UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q




(Mark
One)


þ
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
              
              For
      the quarterly period ended December 31,
  2009







o
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
              
              For
      the transition period from 
      to




Commission File
Number 333-44315




Rotate
Black, Inc.


(Exact
name of registrant as specified in its charter)





Nevada
            
            75-3225181(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (IRS
      Employer
              Identification
      No.)





932
Spring Street, Petoskey, Michigan  49770


(Address
of principal executive offices)





(231)
347-0777


(Registrant’s
telephone number, including area code)


Indicate by checkmark 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
preceding 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  þNo  o




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
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer  o
            Accelerated
      filer  oNon-accelerated
      filer  o
              (Do not check if a smaller reporting company)
            Smaller reporting
      company  þ




Indicate by checkmark whether the
registrant is a shell company (as defined in Rule 126.2 of the Exchange
Act).    Yes  oNo  þ




The
number of shares of common stock outstanding as of February 15, 2010 was
76,747,325.










ROTATE
BLACK, INC. AND SUBSIDIARY





TABLE
OF CONTENTS





PART
I. FINANCIAL INFORMATION






ITEM
    1.
              Financial
      Statements
              
              
              1ITEM 2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              
              
              13ITEM 3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              
              
              16ITEM 4T.
              Controls and
      Procedures
              
              
              16
  PART II. OTHER INFORMATION
  ITEM 1.
              Legal
      Proceedings
              
              
              17ITEM
    1A.
              Risk
      Factors
              
              
              17ITEM 2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              
              
              17ITEM 3.
              Defaults upon
      Senior Securities
              
              
              17ITEM 4.
              Submission of
      Matters to a Vote of Security Holders
              
              
              17ITEM
    5.
              Other
      Information
              
              
              18ITEM 6.
              Exhibits
              
              
              18SIGNATURES
              
              
              19








PART I,  ITEM 1. FINANCIAL
STATEMENTS
 ROTATE
BLACK, INC. AND SUBSIDIARY
 (A
Development Stage Company) 
 CONSOLIDATED
BALANCE SHEET


December
      31,
            
            
            June
      30,2009
            
            
            2009(Unaudited)ASSETSCurrent
      AssetsCash
            
            $
            46,292
            
            
            $
            15,453Prepaid
      expenses
            
            
            34,320
            
            
            
            88,902Total
      current assets
            
            
            80,612
            
            
            
            104,355Unbilled
      development advances
            
            
            2,217,912
            
            
            
            2,069,499Fixed
      assets - net
            
            
            42,178
            
            
            
            49,179Contract
      rights
            
            
            6,323,884
            
            
            
            6,323,884Intangible
      assets
            
            
            374,265
            
            
            
            374,265Investment
      in joint venture
            
            
            -
            
            
            
            139,781Land
      purchase deposit
            
            
            7,399,142
            
            
            
            7,049,142Deferred
      development cost
            
            
            22,748
            
            
            
            -Deferred
      financing fee
            
            
            10,000
            
            
            
            -Security
      deposit
            
            
            3,600
            
            
            
            3,600TOTAL
      ASSETS
            
            $
            16,474,341
            
            
            
            16,113,705LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and accrued expenses
            
            $
            1,830,141
            
            
            $
            1,761,367Note
      payable
            
            
            -
            
            
            
            268,000Note
      payable - truck - current portion
            
            
            5,056
            
            
            
            5,213Total
      current liabilities
            
            
            1,835,197
            
            
            
            2,034,580Note
      payable - truck
            
            
            10,042
            
            
            
            12,628Loan
      payable - stockholder
            
            
            49,227
            
            
            
            1,675,932Deferred
      revenues
            
            
            49,071
            
            
            
            47,078Shares
      to be issued
            
            
            -
            
            
            
            3,995,467TOTAL
      LIABILITIES
            
            
            1,943,537
            
            
            
            7,765,685STOCKHOLDERS'  EQUITYCommon
      stock, $0.01 par value, 100,000,000shares
      authorized; 76,747,325 and 67,321,858shares
      issued and outstanding as ofDecember
      31, 2009 and June 30, 2009,respectively
            
            
            767,473
            
            
            
            673,219Additional
      paid-in capital
            
            
            16,105,368
            
            
            
            8,334,185Subscription
      receivable
            
            
            (874,039
            )
            
            
            -Accumulated
      deficit
            
            
            (2,589,450
            )
            
            
            (1,789,498
            )TOTAL
      ROTATE BLACK, INC.STOCKHOLDERS'
      EQUITY
            
            
            13,409,352
            
            
            
            7,217,906NONCONTROLLING
      INTEREST
            
            
            1,121,452
            
            
            
            1,130,114TOTAL
      STOCKHOLDERS' EQUITY
            
            
            14,530,804
            
            
            
            8,348,020TOTAL
      LIABILITIES ANDSTOCKHOLDERS'
      EQUITY
            
            $
            16,474,341
            
            
            $
            16,113,705





See notes
to financial statements





1





ROTATE
BLACK, INC. AND SUBSIDIARY


(A
Development Stage Company) 
 CONSOLIDATED
STATEMENT OF OPERATIONS
 (UNAUDITED)





August
      2, 2006Three
      Months Ended
            
            
            Six
      Months Ended
            
            
            (Inception)December
      31,
            
            
            December
      31,
            
            
            Through2009
            
            
            2008
            
            
            2009
            
            
            2008
            
            
            December
      31, 2009Operating
      expensesSalary
      expense
            
            $
            85,097
            
            
            $
            37,116
            
            
            $
            136,547
            
            
            $
            119,526
            
            
            $
            248,785Stock
      based compensation
            
            
            100,000
            
            
            
            5,700
            
            
            
            175,000
            
            
            
            741,570
            
            
            
            941,570General
      and administrative expenses
            
            
            131,146
            
            
            
            120,788
            
            
            
            388,021
            
            
            
            221,309
            
            
            
            1,094,108Write-off
      investment in joint venture
            
            
            139,782
            
            
            
            -
            
            
            
            139,782
            
            
            
            -
            
            
            
            139,782Write-off
      deferred expenses
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            233,960Forgiveness
      of accounts payable and accrued expenses
            
            
            (49,145
            )
            
            
            
            
            
            
            (49,145
            )
            
            
            
            
            
            
            (49,145
            )Interest
      expense
            
            
            5,834
            
            
            
            12,873
            
            
            
            18,409
            
            
            
            12,873
            
            
            
            57,953Total
      expenses
            
            
            412,714
            
            
            
            176,477
            
            
            
            808,614
            
            
            
            1,095,278
            
            
            
            2,667,013Loss
      from operations
            
            
            (412,714
            )
            
            
            (176,477
            )
            
            
            (808,614
            )
            
            
            (1,095,278
            )
            
            
            (2,667,013
            )Less:  Net
      loss attributable to noncontrolling interest
            
            
            3,586
            
            
            
            13,938
            
            
            
            8,662
            
            
            
            13,938
            
            
            
            77,563Net
      loss attributable to Rotate Black, Inc.
            
            $
            (409,128
            )
            
            $
            (162,539
            )
            
            $
            (799,952
            )
            
            $
            (1,081,340
            )
            
            $
            (2,589,450
            )Basic
      and diluted net loss per common shareattributed
      to Rotate Black, Inc.
            
