UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: March 31, 2012
OR
¨ 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: 0-20940
CARLYLE GAMING & ENTERTAINMENT LTD.
(Exact name of registrant as specified in its charter)
Colorado | 84-1210544 | |
(State or other jurisdiction of | (IRS Employer I.D. No.) | |
incorporation) |
501 Fifth Avenue
New York, N.Y. 10017
(Address of principal executive offices and Zip Code)
(212) 682-7888
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
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 x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ¨ | Accelerated filer | ¨ | |
Non-accelerated filer | ¨ | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes¨ No x
As of June 28, 2012, there were 41,093,601 shares outstanding of the registrant’s common stock.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION | ||
Item 1. | Financial Statements. | 3 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 15 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 18 |
Item 4. | Controls and Procedures. | 18 |
PART II – OTHER INFORMATION | ||
Item 1. | Legal Proceedings. | 19 |
Item 1A. | Risk Factors. | 19 |
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds. | 19 |
Item 3 | Defaults Upon Senior Securities. | 19 |
Item 4. | Mine Safety Disclosure. | 19 |
Item 5. | Other Information. | 19 |
Item 6. | Exhibits. | 19 |
Signatures | 20 |
2 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
CARLYLE GAMING & ENTERTAINMENT LTD.
New York, New York
FINANCIAL REPORTS |
AT |
March 31, 2012 |
CARLYLE GAMING & ENTERTAINMENT LTD.
New York, New York
TABLE OF CONTENTS | |
Consolidated Balance Sheets at March 31, 2012 (Unaudited) and December 31, 2011 | 5 |
Consolidated Statements of Operations for the Three Months Ended March 31, 2012 and 2011. (Unaudited) | 6 |
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011. (Unaudited) | 7 |
Notes to Consolidated Financial Statements | 8 |
3 |
Carlyle Gaming & Entertainment Ltd.
Consolidated Financial Statements
March 31, 2012
Unaudited
4 |
Carlyle Gaming & Entertainment Ltd.
BALANCE SHEETS
(Unaudited)
As at March 31, 2012 and December 31, 2011
March 31 | December 31 | |||||||
2012 | 2011 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents, unrestricted | $ | 179,448 | $ | 31,860 | ||||
Cash and cash equivalents, restricted - Note 3 | 122,555 | 147,588 | ||||||
302,003 | 179,448 | |||||||
Equipment - (net of accumulated depreciation) - Note 4 | 4,345 | - | ||||||
Goodwill on quasi reorganization - Note 5 | 240,000 | 240,000 | ||||||
Intangible asset rights to gaming software and domains (net of accumulated amortization) - Note 6 | 991,645 | 1,033,533 | ||||||
Total Assets | $ | 1,537,993 | $ | 1,452,981 | ||||
LIABILTIES | ||||||||
Current liabilities | ||||||||
Accrued liabilities | $ | 251,322 | $ | 119,539 | ||||
Accrued liabilities - related parties - Note 7 | 1,823,279 | 1,544,917 | ||||||
Notes payable to related party - Note 8 | 1,100,000 | 1,100,000 | ||||||
3,174,601 | 2,764,456 | |||||||
Going Concern - Note 2 | ||||||||
Contingency - Note 10 | ||||||||
Security Agreement - Note - 11 | ||||||||
Capital Stock - Note 9 | ||||||||
Authorized: | ||||||||
100,000,000 common stock with a par value of $0.001 | ||||||||
50,000 000 preferred stock without par value | ||||||||
Issued and outstanding | ||||||||
41,093,601 common stock | 41,094 | 41,094 | ||||||
Additional paid in capital | 233,476 | 233,476 | ||||||
274,570 | 274,570 | |||||||
Defict accumulated during the development stage | (1,586,045 | ) | (1,586,045 | ) | ||||
Accumulated deficit | (325,133 | ) | - | |||||
Total Stockholders' Deficit | (1,636,608 | ) | (1,311,475 | ) | ||||
Total Liabilites and Stockholders' Deficit | $ | 1,537,993 | $ | 1,452,981 |
See Accompanying Notes to the Financial Statements
5 |
Carlyle Gaming & Entertainment Ltd.
