our company structure is set forth in the following chart:

DRAGON’S LAIR HOLDINGS, INC.

a Florida corporation

DRAGON’S LAIR HEALTH PRODUCTS, INC.

a Florida corporation

(100% Owned Subsidiary)

Our principal executive office is located at 785 N.E. 83rd Terrace, Miami, FL 33138. Our telephone number is (786) 554-2771, and our company website is www.sore-eez.com. Our fiscal year ends on December 31st.

Basis of Presentation

The accompanying consolidated financial statements have been prepared by the Company. The Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principals in the United States of America (“US GAAP”). The consolidated financial statements of the Company include the Company and its sole subsidiary. All material inter-company balances and transactions have been eliminated.

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Going Concern

The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management’s Plan to Continue as a Going Concern

The Company has met its historical working capital requirements from the sale of its capital shares. In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of shares of shares of common stock of the Company, (2) the sale of the Sore-EezÔ Chinese herbal body liniment and other product candidates, and (3) seeking out and completing a merger with an existing operating company. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

Development Stage Risk

Since its inception, the Company has been dependent upon the receipt of capital investment to fund its continuing activities. In addition to the normal risks associated with a new business venture, there can be no assurance that the Company's business plan will be successfully executed. Our ability to execute our business plan will depend on our ability to obtain additional financing and achieve a profitable level of operations. There can be no assurance that sufficient financing will be obtained. Further, we cannot give any assurance that we will generate substantial revenues or that our business operations will prove to be profitable.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. The Company has no cash equivalents.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Inventories

Inventories are valued at the lower of cost or market on a first-in, first-out (FIFO) basis, and include finished goods.

Revenue Recognition

The Company recognizes revenue when:

·	Persuasive evidence of an arrangement exists;

·	Shipment has occurred;

·	Price is fixed or determinable; and

·	Collectibility is reasonably assured.

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The Company closely follows the provisions of Staff Accounting Bulletin No. 104 as described above. For the period from October 4, 2007 (inception) to December 31, 2007 the Company recognized no revenues. In July, 2008, the Company commenced providing our first product, the Sore-EezÔ Chinese herbal body liniment. For the period from October 4, 2007 (inception) to September 30, 2009, the Company recognized revenues in the amount of $1,242.

Earnings (Loss) Per Share

The Company computes earnings per share in accordance with the Accounting Standards Codification (“ASC”) 260 “Earnings Per Share” which was previously Statement of Accounting Standards No. 128, “Earnings per Share” (“SFAS No. 128”). Under the provisions of SFAS No. 128, basic earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common and potentially dilutive common shares outstanding during the period. There were no potentially dilutive common shares outstanding during the period.

Intangible Assets

Intangible assets consist of a license agreement which is recorded at cost and amortized over a straight-line basis. The amortization expense for the periods from January 1, 2009 to September 30, 2009 and from October 4, 2007 (inception) to September 30, 2009 was $180 and $480, respectively. The value of the license was determined to be the legal costs to create the license, which was $1,200, as there were no other out-of-pocket costs for the license or the development of the recipe.

The Company evaluates the recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. There was no impairment loss for the periods from January 1, 2009 to September 30, 2009 and from October 4, 2007 (inception) to September 30, 2009.

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

Fair Value of Financial Instruments

The Company considers that the carrying amount of financial instruments, including accounts payable, approximates fair value because of the short maturity of these instruments.

Share Based Payments

In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” which replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R), companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees or independent contractors are required to provide services. Share-based compensation arrangements include stock options and warrants, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In March 2005, the SEC issued Staff Accounting Bulletin No. 107, or “SAB 107”. SAB 107 expresses views of the staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and provides the staff's views regarding the valuation of share-based payment arrangements for public companies. SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods. On April 14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS 123(R). Companies may elect to apply this statement either prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted 1on a basis consistent with the pro forma disclosures required for those periods under SFAS 123.