            $
            (0.01
            )
            
            
            *
            
            
            $
            (0.01
            )
            
            $
            (0.03
            )Basic
      and diluted averagecommon
      shares outstanding
            
            
            73,478,039
            
            
            
            59,123,384
            
            
            
            67,574,863
            
            
            
            36,340,754*
      Less than $0.01, per share








2


ROTATE
BLACK, INC. AND SUBSIDIARY (A
Development Stage Company) 
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(DEFICIT)


Common
      Stock
            
            
            Additional
            
            
            StockNumber
      of
            
            
            
            
            
            Paid-in
            
            
            Subscription
            
            
            Accumulated
            
            
            
            
            
            NoncontrollingShares
            
            
            Amount
            
            
            Capital
            
            
            Receivable
            
            
            Deficit
            
            
            Total
            
            
            InterestAugust
      2, 2006 - Stock subscription receivable
            
            
            100
            
            
            $
            1
            
            
            $
            99
            
            
            $
            (100
            )
            
            $
            -
            
            
            $
            -
            
            
            
            -Net
      loss - June 30, 2007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (3,433
            )
            
            
            (3,433
            )
            
            
            -Balance
      - June 30, 2007
            
            
            100
            
            
            
            1
            
            
            
            99
            
            
            
            (100
            )
            
            
            (3,433
            )
            
            
            (3,433
            )
            
            
            -Net
      loss - June 30, 2008
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,755
            )
            
            
            (2,755
            )
            
            
            -Balance
      - June 30, 2008
            
            
            100
            
            
            
            1
            
            
            
            99
            
            
            
            (100
            )
            
            
            (6,188
            )
            
            
            (6,188
            )
            
            
            -August
      15, 2008 - Common stock issued inconnection
      with the acquisition of BevSystems
            
            
            1,000,000
            
            
            
            10,000
            
            
            
            47,009
            
            
            
            -
            
            
            
            -
            
            
            
            57,009
            
            
            
            -August
      15, 2008 - Common stock issued inpayment
      of due to stockholder
            
            
            8,999,900
            
            
            
            89,999
            
            
            
            422,980
            
            
            
            100
            
            
            
            -
            
            
            
            513,079
            
            
            
            -August
      21, 2008 - Common stock issued inconnection
      with employment agreements
            
            
            8,300,000
            
            
            
            83,000
            
            
            
            390,100
            
            
            
            -
            
            
            
            -
            
            
            
            473,100
            
            
            
            -August
      27, 2008 - Common stock issued inconnection
      with services rendered
            
            
            4,610,000
            
            
            
            46,100
            
            
            
            216,670
            
            
            
            -
            
            
            
            -
            
            
            
            262,770
            
            
            
            -October
      3, 2008 - Purchase of Rotate BlackGaming,
      Inc.
            
            
            26,560,000
            
            
            
            265,600
            
            
            
            3,331,444
            
            
            
            -
            
            
            
            -
            
            
            
            3,597,044
            
            
            
            1,199,015October
      7, 2008 - Purchase of Dayton assets
            
            
            5,480,900
            
            
            
            54,809
            
            
            
            164,345
            
            
            
            -
            
            
            
            -
            
            
            
            219,154
            
            
            
            -October
      7, 2008 - Purchase of interest in jointventure
            
            
            8,400,000
            
            
            
            84,000
            
            
            
            52,121
            
            
            
            -
            
            
            
            -
            
            
            
            136,121
            
            
            
            -November
      16, 2008 - Common stock issued inconnection
      with consulting agreement
            
            
            100,000
            
            
            
            1,000
            
            
            
            4,700
            
            
            
            -
            
            
            
            -
            
            
            
            5,700
            
            
            
            -November
      and December, 2008 - Common stocksold
      for cash
            
            
            114,000
            
            
            
            1,140
            
            
            
            55,860
            
            
            
            -
            
            
            
            -
            
            
            
            57,000
            
            
            
            -December
      23, 2008 - Common stock issued inpayment
      of due to stockholder
            
            
            48,283
            
            
            
            483
            
            
            
            2,269
            
            
            
            -
            
            
            
            -
            
            
            
            2,752
            
            
            
            -January,
      February and March, 2009 - Commonstock
      sold for cash
            
            
            285,000
            
            
            
            2,850
            
            
            
            282,150
            
            
            
            -
            
            
            
            -
            
            
            
            285,000
            
            
            
            -January
      2, 2009 - Common stock issued inconnection
      with consulting agreement
            
            
            50,000
            
            
            
            500
            
            
            
            24,500
            
            
            
            -
            
            
            
            -
            
            
            
            25,000
            
            
            
            -May
      11, 2009 - Common stock issued inconnection
      with land purchase
            
            
            3,153,675
            
            
            
            31,537
            
            
            
            3,122,138
            
            
            
            -
            
            
            
            -
            
            
            
            3,153,675
            
            
            
            -April,
      May and June, 2009 - Common
            
            
            220,000
            
            
            
            2,200
            
            
            
            217,800
            
            
            
            -
            
            
            
            -
            
            
            
            220,000
            
            
            
            -stock
      sold for cashNet
      loss - June 30, 2009
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,783,310
            )
            
            
            (1,783,310
            )
            
            $
            (68,901
            )Balance
      at June 30, 2009
            
            
            67,321,858
            
            
            
            673,219
            
            
            
            8,334,185
            
            
            
            -
            
            
            
            (1,789,498
            )
            
            
            7,217,906
            
            
            
            1,130,114September
      15, 2009 - Common stock issued inconnection
      with consulting agreement
            
            
            75,000
            
            
            
            750
            
            
            
            74,250
            
            
            
            -
            
            
            
            -
            
            
            
            75,000
            
            
            
            -July,
      August and September, 2009 - Commonstock
      sold for cash
            
            
            300,000
            
            
            
            3,000
            
            
            
            297,000
            
            
            
            -
            
            
            
            -
            
            
            
            300,000
            
            
            
            -October
      21, 2009 - Common stock issued forShawanga
      land contract
            
            
            3,895,467
            
            
            
            38,954
            
            
            
            3,856,513
            
            
            
            -
            
            
            
            -
            
            
            
            3,895,467
            
            
            
            -November
      9, 2009 - Common stock issued forShawanga
      land purchase anti-dilution rights
            
            
            350,000
            
            
            
            3,500
            
            
            
            346,500
            
            
            
            -
            
            
            
            -
            
            
            
            350,000
            
            
            
            -November
      9, 2009 - Common stock issued inconnection
      for services
            
            
            100,000
            
            
            
            1,000
            
            
            
            99,000
            
            
            
            -
            
            
            
            -
            
            
            
            100,000
            
            
            
            -November
      9, 2009 - Common stock issued forsettlement
      of note payable
            
            
            660,000
            
            
            
            6,600
            
            
            
            323,400
            
            
            
            -
            
            
            
            -
            
            
            
            330,000
            
            
            
            -November
      9, 2009 - Common stock issued forpayment
      on due to stockholder
            
            
            1,500,000
            
            
            
            15,000
            
            
            
            1,485,000
            
            
            
            -
            
            
            
            -
            
            
            
            1,500,000
            
            
            
            -November
      10, 2009 - Stock subscription receivable
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,000,000
            )
            
            
            -
            
            
            
            (1,000,000
            )
            
            
            -October,
      November and December, 2009 - Commonstock
      sold for cash
            
            
            2,545,000
            
            
            
            25,450
            
            
            
            1,289,520
            
            
            
            -
            
            
            
            -
            
            
            
            1,314,970
            
            
            
            -December,
      2009 - Collections of stocksubscriptions
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            125,961
            
            
            
            -
            
            
            
            125,961
            
            
            
            -Net
      loss - December 31, 2009
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (799,952
            )
            