STATEMENTS OF OPERATIONS
For the three month period ended March 31, 2012 and 2011
(Unaudited)
For the three | For the three | |||||||
months ended | months ended | |||||||
Mar 31, 2012 | Mar 31, 2011 | |||||||
Revenues | $ | 122,555 | $ | - | ||||
Expenses | ||||||||
Advertising | 5,000 | - | ||||||
Amortization and depreciation | 52,009 | - | ||||||
Communications | 53,491 | - | ||||||
Consulting | - | - | ||||||
Filing fees | 16,264 | - | ||||||
Interest to related party | 16,267 | 15,311 | ||||||
Management salaries | 160,000 | 135,000 | ||||||
Professional fees | 60,850 | 2,000 | ||||||
Rent | 30,500 | - | ||||||
Transfer agent | 8,569 | - | ||||||
Travel, meetings and living | 44,738 | - | ||||||
Total expenses | 447,688 | 152,311 | ||||||
Net loss and comprehensive loss for the period | $ | (325,133 | ) | $ | (152,311 | ) | ||
Basic and diluted loss per share | $ | (0.01 | ) | $ | (0.00 | ) | ||
Weighted average number of shares outstanding | 41,093,601 | 41,093,601 |
See Accompanying Notes to the Financial Statements
6 |
Carlyle Gaming & Entertainment Ltd.
STATEMENTS OF CASH FLOWS
For the three month period ended March 31, 2012 and 2011
(Unaudited)
For the three | For the three | |||||||
months ended | months ended | |||||||
Mar 31, 2012 | Mar 31, 2011 | |||||||
Operating activities | ||||||||
Net loss and comprehensive loss for the period | $ | (325,133 | ) | $ | (152,311 | ) | ||
Amortization | 52,009 | - | ||||||
Changes in non-cash working capital balances | ||||||||
Accrued liabilities | 131,783 | 14,000 | ||||||
Accrued liabilities - related parties | 278,362 | 146,743 | ||||||
Cash provided by (used in) operating activities | 137,021 | 8,432 | ||||||
Investing activities | ||||||||
Purchase of equipment | (4,966 | ) | ||||||
Purchase of software | (9,500 | ) | - | |||||
Cash provided by (used in) investing activities | (14,466 | ) | - | |||||
Increase (decrease) in total cash and cash equivalents | 122,555 | - | ||||||
Less decrease in restricted cash | (25,033 | ) | - | |||||
147,588 | - | |||||||
Cash and cash equivalents, beginning of the period | 31,860 | - | ||||||
Cash and cash equivalents, end of the period | $ | 179,448 | $ | - | ||||
Supplemented disclosure of cash flow information: | ||||||||
Cash paid for: | ||||||||
Interest | $ | 16,267 | $ | 15,311 | ||||
Income taxes | $ | - | $ | - |
See Accompanying Notes to the Financial Statements
7 |
Carlyle Gaming & Entertainment Ltd.
Consolidated Financial Statements
March 31, 2012
Unaudited
Note 1 | Incorporation and quasi reorganization |
Carlyle Gaming & Entertainment Ltd (the “Company”) was incorporated as Clean-X-Press, Inc. on January 4, 1988 under the laws of the State of Colorado. On November 1, 1998, the Company was dissolved by the State of Colorado and on July 18, 2007, the Company was re-instated, under a sole corporate guardianship. The Company has treated this event as a quasi reorganization..
Since July 18, 2007, the Company has been in the development stage (see below), devoting its efforts to the establishment of an online gaming business.
On May 15, 2008, the Company changed its name to Carlyle Gaming & Entertainment Ltd. On that same day, the Directors authorized a reverse stock split of 1:15. These financial statements give retroactive effect to that roll back.
On April 27, 2011, the Company incorporated a wholly owned Canadian subsidiary, Carlyle Interactive Ltd. with the purpose of processing bets in-house. The subsidiary has yet to commence active operations.
Note 2 | Interim reporting |
The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements prepared under the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, they include all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. These interim financial statements follow the same accounting policies and methods of their application as the Company’s audited December 31, 2011 financial statements. All adjustments are of a normal recurring nature. It is suggested that these interim financial statements be read in conjunction with the Company’s December 30, 2011 financial statements.
Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that can be expected for the year ending December 31, 2012.
Note 3 | Significant Accounting policies |
Basis of Presentation
The Company’s consolidated financial statements included herein are prepared under the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. The financial statements include the Carlyle Gaming & Entertainment Ltd. and Carlyle Interactive Ltd.
8 |
Carlyle Gaming & Entertainment Ltd.