Effective commencing on the year ended December 31, 2007, the Company has fully adopted the provisions of SFAS No. 123(R) and related interpretations as provided by SAB 107. As such, compensation cost is measured on the date of grant as the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

Recent Accounting Pronouncements

FASB Accounting Standards Codification

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(Accounting Standards Update (“ASU”) 2009-01)

In June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the Securities and Exchange Commission (“SEC”), have been superseded by the Codification. All other non-grandfathered, non-SEC accounting literature not included in the Codification has become nonauthoritative. The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database. The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts the Company’s financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of the Company’s financial statements or disclosures as a result of implementing the Codification during the quarter ended September 30, 2009. As a result of the Company’s implementation of the Codification during the quarter ended September 30, 2009, previous references to new accounting standards and literature are no longer applicable. In the current quarter financial statements, the Company will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

Subsequent Events

(Included in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events”)

SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued (“subsequent events”). An entity is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For public entities, this is the date the financial statements are issued. SFAS No. 165 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by the Company. SFAS No. 165 became effective for interim or annual periods ending after June 15, 2009 and did not impact the Company’s financial statements. The Company evaluated for subsequent events through the issuance date of the Company’s financial statements. No recognized or non-recognized subsequent events were noted.

Determination of the Useful Life of Intangible Assets

(Included in ASC 350 “Intangibles – Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the Useful Lives of Intangible Assets”)

FSP SFAS No. 142-3 amended the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previously issued goodwill and intangible assets topics. This change was intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under topics related to business combinations and other GAAP. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. FSP SFAS No. 142-3 became effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of FSP SFAS No. 142-3 did not impact the Company’s financial statements.

Noncontrolling Interests

(Included in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51”)

SFAS No. 160 changed the accounting and reporting for minority interests such that they will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 became effective for fiscal years beginning after December 15, 2008 with early application prohibited. The Company implemented SFAS No. 160 at the start of fiscal 2009 and no longer records an intangible asset when the purchase price of a noncontrolling interest exceeds the book value at the time of buyout. Any excess or shortfall for buyouts of noncontrolling interests in mature restaurants is recognized as an adjustment to additional paid-in capital in stockholders’ equity. Any shortfall resulting from the early buyout of noncontrolling interests will continue to be recognized as a benefit in partner investment expense up to the initial amount recognized at the time of buy-in. Additionally, operating losses can be allocated to noncontrolling interests even when such allocation results in a deficit balance (i.e., book value can go negative). The Company presents noncontrolling interests (previously shown as minority interest) as a component of equity on its consolidated balance sheets. Minority interest expense is no longer separately reported as a reduction to net income on the consolidated income statement, but is instead shown below net income under the heading “net income attributable to noncontrolling interests.” The adoption of SFAS No. 160 did not have any other material impact on the Company’s financial statements.

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Consolidation of Variable Interest Entities – Amended

(To be included in ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”)

SFAS No. 167 amends FASB Interpretation No. 46(R) “Consolidation of Variable Interest Entities regarding certain guidance for determining whether an entity is a variable interest entity and modifies the methods allowed for determining the primary beneficiary of a variable interest entity. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS No. 167 is effective for the first annual reporting period beginning after November 15, 2009, with earlier adoption prohibited. The Company will adopt SFAS No. 167 in fiscal 2010 and does not anticipate any material impact on the Company’s financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards or pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

NOTE 4 - EQUITY TRANSACTIONS

On October 4, 2007 (inception), the Company issued 975,000 shares of common stock for the purchase of the license to manufacture, distribute and sell, the Sore-EezÔ Chinese herbal liniment, its initial product, from Yamit Lemoine. The value of the license was determined to be the legal costs to create the license, which was $1,200, as there were no other out-of-pocket costs for the license or the development of the recipe.

On November 4, 2007, the Company issued 5,000,000 shares of common stock to an investor for cash in the amount of $11,100.

On December 31, 2007, the Company issued 63,278 shares of common stock to an investor for cash in the amount of $633.

On March 27, 2008, the Company issued 100,000 shares of common stock to directors for services rendered at a value of $4,008.

On December 11, 2008, the Company completed its public offering pursuant to its Form S-1 Registration Statement of 6,780 shares of Series A Convertible Preferred Stock, which were converted into 1,762,800 shares of common stock and provided aggregate offering proceeds in the amount of $67,800.