            
            (799,952
            )
            
            
            (8,662
            )Balance
      at December 31, 2009 (Unaudited)
            
            
            76,747,325
            
            
            $
            767,473
            
            
            $
            16,105,368
            
            
            $
            (874,039
            )
            
            $
            (2,589,450
            )
            
            $
            13,409,352
            
            
            $
            1,121,452










3


ROTATE
BLACK, INC. AND SUBSIDIARY (A
Development Stage Company) 
 C ONSOLIDATED STATEMENT
OF CASH FLOWS
 (UNAUDITED)


August
      2, 2006Six
      Months Ended
              
              
              (Inception)December
      31,
              
              
              Through2009
              
              
              2008
              
              
              December
      31, 2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
              
              $
              (799,952
              )
              
              $
              (1,081,340
              )
              
              $
              (2,589,450
              )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Stock-based
      compensation
              
              
              175,000
              
              
              
              741,570
              
              
              
              941,570Write-off
      of investment in joint venture
              
              
              139,782
              
              
              
              -
              
              
              
              139,782Write-off
      of deferred expenses
              
              
              -
              
              
              
              -
              
              
              
              233,960Depreciation
      and amortization
              
              
              10,868
              
              
              
              6,379
              
              
              
              27,364Loss
      on settlement of note payable
              
              
              473
              
              
              
              -
              
              
              
              473Forgiveness
      of accounts payable and accrued expenses
              
              
              (49,145
              )
              
              
              
              
              
              
              (49,145
              )Cancellation
      of shares to be issued
              
              
              (32,138
              )
              
              
              -
              
              
              
              (32,138
              )Noncontrolling
      interest
              
              
              (8,662
              )
              
              
              (13,938
              )
              
              
              (77,563
              )Changes
      in assets and liabilities:Prepaid
      expenses
              
              
              (13,280
              )
              
              
              (40,799
              )
              
              
              1,810Unbilled
      development advances
              
              
              (148,413
              )
              
              
              (178,241
              )
              
              
              (806,401
              )Accounts
      payable and accrued expenses
              
              
              204,445
              
              
              
              201,479
              
              
              
              736,242Deferred
      revenues
              
              
              1,993
              
              
              
              3,880
              
              
              
              15,254Net
      cash used in operating activities
              
              
              (519,029
              )
              
              
              (361,010
              )
              
              
              (1,458,242
              )CASH
      FLOWS FROM INVESTING ACTIVITIESInvestment
      in BevSystems and increase indeferred
      acquisition costs (net ofthe
      issuance of common stock of $57,009
              
              
              -
              
              
              
              (228,151
              )
              
              
              (317,256
              )Purchases
      of fixed assets (net of note payableof
      $20,800 in 2008)
              
              
              (3,867
              )
              
              
              (43,098
              )
              
              
              (48,742
              )Security
      deposit
              
              
              -
              
              
              
              (3,600
              )
              
              
              (3,600
              )Investment
      in joint venture
              
              
              -
              
              
              
              -
              
              
              
              (3,660
              )Increase
      in deferred expenses
              
              
              (32,748
              )
              
              
              -
              
              
              
              (47,554
              )Net
      cash used in investing activities
              
              
              (36,615
              )
              
              
              (274,849
              )
              
              
              (420,812
              )CASH
      FLOWS FROM FINANCING ACTIVITIESIncrease
      (decrease) in loan payable - stockholder
              
              
              (126,705
              )
              
              
              583,897
              
              
              
              653,117Proceeds
      from sales of  common stock
              
              
              740,931
              
              
              
              57,000
              
              
              
              1,302,931Payment
      of note payable
              
              
              (25,000
              )
              
              
              -
              
              
              
              (25,000
              )Payments
      of note payable - truck
              
              
              (2,743
              )
              
              
              -
              
              
              
              (5,702
              )Net
      cash provided by investing activities
              
              
              586,483
              
              
              
              640,897
              
              
              
              1,925,346Net
      increase (decrease) in cash
              
              
              30,839
              
              
              
              5,038
              
              
              
              46,292Cash,
      beginning of period
              
              
              15,453
              
              
              
              -
              
              
              
              -Cash,
      end of period
              
              $
              46,292
              
              
              $
              5,038
              
              
              $
              46,292Noncash
      TransactionIssuance
      of common stock in payment of due to stockholder
              
              $
              1,500,000
              
              
              $
              513,079Issuance
      of common stock in payment of note payable
              
              $
              330,000See
      notes to financial statements
 
 
 4
 
 Rotate
Black, Inc. and Subsidiary
  Notes
to Consolidated Financial Statements
  
 1.
 ORGANIZATION AND OPERATIONS
  Rotate
Black, Inc. (Company) was incorporated in Nevada on August 2, 2006 to be the
successor by merger of BevSystems International, Inc. and BevSystems
International Ltd. (BevSystems) under a plan of reorganization (Plan), effective
August 15, 2008, as approved by the United States Bankruptcy Court in Tampa,
Florida. Under the terms of the Plan, BevSystems merged into the Company with
the Company as the survivor.
  On March
31, 2004, BevSystems filed under Chapter 7 of the Bankruptcy Code and, on April
15, 2006, filed a plan of reorganization
under Chapter 11 of the Bankruptcy Code. The Plan provided for the Company to:
(1) purchase the intangible assets of BevSystems
for $175,000, (2) pay creditors opting out of the common stock settlement an
aggregate of $10,000, (3) pay all legal and other
cost of the Plan of $189,265 and (4) issue 1,000,000 shares of common stock of
the Company (10%) to the balance of the creditors.
The shares issued to the creditors were valued at $.057, per share, the value of
the shares acquired by the 90% stockholder, for an
aggregate purchase price of $513,079. All costs of the bankruptcy were paid by
the 90% stockholder, Rotate Black, LLC (RBL), an entity substantially owned by
an officer of the Company and family members. The Company was also required to
provide an escrow fund for future operations of $200,000. All outstanding equity
shares of BevSystems were cancelled. All requirements under the Plan have been
met.
  The
Company recorded the purchase of BevSystems under the purchase method of
accounting and allocated the entire purchase price to intangible
assets.
  On August
15, 2008, the Company commenced operations and all activity prior thereto has
been charged to operations. The Company is in the development
stage.
  Acquisitions
  In
October 2008, the Company acquired: (1) 75% of the
outstanding common stock of Rotate Black-Gaming, Inc. (Gaming), (2) all of the
assets of a casino development in Dayton, Nevada (Dayton) and (3) a 50% joint
venture interest in Rotate Black India Pvt Ltd. (India) in exchange for
26,560,000, 5,480,900 and 8,400,000 shares of common stock of the Company,
respectively, from RBL. The acquisitions have been recorded on the purchase
method of accounting at the carrying amounts on RBL of the assets and
liabilities acquired as of the date of acquisition as RBL is under common
control with the Company.
  Gaming
  The
purchase price of Gaming of $3,597,044 has been allocated as
follows:
  Development
      advances
              
              $
              1,411,511Other
      current assets
              
              
              3,992Land
              
              
              556,000Contract
      rights (a)
              
              
              5,767,884Accounts
      payable and accrued expenses
              
              
              (1,229,570
              )Loan
      payable – stockholder
              
              
              (1,411,941
              )Note
      payable
              
              
              (268,000
              )Deferred
      revenue
              
              
              (33,817
              )4,796,059Less:  noncontrolling
      interest
              
              
              (1,199,015
              )$
              3,597,044
  Gaming is
under contract to develop and manage a world-class destination casino resort in
Sullivan County, New York. Gaming has acquired the property and completed all
design layouts.
  Dayton
  The
purchase price of Dayton of $219,154 was allocated to deferred expenses and
included the predevelopment expenses as of the date acquired.
  As of
December 31, 2009, the Dayton casino development project is on hold and, as of
June 30, 2009, the Company has written-off the deferred expenses of
$233,960.
  India
  The
purchase price of India of $136,121 was allocated to investment in joint venture
and includes all the investment of RBL as of the date acquired. The Company had
identified potential properties for acquisition, but does not anticipate an
acquisition until new Indian gaming laws are solidified in India.
 
