NOTES TO FINANCIAL STATEMENTS
December 31, 2013
Note 1. Basis of Presentation and Organization and Significant Accounting Policies
Basis of Presentation and Organization
Empire Global Gaming, Inc. (the “Company”) was incorporated in the State of Nevada on May 11, 2010 in order to acquire certain U.S Patent license agreements pertaining to roulette and actively engage in the gaming business worldwide and commenced operations in June, 2010. Empire Global Gaming, Inc. was founded to develop, manufacture and sell Class II & Class III Casino electronic and table games for the general public and casinos worldwide. The Company owns exclusive rights through license agreements to four U.S. Patents consisting of 14 roulette games patents. EGGI also sells a complete line of public and casino grade gaming products for roulette, blackjack, craps, baccarat, mini baccarat, pinwheels, Sic Bo, slot machines, poker tables and bingo games. These patents are certified by Gaming Laboratories International to minimize any unfairness in the multi-number bets in roulette (American double 0 & European single 0) to both players and casinos. One of the patents controlled by the Company is for a “new number pattern and board layout” that will insure, the various gaming control boards and commissions in the United States and eventually worldwide, that the highest standards of security and integrity are met.
The Company developed a website (www.lottopick3.com) which provides analytical data to consumers on several different lottery type games. This program is not a gambling/consulting program. It is strictly an analysis program. The website does not offer any advice one way or the other. It offers an in depth breakdown of all the previous numbers that have been drawn in all states that have the pick 3 games. The software breaks things down into all the possible categories and shows any types of trends that may occur.
The Company currently has limited operations in accordance with Financial Accounting Standard Board Codification 915 (“FASB ASC”) Development Stage Entities topic. The Company has been in the development stage since its formation. The accompanying financial statements have been prepared in accordance with authoritative guidance for development stage entities. A development stage entity is one in which planned principal operations has not commenced or if its operations have commenced, there has been no significant revenues there from.
Summary of Significant Accounting Policies
Cash
The Company considers all highly liquid investments with an original maturity of year end or less to be cash equivalents. Cash equivalents include cash on hand and cash in the bank
Prepaid expenses
The Company issued common stock for consulting services. The Company recorded a prepaid consulting expense in March 2013 for $300,000, which is being amortization over the life of the agreement. A prepaid expense of $50,000 represents the unamortized balance.
Advertising
The Company expenses advertising when incurred. The Company has incurred advertising expenses of $1,434 and $560 for the year ended December 31, 2013 and 2012, respectively.
EMPIRE GLOBAL GAMING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2013
NOTE 1. BASIS OF PRESENTATION AND ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair value of financial instruments
As required by the Fair Value Measurements and Disclosures Topic 820 of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”), fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The carrying amounts for the Company’s accounts payable and accrued liabilities approximate fair value due to the short-term maturity of these instruments.
The three levels of the fair value hierarchy are described below:
Level 1
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Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
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Level 2
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Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
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Level 3
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Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
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The Company does not have any assets or liabilities required to be measured at fair value on a recurring basis.
Revenue Recognition
The Company derives its revenue from sale of gaming products. The Company recognizes revenue only when there is persuasive evidence of an arrangement, delivery has occurred, the sale price is determinable and collectability is reasonably assured.
Inventory
Inventory consists of finished gaming products that were contributed by a shareholder of the Company and are valued at lower of market or acquisition cost.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.
Impairment of long lived assets
Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.
Income Taxes
The Company utilizes the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740. “Income Tax” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for the expected future tax consequence of events that have been include in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacting tax rates in effect in the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company has adopted the provision of FASB ASC 740-10-05, “Accounting for Uncertainties in Income Taxes.” The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
EMPIRE GLOBAL GAMING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2013
Financial and Concentrations Risk
The Company does not have any concentration or related financial credit risk as of December 31, 2013.
We maintain cash balances at highly-rated financial institutions in various states. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 (a temporary increase which expires December 31, 2013). At December 31, 2013, we had no account balances over federally insured limits.