Consolidated Financial Statements
March 31, 2012
Unaudited
Going Concern
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At March 31, 2012, the Company had not yet achieved profitable operations, has accumulated losses of $1,911,178 since its quasi reorganization. The Company expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management anticipates that additional funding will be in the form of equity financing from the sale of common stock. Management may also seek to obtain short-term loans from the directors of the Company. There are no current arrangements in place for equity funding or short-term loans
Revenue Recognition
The Company’s revenue consists of the betting wins less betting losses paid out and related charge backs. The Company recognizes revenue after those event have transpired, when its revenue can be reasonably determined and payment assured.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available to management. Actual results could differ from those estimates.
Development Stage Company.
Prior to January 1, 2012, the company had started to earn revenues but had not achieved full operation. At the beginning of 2012, the Company finished the phase in part of its online operations was essentially fully operational. The Company has used January 1, 2012 as the date that it came out of the Development stage (as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-915, “Development Stage Entities”.
Fair Value Measurements
The Company follows ASC 820, “Fair Value Measurements and Disclosures,” for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. This accounting standard established a single definition of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information used in fair value measurement and expands disclosures about fair value measurements required under other accounting pronouncements. It does not change existing guidance as to whether or not an instrument is carried at fair value. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk. The Company has adopted ASC 825, “Financial Instruments”, which allows companies to choose to measure eligible financial instruments and certain other items at fair value that are not required to be measured at fair value. The Company has not elected the fair value option for any eligible financial instruments.
9 |
Carlyle Gaming & Entertainment Ltd.
Consolidated Financial Statements
March 31, 2012
Unaudited
Financial Instruments
The carrying values of accrued liabilities, and accrued liabilities – related parties and notes due related parties approximates the fair value because of their short-term nature of these instruments or their interest rate. All of the Company’s cash balances are held with its payment processor in Costa Rica and such balance are not federally insured. The Company is exposed to credit risks of $179,448.
The interest rate on the note payable to related party is a variable rate and, as such, the Company is exposed to interest risk on this instrument.
Goodwill
In recording goodwill, the Company follows the guidance under ASC Topic 350-20-25 “Intangibles – Goodwill and Other - Goodwill” wherein the excess reorganization value recognized by entities that adopt fresh-start reporting in accordance with ASC Topic 852 ‘Reorganizations’ shall be reported as goodwill and accounted for in the same manner as goodwill. Goodwill is tested for impairment on an annual basis.
Other Intangibles
Software, licenses and other rights have been capitalized in accordance with ASC Topic 350-40 “Intangibles – Goodwill and Other – Internal-Use Software.” Amortization started in September, 2011 when the software became ready for its intended use. Amortization is calculated on a straight line basis over its estimated useful life on the following basis: E-commerce software – 6 years; Gaming software – 6 years; and Customer accounts – 4 years.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its fixed assets and other assets in accordance with FASB ASC Topic, 360.10, Property, Plant and Equipment, Impairment or Disposal of Long-Lived Assets. This guidance requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its expected cash flows, it is considered to be impaired and is written down to fair value, which is determined based on either discounted future cash flows or appraised values. No impairment has been recognized in the accounts.
10 |
Carlyle Gaming & Entertainment Ltd.
Consolidated Financial Statements
March 31, 2012
Unaudited
Basic and Diluted Net Income (Loss) Per Share
The Company computes net loss per share in accordance with FASB ASC Topic 260, "Earnings Per Share". This topic requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the year. Diluted EPS gives effect to all dilutive potential common shares outstanding during the year including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the year is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti dilutive.
Income Taxes
The Company follows FASB ASC Topic 820, “Income Taxes” which requires the use of the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As at March 31, 2012 the Company had $302,003 of cash balances of which $122,555 were subject to a 12 week holdback ($Nil – 2011).
Derivative Instruments
The Company follows FASB ASC 815, “Derivatives and Hedges”. This standard establish accounting and reporting requirements for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. The Company has not entered into derivative contracts to hedge existing risks or for speculative purposes.
Recent Accounting Pronouncements
The Company adopts new pronouncements relating to generally accepted accounting principles applicable to the Company as they are issued, which may be in advance of their effective date. Management does not believe that any recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying financial statements.
11 |
Carlyle Gaming & Entertainment Ltd.
Consolidated Financial Statements
March 31, 2012
Unaudited
Note 3 | Restricted cash and operating cost |
The Company has entered into a payment processing agreement with a company located in Costa Rica. The agreement included a trial period ending June 30, 2012 whereby, the payment processor will incur all of the Company’s website costs, processing and all other costs related to running its betting websites. After this trial period, the Company will pay 7% of all net earnings.