 5
 
 2.
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Basis
of Presentation
 
 The accompanying interim
unaudited consolidated financial statements and related notes have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the rules and regulations set forth
in Regulation S-X of the Securities and Exchange Commission for Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statement presentation. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary to present fairly
the financial position, results of operations and cash flows for the interim
periods have been included. These consolidated financial statements should be
read in conjunction with the financial statements of Rotate Black, Inc. and
Subsidiary together with Management’s Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Form 10-K for the year
ended June 30, 2009. Interim results are not necessarily indicative of the
results for a full year.
  Consolidated
Financial Statements
 
 The
accompanying consolidated financial statements include all of the accounts of
the Company and the subsidiary.
 
 Investments
in 50% or less owned entities are accounted for using the equity
method.  Under the equity method, the Company includes the net income
or loss from the equity entity.
 
 All
significant intercompany accounts and transactions have been eliminated in
consolidation.
  Estimates
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. Actual results
could differ from those estimates.
  Reclassifications
  Certain
amounts for prior years have been reclassified to conform to 2009 financial
statement presentation.
  Financial
Instruments
  The
Company considers the carrying amounts of financial instruments, including cash,
accounts payable, loan payable, stockholder and accrued expenses to approximate
their fair values because of their relatively short maturities.
  Property
and Equipment
  Property
and equipment are recorded at cost and depreciated over their estimated useful
lives using the straight-line method.
  Maintenance
and repairs are charged to operating expenses as they are
incurred.  Improvements and betterments which extend the lives of the
assets are capitalized.  The cost and accumulated depreciation of
assets retired or otherwise disposed of are relieved from the appropriate
accounts and any profit or loss on the sale or disposition of such assets is
credited or charged to income.
  Contract
Rights and Intangible Assets
  Contract
rights and intangible assets are valued at cost and will be amortized over their
estimated useful lives as determined by management. The Company will evaluate
the carrying value of the intangible assets for impairment at least annually or
upon the occurrence of an event which may indicate that the carrying amount may
be greater than its fair value. If impaired, the Company will write-down such
impairment. In addition, the useful lives of the contract rights and intangible
assets will be evaluated by management at least annually or upon the occurrence
of an event which may indicate that the useful life may be definitive and the
Company will commence amortization over such useful life.
  The
Company will commence amortization of contract rights upon the effective date of
the underlying contract. The intangible assets have an indefinitive
life.
  Share-Based
Compensation
  The
Company recognizes compensation expense for all share-based payment awards made
to employees, directors and others. The Company determines the fair value of the
share-based compensation awards granted as either the fair value of the
consideration received or the fair value of the shares issued, whichever is more
reliably measureable. If the fair value of the equity instruments issued is
used, it is measured using the stock price of recent sales of common stock by
the Company (as their shares are thinly traded) as of the earlier of either the
date at which a commitment for performance to earn the equity instrument is
reached or the date the performance is complete.
  All
shares of common stock issued for legal and consulting services have been
charges to operations and are included in stock based compensation.
 6
  Noncontrolling
Interest
  The
Company records adjustments to noncontrolling interest for the allocable portion
of income or loss that the noncontrolling interest holders are entitled based
upon their portion of certain of the subsidiaries that they
own.  Distributions to holders of noncontrolling interests are
adjusted to the respective noncontrolling interest holders'
balance.
  The
Company suspends allocation of losses to noncontrolling interest holders when
the noncontrolling interest balance for a particular noncontrolling interest
holder is reduced to zero.  Any excess loss above the noncontrolling
interest holders' balance is not charged to noncontrolling interest as the
noncontrolling interest holders have no obligation to fund such
losses.
  Loss per
Common Share
  Basic
loss per share is calculated using the weighted-average number of common shares
outstanding during each period. Diluted loss per share includes potentially
dilutive securities such as outstanding options and warrants, using various
methods such as the treasury stock or modified treasury stock method in the
determination of dilutive shares outstanding during each period.
  Income
Taxes
  Deferred
income taxes have been provided for temporary differences between financial
statement and income tax reporting under the liability method, using expected
tax rates and laws that are expected to be in effect when the differences are
expected to reverse.  A valuation allowance is provided when realization is
not considered more likely than not.
  The
Company’s policy is to classify income tax assessments, if any, for interest in
interest expense and for penalties in general and administrative
expenses.
  Consideration
of Subsequent Events
  The
Company evaluated all events and transactions occurring after December 31, 2009
through February 16, 2010, the date these financial statements were issued, to
identify subsequent events which may need to be recognized or non-recognizable
events which would need disclosure.  No recognizable events were
identified. See Note 18 for non-recognizable events identified for
disclosure.
  Recent
Accounting Pronouncements
  Management
does not believe that any recently issued, but not yet effective accounting
pronouncements, if adopted, would have a material effect on the accompanying
consolidated financial statements.
  3.
 GOING CONCERN
  The
financial statements have been prepared assuming the Company will continue as a
going concern. The Company has incurred losses since inception, resulting in an
accumulated deficit of $2,589,450 and negative working capital of $1,754, 585 as
of December 31, 2009 and further losses are anticipated. These factors raise
doubt about the Company’s ability to continue as a going concern. Its ability to
continue as a going concern is dependent upon the ability of the Company to
generate profitable operations in the future and/or to obtain the necessary
financing to meet its obligations arising from normal business operations when
they come due. These financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets or the
amounts of and classification of liabilities that might be necessary in the
event the Company cannot continue.
  4.  PROPERTY
AND EQUIPMENT
  As of December 31, 2009, property and
equipment consisted of the following:
  Truck
              