On April 1, 2009, the Company issued 100,000 shares of common stock to its transfer agent for services rendered at a value of $3,846.

NOTE 5 - CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”). At September 30, 2009, the Company had no amounts in excess of the FDIC insured limit.

NOTE 6 - LICENSE AGREEMENT

We have entered into a license agreement with Yamit Lemoine, a significant shareholder and the wife of our chief executive officer, which grants us a license for a term five (5) years until at least October 4, 2012 for the exclusive worldwide use of the Sore-EezÔ Chinese herbal liniment recipe and, perpetually, thereafter, if we have generated at least $400,000 from the sale of products based on the Sore-EezÔ Chinese herbal liniment recipe on or prior to such date. Pursuant to this license agreement, we are required to exercise our best efforts to undertake and maintain the commercial scale production, marketing and distribution of products embodying the subject matter of the Sore-EezÔ Chinese herbal liniment recipe. We may not sublicense or assign any of our rights under the license agreement.

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On October 4, 2007, the date of our inception, we issued 975,000 shares of our restricted common stock to Yamit Lemoine, for a purchase price of $0.0012308 per share, for the license to the Sore-EezÔ Chinese herbal liniment recipe. The value of the license was determined to be the legal costs to create the license, which was $1,200, as there were no other out-of-pocket costs for the license or the development of the recipe. We do not have any future payments obligations to Yamit Lemoine under the license agreement.

The license will be amortized over five years using the straight line method. Yamit Lemoine may terminate this license agreement in the event that we have not recognized revenues of at least $400,000 from the sale of products based on the Sore-EezÔ Chinese herbal liniment recipe by October 4, 2012. We have not achieved this level of sales as of September 30, 2009, so the license remains subject to termination by the licensor at the end of such period.

The estimated amortization expense over the next five years is as follows:

Year Ending December 31

2007 ............ $ 60

2008 ............ $240

2009 ............ 240

2010 ............ 240

2011 240

2012 180

$1,200

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing in this Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed on March 31, 2009 with the Securities and Exchange Commission and are hereby referenced.

The statements in this report include forward-looking statements. These forward-looking statements are based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. You should not rely upon these forward-looking statements as predictions of future events because we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify a forward-looking statement by the use of the forward-terminology, including words such as “may”, “will”, “believes”, “anticipates”, “estimates”, “expects”, “continues”, “should”, “seeks”, “intends”, “plans”, and/or words of similar import, or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. These forward-looking statements relate to, among other things: our sales, results of operations and anticipated cash flows; capital expenditures; depreciation and amortization expenses; sales, general and administrative expenses; our ability to maintain and develop relationship with our existing and potential future customers; and, our ability to maintain a level of investment that is required to remain competitive. Many factors could cause our actual results to differ materially from those projected in these forward-looking statements, including, but not limited to: variability of our revenues and financial performance; risks associated with technological changes; the acceptance of our products in the marketplace by existing and potential customers; disruption of operations or increases in expenses due to our involvement with litigation or caused by civil or political unrest or other catastrophic events; general economic conditions, government mandates and conditions in the gaming/entertainment industry in particular; and, the continued employment of our key personnel and other risks associated with competition.

For a discussion of the factors that could cause actual results to differ materially from the forward-looking statements see the “Liquidity and Capital Resources” section under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this item of this report and the other risks and uncertainties that are set forth elsewhere in this report or detailed in our other Securities and Exchange Commission reports and filings. We believe it is important to communicate our expectations. However, our management disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

Our Company is a provider of personal care products by means of a network of direct sales consultants, which is in the development stage. Our business strategy is to provide quality products, operate at a profit and enable our direct sales consultants to operate at a profit. In July, 2008, we commenced providing to the marketplace our first product, the Sore-Eez Chinese herbal body liniment. Our primary focus over the course of the next 12 months will be to concentrate our efforts on introducing the Sore-Eez Chinese herbal liniment and other product candidates to the marketplace, producing inventory for sale and implementing our business plan, including recruiting and training a network of direct sales consultants.