The payment processor holds the liability of paying the Company’s customers for all payouts. As such, they have required a guarantee from the Company’s CEO and Intercapital Management Ltd. for $250,000 in the event that payouts exceed the Company’s cash balance. In addition, during each 12 week period 30% of the revenue is held by the payment processor as a holdback against potential losses.
Note 4 | Equipment |
January 1, | March 31, | Accumulated | Net book | |||||||||||||||||
2012 | Additions | 2012 | Depreciation | value | ||||||||||||||||
Computer hardware | $ | - | $ | 4,966 | $ | 4,966 | $ | 621 | $ | 4,345 |
Note 5 | Goodwill on quasi reorganization |
The Company was officially dissolved for 9 years starting November 1, 1998. On July 18, 2007, a plaintiff was granted guardianship by the District Court, Arapahoe County, State of Colorado, to gain full and absolute authority to conduct the affairs of the Company. The Company thus emerged from dissolution but without tangible assets or liabilities. Further, accumulated losses and additional paid in capital were indeterminable, as accounting records were not entered during the period of dissolution.
Shortly after emergence, the guardian sold all of the deliverable shares of the Company, representing 88% of the total issued and outstanding shares, for $240,000. Following the guidance under FASB ASC Topic 852-20 “Reorganizations” management estimated the value of the net assets at $240,000. Accumulated deficit was adjusted to nil, shares of common capital stock were recorded at par and additional paid in capital was adjusted to record the balance of equity.
12 |
Carlyle Gaming & Entertainment Ltd.
Consolidated Financial Statements
March 31, 2012
Unaudited
Note 6 | Rights to gaming software and domains |
On July 21, 2009, the Company purchased all the business rights, including domain names, trademarks, proprietary software codes, company intellectual property and formulas for $1,100,000. The assets purchased will enable the Company to operate an online gaming site. The Company began taking bets on September 2011 and began recording amortization at this point.
Net Book | Net Book | |||||||||||||||
Accumlated | Value March | Value Dec 31 | ||||||||||||||
Cost | Amortization | 31, 2012 | 2011 | |||||||||||||
E-commerce software | $ | 600,000 | $ | 58,333 | $ | 541,667 | $ | 566,867 | ||||||||
Gaming software | 300,000 | 29,167 | 270,833 | 283,333 | ||||||||||||
Customer accounts | 200,000 | 29,167 | 170,833 | 183,333 | ||||||||||||
Computer software | 9,500 | 1,188 | 8,312 | - | ||||||||||||
$ | 1,109,500 | $ | 117,855 | $ | 991,645 | $ | 1,033,533 |
Note 7 | Accrued liabilities – related parties |
Accrued liabilities, due to related parties, consist of the following:
March 31 | Dec 31 | |||||||
2012 | 2011 | |||||||
Interest on notes | $ | 155,763 | $ | 139,496 | ||||
Management salaries | 1,552,920 | 1,387,930 | ||||||
Miscellaneous payables | 114,596 | 17,491 | ||||||
$ | 1,823,279 | $ | 1,544,917 |
Note 8 | Notes payable to related party |
The notes payable are due to a director and major shareholder and bear interest at prime plus 2%. The notes are now payable on demand.
Note 9 | Capital stock |
On July 15, 2007 the Company completed a quasi reorganization when the District Court, Arapahoe County, State of Colorado granted guardianship with full and absolute authority to conduct the affairs of the Company. At that time there were 97,855,005 shares of common stock issued and outstanding.
On May 15, 2008 the Directors authorized a reverse stock split of 1:15. These statements give retroactive effect to that transaction.
On May 15, 2008 the Company issued 1,569,934 shares at $.001 per share for a note receivable. The expected proceeds were recorded as subscriptions receivable.
On June 30, 2008 the Company issued 11,000,000 shares at $.001 per share for a note receivable. The expected proceeds were recorded as subscriptions receivable.
13 |
Carlyle Gaming & Entertainment Ltd.
Consolidated Financial Statements
March 31, 2012
Unaudited
On July 15, 2008 the Company issued 4,000,000 shares at $.001 per share for a note receivable. The expected proceeds were recorded as subscriptions receivable.
On October 10, 2008 the Company issued 3,750,000 shares at $.001 per share for a note receivable. The expected proceeds were recorded as subscriptions receivable.