              $
              39,761Furniture
      and fixtures
              
              
              8,490Office
      equipment
              
              
              21,29169,542Less
      accumulated depreciation
              
              
              (27,364
              )$
              42,178
 
 For the
six months ended December 31, 2009 and 2008, depreciation expense was $10,868
and $6,379, respectively.
  5.
 INTANGIBLE ASSETS
  The
intangible assets acquired under the Plan consisted of a license of patents,
pending patents, trade secrets, know-how and other intangibles of Life O2
Oxygenated Water (Life O2) which were assigned to the Company under the Plan.
The license grants the Company the exclusive worldwide (as defined),
irrevocable, perpetual, royalty-free right to all the intangible assets for use
in the production, marketing, distribution, sublicensing and sale of Life O2,
subject to certain previously granted licenses, and only for human consumption.
The Company has the right to assign the rights under the license to any
corporate successor by way of merger, etc. The Company is entitled to
sublicense, exclusively or not, or to subcontract the manufacture of products
under the license.
  7
  The
Company is currently evaluating a sublicense and bottling arrangements or sale
of the license.
  As of the
December 31, 2009, management has determined no impairment of the intangible
assets has occurred.
  6.
 CONTRACT RIGHTS
  As of December 31, 2009,Contract rights consisted of
the various rights acquired under the Development and Management Agreements
acquired from RBL, at RBL’s costs and the additional costs of the
Company.
  Development
Agreement
  On June
22, 2007, Gaming entered into a Development Agreement with the Seneca Nation of
Indians (Nation), a Federally recognized Indian tribal government, to act as the
Developer to provide managerial expertise and financial resources to assist the
Nation in acquiring land and developing and constructing a gaming facility
(Facility). The purpose of the Facility for the Nation is to provide employment
and improve the social, economic, education, and health needs of its members; to
increase its revenues and to enhance the Nation’s economic
self-sufficiency.
  The
Development Agreement commenced upon execution and continues through the date
the Facility is open to the public and operational, until all obligations of the
parties have expired, as defined, or until all obligations owed to the Company
by the Nation have been satisfied, whichever is later; provided the agreement is
not terminated by mutual agreement.
  Under the
terms of the Development Agreement, the Company is responsible for arranging a
limited recourse loan or other arrangements to finance the Facility in an
aggregate principal amount of up to $350,000,000. The proceeds of the loan are
to be used exclusively for the development, design, construction, furnishing and
equipping of the Facility, for start-up and working capital and reimbursing the
Company for development advances.  Development advances are the funds
advanced by the Company for necessary costs in advance of the facility loan
which include expenses for legal, engineering and architectural
fees.  A development fee of 2.5% of total development costs will be
paid to the Company for services rendered pursuant to the Development Agreement
and are in addition to the amounts advanced to cover the development
costs.
  The
Company is committed under an agreement between a financial advisor and the
Nation through December 31, 2009, under which the advisor will assist in certain
financings, etc. Upon closing of any such financings, the Company shall issue
warrants to purchase common stock of the Company to the advisor equal to 7% of
the Company's fully diluted shares outstanding.
  As of
December 31, 2009, unbilled Development Advances were $2,217,912, including
$205,998 of interest and $49,071 of developer fees, which have been deferred.
The unbilled Development Advances will be billed upon the closing of the
financing and the deferred development fees will be recognized.
  In
October, 2007, as amended, Gaming acquired land in exchange for $556,000,
payable $288,000 in cash and the issuance of a note in the amount of $268,000,
payable on August 15, 2009, as extended, with interest payable at 18%, per
annum. In August 2009, the Company made a payment of $25,000 against the
note.
  On
November 1, 2009, the Company issued 660,000 shares of common stock in full
repayment of the note payable of $243,000 and accrued interest thereon of
$87,000, $0.50, per share. The number of shares and price per share are subject
to adjustment for stock splits, dividends, exchanges and consideration received
by stockholders in the event of an acquisition of the Company by another entity,
and dependent on the performance of the stock prices, as defined. In addition,
for one year and under certain conditions, the Company is could be liable for
certain market loss on these shares, as defined.
  On
December 23, 2008, under the terms of the Development Agreement, the land was
transferred to the Nation, without compensation, and the cost of the land has
been included in Contract Rights.
  Management
Agreement
  On June
14, 2008, Gaming entered into a Management Agreement with the Nation for an
exclusive right and obligation to manage, operate and maintain the gaming
facility to be developed in Sullivan County, New York, commencing on the
effective date, as defined, and continuing for a period of seven years after the
date on which gaming commences in the facility.  The term will be
automatically extended for a period of seven years unless terminated under the
provisions of the agreement.
  Under the
Management Agreement, the Nation will pay the Company a fee based on a percent
of gaming revenues, as defined.  As manager, the Company will conduct
and direct all business and affairs in connection with the operation, management
and maintenance of the Facility, including all commercial gaming business, sale
of food, beverages, tobacco and gifts, hotels, parking, resorts, amusement or
accommodation operations.
  Land
Purchase
  On May
26, 2009, the Company entered into an agreement to acquire additional real
property in Sullivan County, New York. The purchase price for the property was
7,049,142 shares of common stock of the Company, $1,750,000 in cash on escrow
and $1,750,000 in cash upon closing. On May 11, 2009, the Company issued
3,153,675 shares of common stock and RBL transferred, on behalf of the Company,
3,895,467 shares of the Company’s common stock to the seller, both being held in
escrow, as a deposit under the agreement. The shares were valued at $7,049,142,
$1.00, per share.
  In
October 2009, the Company issued 3,895,467 shares of common stock to
RBL.
  On
November 9, 2009, the Company issued 350,000 shares of common stock in
satisfaction of all anti-dilution rights of the land purchase
agreement.
  As the
agreement is cancellable, the time requirements under the agreement have been
delayed until certain matters have been resolved.
  8
 
 7.       CASINO
PROPERTIES
  On August
15, 2009, the Company entered into an agreement to acquire the purchase
opportunities (Purchase Opportunities) of certain other casino properties in
exchange for 5,000,000 shares of common stock of the Company, issuable 2,500,000
upon transfer of the first purchase opportunity and the balance of 2,500,000
shares to be held in escrow until agreements to manage casino property are
completed.  The Purchase Opportunities include contact information,
work product and due diligence to date on these certain casino
properties.
  8.
 INVESTMENT IN JOINT VENTURE
  Investment in joint venture consisted
of a 50% interest in India.  The financial statements of India are as
follows:
  As of December 31, 2009, the balance
sheet of India was as follows:
 
 Total
      Assets
              
              NONECapital
      Contribution
              
              $
              272,242Deficit
              
              
              (272,242
              )Total
      assets and liabilities
              
              NONE
 
 For the
period October 7, 2008 through December 31, 2009, the investment in India was
inactive.
  As of
December 31, 2009, the India casino development project is on hold and, as of
December 31, 2009, the Company has determined that the recovery of the carrying
value is uncertain and has written-off the investment in the joint venture of
$136,121.
  9.
 LEASE
 
 On August
8, 2008, the Company entered into a lease for office space, commencing on
September 1, 2008 through August 31, 2011.  Rent is payable in
advance, in annual installments. The initial year’s rent is $46,200, increasing
as defined. The Company has an option to extend the lease for an additional
three year period.
  As of
December 31, 2009, $28,508 of the second year’s rent was included in accrued
expenses.
  10. 
LOAN PAYABLE – STOCKHOLDER
 
 As of
December 31, 2009, loan payable - stockholder primarily consisted of Development
Advances incurred by RBL on behalf of the Company and is payable on demand, with
interest at 12%, per annum.
  On
November 9, 2009, the Company issued 1,500,000 shares of common stock to RBL as
repayment of loan payable – stockholder of $1,500,000, $1.00, per
share.
  11.
 NOTE PAYABLE -TRUCK
  On September 10, 2008, the Company
originally borrowed $20,800 to purchase a truck. The note is payable in equal
installments of $520, including interest at 9.19%, per annum, through September
10, 2012.
  As of December 31, 2009, minimum annual
payments under the loan are:
  2010
              
              $
              5,0562011
              
              
              5,5412012
              
              
              4,501$
              15,098
  12.
 COMMON STOCK
  On August
2, 2006, the Company issued 100 shares of common stock under a stock
subscription receivable for $100 which was paid in August 2008.
  On August
2, 2006, the Company authorized 100,000,000, $0.01, par value, shares of common
stock.
  On August
15, 2008, the Company issued 8,999,900 shares of common stock to RBL in payment
of due to stockholder of $513,079.
 9
 
 On August
21, 2008, the Company issued an aggregate of 8,300,000 shares common stock to
four officers and an employee of the Company as a one-time incentive in
connection with their employment agreements. The shares were valued at $473,100
($0.057, per share), the value of the shares issued on August 15, 2008, and were
charged to operations.
 