Stock Based Compensation
Stock based compensation is accounted for using the Equity-Based Payments to Non-Employee Topic of the FASB ASC, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. We determine the value of stock issued at the date of grant. We also determine at the date of grant the value of stock at fair market value or the value of services rendered (based on contract or otherwise) whichever is more readily determinable.
Stock based compensation for employees is accounted for using the Stock Based Compensation Topic of the FASB ASC. We use the fair value method for equity instruments granted to employees and will use the Black Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
Net Loss Per Common Share
Earnings per share is calculated in accordance with the Earnings per Share Topic of the FASB ASC. The weighted-average number of common shares outstanding during each period is used to compute basic earnings (loss) per share. Diluted earnings per share is computed using the weighted average number of shares plus dilutive potential common shares outstanding. Potentially dilutive common shares consist of employee stock options, warrants, and other convertible securities, and are excluded from the diluted earnings per share computation in periods where the Company has incurred net loss. From inception, May 11, 2010, to December 31, 2013, the Company incurred a net loss, resulting in no potentially dilutive common shares.
Statement of Cash Flows
For the purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents. As of December 31, 2013, the Company had no cash equivalents.
EMPIRE GLOBAL GAMING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2013
NOTE 2. GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. To date, the Company generated revenue of $23,128 from inception, is considered a development stage company, has experienced recurring net losses, and has a net loss of $696,224, for the period of May 11, 2010 (inception) to December 31, 2013 and $335,556 for the year ended December 31, 2013. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. We will need to raise funds or increase revenues to continue operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources or increase revenues. Management’s plan is to continue progressing in its business plan and increase revenues, and if necessary, obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3. INCOME TAXES
The components of the Company’s deferred tax asset are as follows as of December 31, 2013:
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December 31, 2013
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December 31, 2012
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Net operating loss carry forward at 35%
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$
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243,678
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|
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$
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126,234
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Valuation allowance
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|
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-243,678
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|
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-126,234
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Net deferred tax allowance
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$
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-
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$
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-
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Deferred tax asset consists of net operating losses of approximating $696,000 and $360,000 for the years ended December 31, 2013 and 2012, which expires between 2030 to 2032.
The reconciliation of income tax expense at the U.S. statutory rate of 35% for the years ended December 31, 2013 and 2012 is as follows:
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2013
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2012
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US Statutory rate
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35
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%
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|
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35
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%
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Valuation allowance
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|
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-35
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%
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|
|
-35
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%
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Income tax provision
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|
|
-
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|
|
|
-
|
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EMPIRE GLOBAL GAMING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2013
The Company had no gross unrecognized tax benefits that, if recognized, would affect the effective income tax rate in future periods. At December 31, 2013, the amount of gross unrecognized tax benefits before valuation allowances and the amount that would favorably affect the effective income tax rate in future periods after valuation allowances were $0. The Company has not accrued any additional interest or penalties.
The Company files income tax returns in the United States. The Company will file its U.S. federal return for the year ended December 31, 2013 in 2014. Once filed, the 2013 U.S. federal return and those for 2011 and 2012 will be considered as open tax years. No tax returns are currently under examination by any tax authorities. The Company has not accrued any additional interest or penalties or the delinquency of our outstanding tax returns as we have incurred net losses in those periods still outstanding.
NOTE 4. RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property.
The Company’s management received 41,000,000 shares of restricted stock as compensation for contributing the business plan and its efforts in commencing operations., These 41,000,000 shares have been accepted as full compensation for management's services for the first year of operation. Nicholas Sorge, Sr., President and Director received 40,000,000 shares for his services to the Company including developing the business plan for the Company and other miscellaneous administrative matters on behalf of the Company. Dolores Marsh, Secretary, Chief Financial Officer, Controller and Director received 1,000,000 shares for her services to the Company including developing along with Nicholas Sorge, Sr., the business plan for the Company, devoting the time and skill necessary to negotiate with various vendors and undertaking various administrative matters on behalf of the Company. Also, the Company issued 8,000,000 shares to other founder/management when the Company was formed.