Going Concern

Our financial statements have been prepared on the basis of accounting principles applicable to a going concern. As a result, they do not include adjustments that would be necessary if we were unable to continue as a going concern and would therefore be obligated to realize assets and discharge our liabilities other than in the normal course of operations. As reflected in the accompanying financial statements, the Company is in the development stage with limited revenues, has used cash flows in operations of $52,699 from inception of October 4, 2007 to September 30, 2009 and has an accumulated deficit of $61,206 through September 30, 2009. This raises substantial doubt about our ability to continue as a going concern, as expressed by our auditors in its opinion on our financial statements included in this report. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.

We have not yet established an ongoing source of revenues sufficient to cover our operating costs and allow us to continue as a going concern. Our ability to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to cease operations. There can be no assurance that we will operate at a profit or additional debt or equity financing will be available, or if available, can be obtained on satisfactory terms.

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an on-going basis, management evaluates these estimates and assumptions, including but not limited to those related to revenue recognition and the impairment of long-lived assets, goodwill and other intangible assets. Management bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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Stock Compensation

The Company adopted SFAS No. 123R, Share-Based Payment (“SFAS 123R”), which requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The Company accounts for stock-based compensation arrangements with nonemployees in accordance with the Emerging Issues Task Force Abstract No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services. The Company records the expense of such services to employees and non employees based on the estimated fair value of the equity instrument using the Black-Scholes pricing model.

Revenue Recognition

The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements’ and No. 104, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers. Retail sales to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon our delivery to the carrier. Return allowances, which reduce product revenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales taxes. Amounts received in advance for subscription services, are deferred and recognized as revenue over the subscription term.

Outlook

The most important metric by which we judge the Company’s performance now and in the near term is top line sales growth. Our current commitment to develop and deliver quality products means that, for the near future, bottom line profitability will be a poor indicator of our success. We do not expect our development investment rate to decline meaningfully in the near future. Since investors are certain to be the primary, near term source of liquidity to support our development and marketing efforts, our liquidity will be driven by our ability to attract repeat investments from current shareholders and to find new ones. This in turn may be materially impacted by the general investment climate.

Our primary marketing challenge for the coming 12 months is to achieve greater and greater market awareness through hiring new direct marketing consultants. Our primary developmental and operational challenge is to increase the amount of products we can offer and the amount of products can produce and make available for sale.

Revenues

As our revenues increase, we plan to continue to invest in marketing and sales by increasing the number of direct sales consultants and management personnel, expand our selling and marketing activities, building brand awareness and sponsoring additional marketing events. We expect that in the future, marketing and sales expenses will increase in absolute dollars. We do not expect our revenues to increase significantly until 2010.

General and Administrative Expenses

We expect that general and administrative expenses associated with executive compensation will increase in the future. Although our current chief executive, president, secretary and treasurer has foregone full salary payments during the initial stages of the business, during 2009 such person began to receive compensation. In addition, we believe in the 2010 fiscal year that the compensation packages required to attract the senior executives the Company requires to execute against its business plan will increase our total general and administrative expenses.

Summary of Consolidated Condensed Results of Operations

Any measurement and comparison of revenues and expenses from continuing operations should not be considered necessarily indicative or interpolated as the trend to forecast our future revenues and results of operations.

Results for the Nine Months Ended September 30, 2009 Compared to September 30, 2008

Revenues. The Company’s revenues for the nine months ended September 30, 2009 were $0. The Company’s revenues for the nine months ended September 30, 2008 were $0. No revenues occurred during these periods, because no there were no product sales.

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Cost of Revenues. The Company’s cost of revenues for the nine months ended September 30, 2009 were $0. The Company’s cost of revenues for the nine months ended September 30, 2008 were $0. There was not cost of revenues, because no product sales were made by the Company.

Gross Profit/Loss. The Company’s gross profit/loss for the nine months ended September 30, 2009 was $0. The Company’s gross profit/loss for the nine months ended September 30, 2008 was $0. No gross profit/loss occurred during these periods, because no there were no product sales.