 On August
27, 2008, the Company issued an aggregate of 4,610,000 shares of common stock to
three individuals for services. The shares were valued at $262,770 ($0.057, per
share), the value of the shares issued August 15, 2008, and were charged to
operations.
  On
November 16, 2008 the Company entered into an agreement with a capital markets
consultant in exchange for a finder’s fee equal to 10% of the capital the
consultant may raise for the Company, payable 5% in cash and 5% in equity. In
addition, in March 2009, the Company issued 100,000 shares of common stock as a
commencement bonus, valued at $5,700.
  On
December 23, 2008, the Company issued 48,283 shares of common stock to RBL in
payment of due to stockholder, valued at $2,752.
  In
November and December 2008, the Company sold an aggregate of 114,000 shares of
common stock for an aggregate of $57,000, $0.50, per share.
  On
January 2, 2009, the Company issued 50,000 shares of common stock for legal
services, valued at $25,000, $0.50, per share.
  In
January, February and March 2009, the Company sold an aggregate of 285,000
shares of common stock for $285,000, $1.00, per share.
  In April,
May and June, 2009, the Company sold an aggregate of 220,000 shares of common
stock for $220,000, $1.00, per share.
  On
September 15, 2009, the Company issued 75,000 shares of common stock for
services rendered, valued at $75,000.
  In July,
August and September, 2009, the Company sold an aggregate of 300,000 shares of
common stock to investors for $300,000, $1.00, per share.
  In
November 2009, the Company issued 100,000 shares of common stock for
professional services valued at $100,000, $1.00, per share.
  In
November 2009, the Company sold 85,000 shares of common stock for $85,000,
$1.00, per share.
  In
December 2009, the Company sold 460,000 shares of common stock for $229,970,
$0.50, per share.
  Subscription
Receivable
  On
November 10, 2009, the Company entered into a subscription agreement
(Subscription), to sell 2,000,000 shares of its common stock, at a purchase
price of $.50, per share, for an aggregate purchase price of
$1,000,000.
 
 As of
December 31, 2009 and in January 2010, the Company has collected $125,961 and
$73,000, respectively, under the Subscription.
 
 13.  NONCONTROLLING
INTEREST
 
 As of
December 31, 2009, the noncontrolling interest of Gaming was 25%.
  14.
 INCOME TAXES
 
 As of
December 31, 2009, management has evaluated and concluded that there are no
significant uncertain tax positions requiring recognition in the Company’s
consolidated financial statements.
  15.  FINANCING
ARRANGEMENT
  On
October 26, 2009, the Company entered into an agreement with a placement agent
(Agent) for a proposed offering (Offering) up to $12,500,000 of debt obligations
or other financings, on a best-efforts basis.
  The
Company will pay fees to the Agent, as follows:
  -
              nonrefundable
      retainer of $25,000, payable $10,000 upon execution and $15,000 upon
      completion of a term sheet, credited  against expenses due of
      the Offering;
  -
              6%
      of the maximum amount of any debt securities, including the face value of
      any committed line of credit, payable at
  closing;
  -
              a
      warrant to purchase common shares of the Company equal to 3% of(10 the
      number of shares issued in an equity financing  and (2) any
      maximum credit available in any debt obligation divided by the closing
      price of the Company's stock price on the day of closing, as defined. The
      warrant will be exercisable at the minimum exercise price of any warrants
      received by investors in the financing or, in the absence of any warrant
      issuance, the closing price for the common stock of the Company on the day
      of the closing for five years.  10
  16.
COMMITMENTS AND CONTINGENCIES
  On December 2, 2008, the Company
entered into an agreement with a consultant to provide lobbying and other
related services for $15,000, per month, through December 31, 2009.
  On March 25, 2009, the Company entered
into an agreement for architectural services to construct a temporary casino in
Sullivan County, New York, for $25,000, not including reimbursable expenses,
payable monthly based upon the percentage of work completed.
  On April 23, 2009, the Company entered
into an agreement with a consultant to provide public relations, advertising and
marketing services for $5,000, per month, through April 30, 2010.
  From April 9, 2009, the Company has
agreed to pay a consultant for legislative and regulatory representation of
$10,000, per month, through April 9, 2010.
  17.  ADOPTION
OF ACCOUNTING POLICIES
  During
the six months ended December 31, 2009, the Company adopted the following
accounting pronouncements without a material impact on the financial
statements.
  In
September 2009, the Financial Accounting Standards Board (FASB) issued ASU No.
2009-08, "Earnings Per Share - Amendments to Section
260-10-S99".  This Codification Update represents technical
corrections to Topic 260-10-S99, "Earnings Per Share", based on EITF Topic D-53,
"Computation of Earnings Per Share for a Period that Includes a Redemption or an
Induced Conversion of a Portion of a Class of Preferred Stock" and EITF Topic
D-42, "The Effect of the Calculation of Earnings Per Share For the Redemption or
Induced Conversion of Preferred Stock". The Codification Update provides
guidance regarding the definition of redemptions and conversions of
equity-classified preferred stock instruments in relation to the calculation of
earnings per share.
  In August
2009, the FASB issued ASU No. 2009-05, "Measuring Liabilities at Fair
Value".  This ASU amends the "Fair Value Measurements and Disclosures"
Topic of the Codification to provide further guidance on how to measure the fair
value of a liability.  ASU No. 2009-05 is effective for the first
reporting period beginning after issuance.
  In June
2009, the FASB issued Statement No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162” (“SFAS 168”).  FAS 168
establishes the FASB Accounting Standards Codification (“Codification”) as the
source of authoritative U.S. generally accepted accounting principles (“GAAP”)
recognized by the FASB to be applied to rules and interpretive releases of the
Securities and Exchange Commission (“SEC”) under federal securities laws as
authoritative GAAP for SEC registrants.
 
 In April
2009, the FASB issued Staff Position No. 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB
28-1”), FSP FAS 107-1 and APB 28-1 amends SFAS 107, “Disclosures about Fair
Value of Financial Instruments”, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements.  This FSP also amends APB
Opinion No. 28, “Interim Financial Reporting”, to require those disclosures in
summarized financial information at interim reporting periods.  FSP
FAS 107-1 and APB 28-1 is effective for interim reporting periods ending after
June 15, 2009 and does not require disclosures for earlier periods presented for
comparative purposes at initial adoption.  In periods after initial
adoption, the FSP requires comparative disclosures only for periods ending after
initial adoption.
  Statement
of Financial Accounting Standards No. 141(R), “Business Combinations” (“SFAS
141”), which replaced SFAS No. 141, “Business Combinations”, establishes
principles and requirements for determining how an enterprise recognizes and
measures the fair value of certain assets and liabilities acquired in a business
combination, including non-controlling interests, contingent consideration and
certain acquired contingencies.  SFAS 141(R) also requires
acquisition-related transaction expenses and restructuring costs be expensed as
incurred rather than capitalized as a component of the business
combination.
  Financial
Staff Position (“FSP”) 141(R)-1, “Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies”, amended and
clarified SFAS 141R to address application issues associated with initial
recognition and measurement, subsequent measurement and accounting, and
disclosure of assets and liabilities arising from contingencies in a business
combination.
  In April,
2008, the FASB issued Statement of Financial Accounting Standards Staff Position
142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”).
FSP 142-3 amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized
intangible asset under FASB No. 142, “Goodwill and Other Intangible Assets”. FSP
SFAS 142-3 is effective for financial statements issued for fiscal years
beginning after December 31, 2008 and must be applied prospectively to
intangible assets acquired after the effective date.
  FASB No.
160. “Non-controlling Interest in Consolidated Financial Statements – An
Amendment of ARB No. 51” (“SFAS 160”), establishes accounting and reporting
standards for the non-controlling interest in a subsidiary (previously referred
to as minority interests).  SFAS 160 also requires that a retained
non-controlling interest upon the deconsolidation of a subsidiary be initially
measured at its fair value.  SFAS 160 also requires reporting any
non-controlling interests as a separate component of stockholders’ equity and
presenting any net income allocable to non-controlling interests and net income
attributable to stockholders of the Company separately in its consolidated
statements of income.