In December 2012, Nicholas Sorge, Sr. loaned the Company $2,120 to pay for various expenses. The note payable bears interest at 4% per annum and is due with interest on December 31, 2018. The Company has accrued interest of $373 through December 31, 2013.
In 2013, Nicholas Sorge, Sr. loaned the Company an additional $37,100. The note payable bears interest at 4% per annum and is due with interest on December 31, 2018. The balance of the note payable is $39,220 at December 31, 2013.
During 2011, Nicholas Sorge, Jr. contributed $22,150 of inventory to the Company. Since the inventory was contributed the original cost to Mr. Sorge was recorded to Additional Paid in Capital. This inventory consisted of various different gaming items for resale.
During 2012, 77% of the Company’s revenue was derived from existing shareholders/officers of the Company. In 2013, no sales were made to existing shareholders/officers.
EMPIRE GLOBAL GAMING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2013
NOTE 5. COMMON STOCK
See note and regarding issuance of Founders’ shares.
The Company’s authorized Common Stock is 980,000,000 common shares with $0.001 par value.
During the year ended December 31, 2011, 801,000 shares of Common Stock were sold and issued as follows: 348,000 shares on May 9, 2011, 40,000 shares on May 23, 2011, 73,000 shares on May 31, 2011, 20,000 shares on June 15, 2011, 40,000 shares on June 22, 2011, 60,000 shares on July 1, 2011, 160,000 shares on July 5, 2011, 40,000 shares on July 13, 2011, 20,000 shares on October 3, 2011, 6,000,000 shares on March 31, 2013, 50,000 shares on April 1, 2013, 400,000 shares on April 1, 2013, and 50,000 shares on April 10, 2013.
The details of the 6,000,000 shares issued on March 31, 2013 are as follows:
Nunzio J. Valerie received 1,500,000 shares valued at $75,000
Michael Lopez received 2,000,000 shares valued at $100,000
Steven Horowitz received 1,500,000 shares valued at $75,000
Steven Wildstein received 1,000,000 shares valued at $50,000
The shares were valued based on the cost of these services as per the respective invoices or agreement.
The four (4) individuals were given shares of the Company's common stock to provide management and financial consulting services to the Company. They were to consult and assist the Company in developing and implementing appropriate plans and means for presenting the Company and its business plans, strategy and personnel to the financial community; and at the Company's request, review business plans, strategies, mission statement budgets, proposed transactions and other plans for the purpose of advising the Company of the public relations implications thereof.
As of December 31, 2013, the Company has 57,301,000 shares of Common Stock issued and outstanding.
NOTE 6. SUBSEQUENT EVENTS
Management evaluated all activity of the Company through the issue date of the Financial Statement and there have been no subsequent events that would have a material impact on the financial statements as of and for the period ended December 31, 2013 other than:
Item 9: Changes in and Disagreements with Accounta
nts on Accounting and Financial Disclosure
There have been no changes in or disagreements with our certified public accountants on accounting matters or financial disclosure.
Item 9A: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
(a) We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) that are designed to provide reasonable assurance that information required to be disclosed in our filings and submissions under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our principal executive officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
We completed an evaluation under the supervision and with participation of our management, including our principal executive officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and Chief Financial Officer have concluded that as of December 31, 2013, such disclosure controls and procedures were effective to provide the reasonable assurance described above.
(b) There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) during the period covered by this report that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our 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 our assets;
• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our 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. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. The scope of management's assessment of the effectiveness of internal control over financial reporting includes all of our Company's consolidated subsidiaries.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control-Integrated Framework." Based on this assessment, management believes that, as of December 31, 2013, our internal control over financial reporting was effective based on those criteria.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the most recent fiscal quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.