Executive, Marketing and Promotion Expenses. Executive, marketing and promotion expenses for the nine months ended September 30, 2009 were $3,080 compared to $0 for the nine months ended September 30, 2008. Executive, marketing and promotional expenses consist of salary expense in 2009. We expect our executive, selling and marketing expenses to increase in the future due to an increase in direct expenses related to executive compensation, sales and marketing, including increases to salaries to personnel in marketing and business development, as well as increased bonus payments and sales commissions on our revenues.

General and Administrative Expenses. General and administrative expenses for the nine months ended September 30, 2009 were $38,774 compared to $18,206 for the nine months ended September 30, 2008. General and administrative expenses consisted primarily of professional service fees associated with the Company’s initial public offering, stock compensation expense and amortization of a license.

Net Loss. Net loss for the nine months ended September 30, 2009 was $38,774 as compared to $18,206 for the nine months ended September 30, 2008. The net loss for the nine months ended September 30, 2009 and September 30, 2008 was primarily related to general and administrative expenses and no revenues for the periods indicated.

As of nine months ended September 30, 2009, we had an accumulated deficit of $61,206.

Results for the Quarter Ended September 30, 2009 Compared to September 30, 2008

Revenues. The Company’s revenues for the three months ended September 30, 2009 were $0. The Company’s revenues for the three months ended September 30, 2008 were $0. No revenues occurred during these periods, because no there were no product sales.

Cost of Revenues. The Company’s cost of revenues for the three months ended September 30, 2009 were $0. The Company’s cost of revenues for the three months ended September 30, 2008 were $0. There was not cost of revenues, because no product sales were made by the Company.

Gross Profit/Loss. The Company’s gross profit/loss for the three months ended September 30, 2009 was $0. The Company’s gross profit/loss for the three months ended September 30, 2008 was $0. No gross profit/loss occurred during these periods, because no there were no product sales.

Executive, Marketing and Promotion Expenses. Executive, marketing and promotion expenses for the three months ended September 30, 2009 were $2,000 compared to $0 for the three months ended September 30, 2008. Executive, marketing and promotional expenses consist of salary expense in 2009. We expect our executive, selling and marketing expenses to increase in the future due to an increase in direct expenses related to executive compensation, sales and marketing, including increases to salaries to personnel in marketing and business development, as well as increased bonus payments and sales commissions on our revenues.

General and Administrative Expenses. General and administrative expenses for the three months ended September 30, 2009 were $6,812 compared to $8,815 for the three months ended September 30, 2008. General and administrative expenses consisted primarily of professional service fees associated with the Company its initial public offering, stock compensation expense and amortization of a license.

Net Loss. Net loss for the three months ended September 30, 2009 was $6,812 as compared to $7,704 for the three months ended September 30, 2008. The net loss for the three months ended September 30, 2009 and September 30, 2008 was primarily related to general and administrative expenses and no revenues for the periods indicated.

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Impact of Inflation

We believe that the rate of inflation has had negligible effect on our operations. We believe we can absorb most, if not all, increased non-controlled operating costs by increasing sales prices, whenever deemed necessary and by operating our Company in the most efficient manner possible.

Liquidity and Capital Resources

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. Since its inception, the Company has been funded by its founders and through its initial public offering.

As of September 30, 2009, total current assets were $26,741 which consisted of $26,339 of cash and $402 of inventory. As of December 31, 2008, total current assets were $67,015 which consisted of $66,613 of cash and $402 of inventory.

As of September 30, 2009, total current liabilities were $450, which consisted of accounts payable. As of December 31, 2008, total current liabilities were $6,051, which consisted of accounts payable. We had net working capital of $26,291 as of September 30, 2009, compared to net working capital of $60,964 as of December 31, 2008.

During the nine months ended September 30, 2009, operating activities used cash of $40,274 as compared to the nine months ended September 30, 2008, where we used cash of $9,796 in operating activities. The cash used by operating activities for the nine months ended September 30, 2009 and September 30, 2008 was due primarily to general and administrative expenses.

For the nine months ended September 30, 2009, we had a net decrease in cash of $(40,274) as compared to $(10,291) for the nine months ended September 30, 2008. Cash flows from financing activities represented the Company’s principal source of cash since October 4, 2007 (inception) through September 30, 2009.

We acquired certain equipment during the nine month period ended September 30, 2008 in the amount of $495.