On February 16, 2009 the Company issued 13,000,000 shares at $.001 per share a note receivable. The expected proceeds were recorded as subscriptions receivable.
On May 11, 2009 the Company issued 1,250,000 at $.001 per share shares for a note receivable. The expected proceeds were recorded as subscriptions receivable.
Effective December 31, 2009, the major shareholder applied a portion of the unpaid management wages that were owed to him against share subscriptions receivable. No subscriptions remain unpaid.
As at March 31, 2012, there were no shares subject to options, warrants or other agreements.
Note 10 | Contingency |
In the event of the sale of a majority of the shares of common stock of the Company to a third party, the current Board of Directors and Officers have employment contracts that stipulate they will receive a bonus, the aggregate of which would be at least $1,080,000.
Note 11 | Security agreement |
The Company entered into a Loan and Security agreement with Intercapital Management Ltd. whereby Intercapital Management Ltd. made available a line of credit of $1,000,000. In consideration for the line of credit, the Company granted a security interest by way of: (i) accounts; (ii) software and hardware; (iii) contract rights; and (iv) fixed assets and other assets. Interest is charged at the prime rate plus 2%. The term of the agreement shall continue until the latest of: (a) 60 days after either party provides written notice of termination to the other. The agreement is also personally guaranteed by the Chief Executive Officer.
Note 12 | Subsequent events |
On March 15, 2012 the Company entered into a software purchase agreement with a software vendor located in Florida, USA to acquire an online Poker Software Suite. The total purchase price of the software is $70,000 USD plus 1.5% of the Company’s monthly revenue as support fee or $250,000 per annum whichever is greater for support services to the Company’s customers.
Subsequent to the quarter end, the agreement was jointly terminated.
14 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This quarterly report on Form 10-Q and other reports filed by Carlyle Gaming & Entertainment Ltd. (“we,” “us,” “our,” or the “Company”), from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates.
Plan of Operation
We were incorporated in Colorado on January 4, 1988 under the Company's previous name Patent Pending, Inc., a private company. A change of control of the Company occurred in October 1994 and the Company changed its name from "Patent Pending, Inc. " to "Clean-X-Press, Inc.", Another change of control of the Company occurred on May15, 2008 , the Company changed its name to Carlyle Gaming & Entertainment Ltd. ,its symbol changed to CGME and established a fiscal year end of December 31. We were a development stage company from May 2008 until October, 2011. We specialize in owning and operating legal and licensed interactive software-based games of chance including sports wagering facilities which are offered as an online service accessible worldwide through the Internet in legal and licensed jurisdictions.
· | our primary activities were conducted and consisted of the following: |
· | Developing our business model; |
· | Market research and analysis; |
· | Purchasing, testing and evaluating software, hardware and other related technologies; |
· | Recruiting and training employees; |
· | Initial planning and development of our Web site, known as www.carlylegaming.com and www.betcarlyle.com. |
· | Developing our information systems infrastructure; and |
· | Establishing finance and administrative functions. |
On September 10, 2010, we launched the www.carlylegaming.com and www.betcarlyle.com. websites. These went sites live and in a play for fun testing mode and were not generating income.
In late September 2011, we began taking live wagering on both www.carlylegaming.com and www.betcarlyle.com and commenced generating revenue.
We continued these initial activities and also focused on:
· | Increasing marketing activities; |
· | Launching new online gaming Web sites; |
· | Implementing improved gaming software and payment solutions. |
· | Improving the functionality and appearance of the Web sites; and |
· | Enhancing our financial, infrastructure and administrative capabilities. |
15 |
We intend to continue to increase our marketing and administrative activities, and to increase other operating expense as required to build our business.
We have incurred significant losses and negative cash flows from operations in every fiscal period since inception due to the initial research, technology infrastructure development and starting of our business. Our revenues have not been sufficient to cover our expenses to date. In order to significantly increase revenues we will be required to incur significant advertising and promotional expenses. We anticipate additional revenues to occur in the fall and winter months, when wagering on professional and college football and, to a lesser extent basketball, and internet gaming activities as a whole, are expected to be at their highest levels. In anticipation of an expansion of our operations, we have recently employed additional management personnel. We intend to employ additional personnel in such areas as sales, technical support and finance. These actual and proposed increases in personnel will significantly increase our selling, general and administrative expenses.