11
 
 18.
 SUBSEQUENT EVENTS
  Gaming
Vessel
  In
January 2010, the Company entered into an offer to purchase with a Chapter 11
Trustee a gaming vessel for $3,000,000, payable: (a) $125,000 in cash, (b) a
note in the amount of $125,000, as a deposit, and (c) the balance at
closing. The closing shall be no later than March 15, 2010, subject to a
single extension of no more than 30 days, at the election of the Company upon a
payment to the Trustee of an additional cash deposit of $50,000.  The
deposit shall be forfeited in the event that the Company defaults, breaches the
terms of the offer, or breaches the terms of any sale. In February 2010, the
Chapter 11 Trustee approved the sale.
  The Note
is due March 15, 2010, with interest at 22%, per annum, and is guaranteed by the
Company’s chief executive officer.
  In,
January 2010, a newly formed subsidiary of the Company, organized to acquire the
gaming vessel, sold 20% of its initial capitalization for
$125,000.
  Consulting
Agreements
  On
February 1, 2010, the Company entered into agreements with two consultants for
the renovations and operations of the gaming vessel for an aggregate of
$100,000, payable $10,000, per month, commencing October 1, 2010 through July 1,
2011.
  12
  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
  The
following discussion should be read in conjunction with, and is qualified in its
entirety by, the Unaudited Financial Statements and the Notes thereto included
in this report. This discussion contains certain forward-looking statements that
involve substantial risks and uncertainties. When used in this report, the words
"anticipate," "believe," "estimate," "expect” and similar expressions as they
relate to our management or us are intended to identify such forward-looking
statements. Our actual results, performance or achievements could differ
materially from those expressed in, or implied by, these forward-looking
statements. Historical operating results are not necessarily indicative of the
trends in operating results for any future period.




OVERVIEW





Rotate
Black, Inc. (Company) was incorporated in Nevada on August 2, 2006 to be the
successor by merger of BevSystems International, Inc. and BevSystems
International Ltd. (BevSystems) under a plan of reorganization (Plan), effective
August 15, 2008, as approved by the United States Bankruptcy Court in Tampa,
Florida. Under the terms of the Plan, BevSystems merged into the Company with
the Company as the survivor.




On March
31, 2004, BevSystems filed under Chapter 7 of the Bankruptcy Code and, on April
15, 2006, filed a plan of reorganization under Chapter 11 of the Bankruptcy
Code. The Plan provided for the Company to: (1) purchase the intangible assets
of BevSystems for $175,000, (2) pay creditors opting out of the common stock
settlement an aggregate of $10,000, (3) pay all legal and other cost of the Plan
of $189,265 and (4) issue 1,000,000 shares of common stock of the Company (10%)
to the balance of the creditors. The shares issued to the creditors were valued
at $.057, per share, the value of the shares acquired by the 90% stockholder,
for an aggregate purchase price of $513,079. All costs of the bankruptcy were
paid by the 90% stockholder, Rotate Black, LLC (RBL), an entity substantially
owned by an officer of the Company and family members. The Company was also
required to provide an escrow fund for future operations of $200,000. All
outstanding equity shares of BevSystems were cancelled. All requirements under
the Plan have been met. The Company recorded the purchase of BevSystems under
the purchase method of accounting and allocated the entire purchase price to
intangible assets.




On August
15, 2008, the Company commenced operations and all activity prior thereto has
been charged to operations. Rotate Black is a development stage company focused
on building its business of developing and managing casino properties
worldwide.




Gaming




On
October 7, 2008, the Company entered into certain agreements with Rotate Black,
LLC (“RBL”) a Michigan Limited Liability Company for the acquisition of three of
its business units, “Gaming” “Dayton” and “India” (as each is defined in the
preceding notes to the financial statements). Under the terms of the agreements,
we acquired land, receivables and contract rights for an aggregate of 40,440,900
shares of its common stock.




Pursuant
to the RBL agreement we acquired a seventy five percent (75%) ownership in RBL’s
wholly owned subsidiary Rotate Black Gaming, Inc. (Gaming), a Nevada
corporation. In accordance with a December 2009 Executive Order issued by the
President of the Seneca Nation of Indians (Nation), Gaming is the Presidential
Representative to pursue the development of a Class III world-class casino
resort tentatively scheduled to be named “the Seneca Catskills Resort and
Casino” consistent with the terms of Development and Management Agreements
previously entered into with the Nation.  To date, Gaming has
completed the overall plans for the three phased development, acquired property
and transferred the property to the Nation. Although there can be no assurance,
Gaming intends to discuss and finalize a successful strategy with the Nation for
moving the lands to gaming eligible status.


13





On
December 4, 2009, Gaming received a written temporary determination from the
Nation’s gaming regulatory body, the Seneca Gaming Authority (SGA). The
temporary determinations found our gaming subsidiary and four of our officers
unsuitable to be issued a Class III Gaming License by the SGA.




On
December 23, 2009, the Nation issued an Executive Order providing that it was
"in the Nation's best interests" that Gaming "continue to pursue a Catskills
Class III gaming facility on behalf of the Nation" during the SGA appeal process
and designated Gaming “a Presidential Representative" to pursue such Catskills
project " consistent with terms of the Development and Management Agreements
previously entered into with the Nation".  The Executive Order
provides Gaming with the Presidential authority to continue to exclusively
develop this project pending the SGA’s appeal process. At the successful
conclusion of the SGA’s appeals process, we intend to seek any and all formal
extensions




On
January 19, 2010, each of Gaming and the four officers filed appellant petitions
with the SGA to review their initial determinations of
suitability.  We believe the appellant petitions provided meritorious
factual and legal positions for the SGA to reverse its initial
determinations.




On
February 10, 2010, the SGA notified Gaming that it had determined that it was
not necessary to continue the licensing process for Gaming and its four named
officers and that it was prepared to rescind its temporary findings of
unsuitability and withdraw such findings without prejudice.  Gaming
continues to work with the SGA for a final satisfactory resolution of this
matter.




Big Easy
Gaming Vessel




On
February 2, 2010, Rotate Black, Inc entered into a purchase agreement with the
Chapter 11 Trustee of Cruise Holding II, LLC to purchase the gaming vessel “The
Big Easy” for $3,000,000. Pursuant to the Purchase Agreement, the Company paid a
cash deposit of $125,000 and issued a note in the amount of $125,000, which was
personally guaranteed by the Company’s Chief Executive Officer, John Paulsen.
The Purchase Agreement provides for a closing no later than March 15, 2010,
subject to a single extension of no more than 30 days, at the election of the
Company upon a payment to the Trustee of an additional cash deposit of $50,000.
The Purchase Agreement also provides that the $250,000 deposit shall be
forfeited as liquidated damages in the event that the Company defaults, breaches
the terms of the offer, or breaches the terms of any sale order that may be
entered by the U.S. Bankruptcy Court for the Southern District of
Florida.