Intangible Assets

Intangible assets consist of a license agreement, which is recorded at cost and amortized over a straight-line basis. The amortization expense for the nine month period ended September 30, 2009 and December 31, 2008 was $180 and $240, respectively. The value of the license was determined to be the legal costs to create the license, which was $1,200 and less amortization expense, it was valued at $720 as of September 30, 2009 and $900 as of December 31, 2008.

The Company evaluates the recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. There was no impairment loss for the nine month periods ended September 30, 2009 and September 30, 2008.

Material Commitments

There were no material commitments during the nine month periods ended September 30, 2009 and September 30, 2008.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or any anticipate entering into any off-balance arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Recent Accounting Pronouncements

FASB Accounting Standards Codification

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(Accounting Standards Update (“ASU”) 2009-01)

Subsequent Events

(Included in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events”)

Determination of the Useful Life of Intangible Assets

(Included in ASC 350 “Intangibles – Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the Useful Lives of Intangible Assets”)

Noncontrolling Interests

(Included in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51”)

Consolidation of Variable Interest Entities – Amended

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(To be included in ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”)

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are not subject to risks related to foreign currency exchange rate fluctuations. Our functional currency is the United States dollar. We do not transact our business in other currencies. As a result, we are not subject to exposure from movements in foreign currency exchange rates. We do not use derivative financial instruments for speculative trading purposes.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our President and Treasurer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our President and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of our first fiscal quarter covered by this report. Based on the foregoing, our President and Treasurer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in our internal controls over financial reporting during our first fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Management’s Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2009. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. The COSO framework is based upon five integrated components of control: control environment, risk assessment, control activities, information and communications and ongoing monitoring.

Based on the assessment performed, management has concluded that the Company’s internal control over financial reporting is effective and provides reasonable assurance regarding the reliability of its financial reporting and the preparation of its financial statements as of September 30, 2009 in accordance with generally accepted accounting principles. Further, management has not identified any material weaknesses in internal control over financial reporting as of September 30, 2009.

This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

/s/ Michel Lemoine

President, Secretary, Treasurer and Director

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PART II OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

There were no unregistered sales of equity securities by us during the three months ended September 30, 2009.

Use of Proceeds from Initial Public Offering

On October 2, 2008, we commenced an initial public offering of 50,000 shares of our Series A Convertible Preferred Stock pursuant to our Form S-1 Registration Statement ( No. 333-150751), which was declared effective by the SEC on such date. Each share of Series A Convertible Preferred Stock was convertible into 260 shares of Common Stock. Of the 50,000 shares of Series A Convertible Preferred Stock that were offered, 6,780 shares were sold at an offering price of $10.00 per share and generated gross proceeds of $67,800. Such offering was made directly to the public by us without the assistance of any underwriters, brokers or dealers. The proceeds of the offering in the amount of $67,800 were deposited in our non-interest bearing bank account, and have been used by us in the business, as of September 30, 2009, as follows:


Marketing, Promotion and Advertising	$	4,256
Printing expenses		7,133
Executive Compensation		3,080
Legal fees and expenses		16,382
Accounting fees and expenses		9,100
Blue sky fees and expenses		1,292
Transfer Agent fees		5,461
Miscellaneous		1,385

Total	$	48,089

Other than executive compensation paid to our Chief Executive Officer, President, Secretary and Treasurer in the amount of $3,080, no cash payments were made to the directors or officers of the Company or associates or affiliates of the Company from the proceeds of our initial public offering.

Item 6. Exhibits

(a) Exhibits

Exhibit 31.1 302 Certification – Michel Lemoine

Exhibit 32.1 906 Certification – Michel Lemoine

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DRAGON’S LAIR HOLDINGS, INC.

DATE: November 16, 2009 By: /s/ Michel Lemoine

Michel Lemoine

President, Secretary and Treasurer

(Principal Accounting Officer and Authorized Officer)

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Dragon’s Lair Holdings, Inc.

Index to Exhibits

Exhibit

Number Description

Exhibit 31.1 302 Certification – Michel Lemoine

Exhibit 32.1 906 Certification – Michel Lemoine

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