Results of Operation
For the three months ended March 31, 2012 compared to the three months ended March 31, 2011
Revenues and Profit
In the three month period ended March 31, 2012, Carlyle Gaming & Entertainment Ltd. had total revenue of $122,555, compared to total revenue of $0 for the same period in 2011. We expect to generate revenue as we expand our business operations.
The Company had $0 in gross profits for the three month period ended March 31, 2012, compared to $0 for the same period in 2011. We believe our business operations will be profitable once we begin to generate consistent revenue.
General and Administrative Expenses
For the three month period ended March 31, 2012, the Company’s advertising expenses have been $5,000, compensation expenses have been $160,000, general and administrative expenses have been $266,401, interest expenses were $16,267. For the same period in 2011, advertising expenses were $0, compensation expenses were $135,000, general and administrative expenses were $2,000 interest expenses were $15,311. Our expenses have increased due to our increase in general administrative expenses.
Net Loss
The net loss for the three month period ended March 31, 2012 was $(325,133), which was a increase from $(152,311) for the same period in 2011. This increase is attributable to the increase in general and administrative expenses.
Liquidity and Capital Resources
As of March 31, 2012, we financed our working capital requirements with existing cash balances and existing credit facilities primarily from Intercapital Management (Canada) Ltd. during such periods.
Our existing credit facility is the following:
(a) We have entered into a Loan and Security agreement with Intercapital Management (Canada) Ltd. whereby Intercapital Management (Canada) Ltd. made available a line of credit of $1,000,000. In consideration for the line of credit, we have granted a security interest by way of: (i) accounts; (ii) software and hardware; (iii) contract rights; and (iv) fixed assets and other assets. Interest is charged at the prime rate plus 1%. The term of the agreement shall continue until the latest of: (a) 60 days after either party provides written notice of termination to the other. The agreement is also personally guaranteed by our Chief Executive Officer. To date the credit facility has not been used.
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Our plan of operations for the twelve months following the date of this registration statement is to complete the following objectives within the time period specified, subject to the availability of adequate capital as outlined below:
Short Term (1-3 months)
Continue to build strategic partnerships and initiate our sales and marketing plans, which are focused on gaining market share.
Medium Term (3 – 12 months)
Focus on recruitment of professional staff, training and continuous professional development with existing professional staff.
Long Term (2- 5 years)
Continue to modify our strategy to meet our customer’s changing needs. This will involves setting the right expectations with the end client, as well as its existing professional staff, continuous assessment and monitoring, constructive feedback, appropriate coaching and mentoring. Continue our international expansion.
There is no assurance that our company will be able to obtain further funds required for our continued working capital requirements.
There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon the continued financial support from our shareholders, our ability to obtain necessary equity financing to continue operations, and achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on our audited consolidated financial statements our
independent auditors included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that led to this disclosure by our independent auditors.
Future Financing Requirements
We will need to obtain proper funding from equity and/or additional debt financing in order to be able to fulfill our projections. Failure to generate sufficient revenues, raise additional capital or reduce certain discretionary spending could have a material adverse effect on our ability to achieve our business objectives and will greatly affect our ability to continue as a going concern.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Though we evaluate our estimates and assumptions on an ongoing basis, our actual results may differ from these estimates.
17 |
Recently Issued Accounting Standards
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
Stock-Based Compensation
Stock-based compensation related to non-employees is recognized as compensation expense in the accompanying consolidated statements of operations and is based on the fair value of the services received or the fair value of the equity instruments issued, whichever is more readily determinable. The Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of FASB ASC 505, “Equity Based Payments to Non-Employees.” The measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement. We follow the provisions of FASB ASC 718. FASB ASC 718 requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). FASB ASC 718 also requires measurement of the cost of employee services received in exchange for an equity award based upon the grant-date fair value of the award.
Off Balance Sheet Arrangements
The Company does not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We do not hold any derivative instruments and do not engage in any hedging activities.
Item 4. Controls and Procedures.
As of the end of the period covered by this Report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities and Exchange Act of 1934 (the “Exchange Act”). Based on their evaluation of our disclosure controls and procedures as of March 31, 2012, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and this information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosures.
Management identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our internal control over financial reporting regarding a lack of adequate segregation of duties and concluded that such controls were not effective as of March 31, 2012.
Changes in Internal Control Over Financial Reporting
The Company is in the process of improving its internal control over financial reporting in an effort to remediate this material weakness by improving period-end closing procedures and requiring all period-end recurring and non-recurring adjustments be reviewed by the Chief Financial Officer.