On
February 8, 2010, the US Bankruptcy Court for the Southern District of Florida
approved the Private Sale of the M/V Big Easy free and clear of liens, claims
and encumbrances to us. The Court ordered that any party in interest objecting
to the sale order may file a motion for reconsideration within ten calendar
days, so long as the objecting party enters into a binding Asset Purchase
Agreement with the Trustee at a cost higher than $3,525,000 and tenders a cash
deposit in the amount of $525,000. Then if the Court agrees to vacate the
Company’s sale order, Rotate Black would be entitled to receive a break up fee
of $250,000 and a refund of its cash deposit along with the cancellation of the
promissory note and personal guaranty.  At the time of this filing no
one had objected to the Court’s approved sale order.




Other
Gaming Development




As of
February 15, 2010, we have commenced the early development of other gaming
properties and placed our India and Dayton gaming developments on
hold.




Life
O2




Management
is currently evaluating sublicense and bottling arrangements or a sale of the
license.


14
  Results
of Operations





Revenue




As of
December 31, 2009, we have had no recognizable revenues. Revenues, consisting of
development fees, will commence upon the closing of the financing related to the
Development Agreement. As of December 31, 2009, we have unbilled development
advances of $2,219,223.




Operating
Expenses




Operations
for the six months ended December 31, 2009 and 2008 are not comparable because,
during 2008, the Company was not operational inasmuch as management was pursuing
contracts and approvals but not expending capital or incurring expenses while
awaiting contracts and approvals.




Our
operating expenses consisted of salaries, stock based compensation and various
general and administrative expenses. As of December 31, 2009, we wrote-off our
investment in joint venture for our India casino development of $136,121. Our
management has determined that the fair value was uncertain because the gaming
laws in India may not stabilize for two to three years.




Also,
during the six months ended December 31, 2010, a vender agreed to forgive
$49,145 for payment of the balance due.




Cash Used
in Financing Activities




Net cash
flows from financing activities for the six months ended December 31, 2009 was
$586,483, consisted of proceeds from sales of common stock of $740,931,
principally offset in part by a decrease in loan payable – stockholder (RBL) of
$126,705




Net cash
flows from financing activities for the six months ended December 31, 2008 were
$640,897, consisted proceeds from sales of common stock of $57,000 and an
increase in loan payable – stockholder (RBL) of $583,897




Liquidity
and Capital Resources




As of
December 31, 2009, we had negative working capital of $1,754,585 compared to
negative working capital of $1,930,225 as of June 30, 2009, an accumulated
deficit of $2,589,450 and further losses are anticipated.




We do not
have sufficient funds to continue our operating activities. Future operating
activities are expected to be funded by sales of common stock and to a limited
extent, provided by loans from RBL, our major stockholder until such time that
operations will generate sufficient funds.




These
factors raise doubt about our ability to continue as a going concern. Our
ability to continue as a going concern is dependent upon our ability to generate
profitable operations in the future and/or to obtain the necessary financing to
meet its obligations arising from normal business operations when they come due.
These financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or the amounts of and
classification of liabilities that might be necessary in the event we cannot
continue.




Upon the
funding of the Facilities financing with CRT Capital, the deferred development
cost will be invoiced and we will recognized our deferred revenue.


15





On
October 26, 2009, we entered into an agreement with CapStone Investments to act
as placement agent (Agent) for a proposed offering by the Company of up to
$12,500,000 of debt obligations or other financings, on a best-efforts
basis.




We plan
to utilize the proceeds of the CapStone financing to fund the acquisition of
assets and operations of the casino properties under the Purchase
Opportunities.




Contractual
Obligations





Not
applicable as we are a smaller reporting company.





Off-balance
Sheet Arrangements





The
Company has no off-balance sheet arrangements.





Impact
of Inflation





We
believe that inflation has not had a material impact on our results of
operations for the six months ended December 31, 2009. We cannot be assured that
future inflation will not have an adverse impact on our operating results and
financial condition.





ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK




Not
applicable as we are a smaller reporting company.





ITEM 4(T). CONTROLS AND
PROCEDURES




Evaluation
of Disclosure Controls and Procedures





We
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and our Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act. Based upon that evaluation, our Chief Executive Officer and
the Chief Financial Officer, we have concluded that our disclosure controls and
procedures were not effective as of December 31, 2009, based on their evaluation
of these controls and procedures. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by an issuer in reports it files or submits under the
Exchange Act is accumulated and communicated to management, including its
principal executive officer or officers and principal financial officer or
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.




We have
identified certain matters that constitute deficiency (as defined under the
Public Company Accounting Oversight Board Auditing Standard No. 2) in our
internal controls over financial reporting. The deficiencies that we have
identified relate to the fact that that our overall financial reporting
structure, internal accounting information systems and current staffing levels
are not sufficient to support our financial reporting requirements. We are
working to remedy our deficiency.




Changes
in internal control over financial reporting




There
were no changes in our internal control over financial reporting that occurred
during the quarter ending December 31, 2009 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.





16





PART
II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS








ITEM 1A. RISK FACTORS








ITEM 2. UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS





In
October 2009, the Company issued 3,895,467 shares of common stock for the
purchase of land of $3,895,467, $1.00, per share.




On
November 1, 2009, the Company issued 660,000 shares of common stock in full
repayment of the note payable of $243,000 and accrued interest thereon of
$87,000, $0.50, per share




On
November 9, 2009, the Company issued 1,500,000 shares of common stock to RBL as
repayment of loan payable – stockholder of $1,500,000, $1.00, per
share.




On
November 9, 2009, the Company issued 350,000 shares of common stock in
accordance with the anti-dilution rights clause of the land purchase
agreement.




In
November 2009, the Company issued 100,000 shares of common stock for
professional services valued at $100,000, $1.00, per share.




In
November 2009, the Company sold 85,000 shares of common stock to an investor for
$85,000, $1.00, per share.




In
December 2009, the Company sold 460,000 shares of common stock to an investor
for $229,970, $0.50, per share.




Subscription
Receivable




On
November 23, 2009, the Company entered into a Subscription Agreement with one
accredited investor, an individual previously known to the Company and a
stockholder, pursuant to which the Company sold 2,000,000 shares of its common
stock, at a purchase price of $.50, per share in a private placement for an
aggregate purchase price of $1,000,000.  As of December 31, 2009 the
Company had collected $125,961 under the terms of the Subscription
Agreement.





ITEM 3. DEFAULTS
UPON SENIOR SECURITIES




None.





ITEM 4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS





None.




17





ITEM 5. OTHER
INFORMATION





None.





ITEM 6.
EXHIBITS





Exhibit No.:
            
            Exhibit31.1
            
            Certification
      of Principal Executive Officer pursuant to Rule 13a-15(a) and Rule 15d-15(a),
      promulgated under the Securities Exchange Act of 1934, as amended.31.2
            
            Certification
      of Principal Financial Officer pursuant to Rule 13a-15(a) and Rule 15d-15(a),
      promulgated under the Securities Exchange Act of 1934, as amended.32.1
            
            Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to 18
      U.S.C.
              Section
      1350, as adopted pursuant to Section 302 of The Sarbanes-Oxley Act of
      2002.








18




SIGNATURES




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





ROTATE
      BLACK, INC.
              (Registrant)February
      16, 2010
            
            By:
            
            /s/
      John PaulsenJohn
      PaulsenChief
      Executive Officer
              (Authorized
      Officer, Principal Executive Officer and Principal Financial
      Officer)





19