As of March 31, 2012, there has been no change in the Company’s internal control over financial reporting that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors.
We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on April 18, 2012.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no unregistered sales of the Company’s equity securities during the quarter ended March 31, 2012.
Item 3. Defaults Upon Senior Securities.
There were no defaults upon senior securities during the quarter ended March 31, 2012.
Item 4. Mine Safety Disclosure.
Not applicable.
Item 5. Other Information.
There is no other information required to be disclosed under this item which was not previously disclosed.
Item 6. Exhibits.
Exhibit No. | Description | |
31.1 | Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002* | |
31.2 | Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002* | |
32.1 | Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |
32.2 | Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
*filed herewith
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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.
CARLYLE GAMING & ENTERTAINMENT LTD. | ||||
(Registrant) | ||||
Dated: July 6, 2012 | ||||
By: | /s/ Sandy J. Masselli, Jr. | |||
Name: | Sandy J. Masselli, Jr. | |||
Title: | Principal Executive Officer | |||
Dated: July 6, 2012 | ||||
By: | /s/ Alexander Kennedy | |||
Name: | Alexander Kennedy | |||
Title: |
Principal Financial Officer and Chief Accounting Officer |
20 |
EXHIBIT 31.1
CERTIFICATIONS
I, Sandy J. Masselli Jr.., certify that:
1. | I have reviewed this Annual Report on Form 10-K of Carlyle Gaming & Entertainment Ltd. (the “Registrant”) |
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrant’s other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have: |
a) | designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | designed such internal control over financial reporting, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptable accounting principles; | |
c) | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, and evaluated the effectiveness of our internal control over financial reporting, and presented in this report our conclusions about the effectiveness of our internal control over financial reporting, as of the end of the period covered by this report based on such evaluation; and | |
d) | disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent function); |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Date: July 6, 2012 | By: /s/ Sandy J. Masselli Jr. |
Sandy J. Masselli, Jr. | |
Chief Executive Officer and Chairman |
EXHIBIT 31.2
CERTIFICATIONS
I, Alexander Kennedy, Chief Financial Officer and Director of Carlyle Gaming & Entertainment Ltd. (the “Registrant”), certify that:
1. | I have reviewed this annual report on Form 10-K of the Registrant; |
2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrant’s other certifying officer and I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have: |
a) | designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | designed such internal control over financial reporting, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptable accounting principles; | |
c) | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, and evaluated the effectiveness of our internal control over financial reporting, and presented in this report our conclusions about the effectiveness of our internal control over financial reporting, as of the end of the period covered by this report based on such evaluation; and | |
d) | disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent function); |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
Date: July 6, 2012 | By: /s/ Alexander Kennedy |
Alexander Kennedy | |
Chief Financial Officer & Director |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Carlyle Gaming & Entertainment Ltd.. (the “Registrant”) on Form 10-K for the fiscal year ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), I, Sandy J. Masselli, Jr. Chief Executive Officer and Chairman, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) | The Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in the Annual Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant. |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. section 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Date: July 6, 2012 | By: | /s/ Sandy J. Masselli, Jr. |
Sandy J. Masselli, Jr. | ||
Chief Executive Officer and Chairman |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Carlyle Gaming & Entertainment Ltd. (the “Registrant”) on Form 10-K for the fiscal year ended December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), I, Alexander Kennedy, Chief Financial Officer and Director of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:
(1) | The Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
(2) | The information contained in the Annual Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant. |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. section 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Date: July 6, 2012 | By: | /s/ Alexander Kennedy |
Alexander Kennedy | ||
Chief Financial Officer & Director |
Restricted cash and operating cost
|
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2012
|
|||
Restricted Cash and Operating Cost [Abstract] | |||
Restricted Cash and Operating Cost [Text Block] |
The Company has entered into a payment processing agreement with a company located in Costa Rica. The agreement included a trial period ending June 30, 2012 whereby, the payment processor will incur all of the Company’s website costs, processing and all other costs related to running its betting websites. After this trial period, the Company will pay 7% of all net earnings.
The payment processor holds the liability of paying the Company’s customers for all payouts. As such, they have required a guarantee from the Company’s CEO and Intercapital Management Ltd. for $250,000 in the event that payouts exceed the Company’s cash balance. In addition, during each 12 week period 30% of the revenue is held by the payment processor as a holdback against potential losses. |
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