UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-Q


þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009


OR


o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________




Commission file number 0-53439




DRAGON’S LAIR HOLDINGS, INC.


(Exact name of registrant as specified in its charter)




Florida

26-1427633(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)





785 NE 83rd Terrace
Miami, Florida

33138(Address of principal executive offices)

(Zip Code)




(786) 554-2771


(Issuer’s telephone number, including area code)





Not applicable


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





Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þNo o





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).  Yes oNo þ





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





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


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes þNo o




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




Class

Outstanding at June 30, 2009Common Stock, no par value per share

8,001,078 shares


-1-


DRAGON’S LAIR HOLDINGS, INC.




TABLE OF CONTENTS


PAGEPart I Financial Information
3Item 1. Financial Statements (unaudited)
3Balance Sheets
3Statements of Operations
4Statements of Cash Flows
5Notes to Financial Statements
6Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
11Item 3. Quantitative and Qualitative Disclosures About Market Risk
16Item 4. Controls and Procedures
17Part II Other InformationItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
18Item 6. Exhibits
18SignaturesExhibit 31.1Exhibit 32.1


-2-





PART I FINANCIAL INFORMATION





Item 1.  Financial Statements





DRAGON'S LAIR HOLDINGS, INC.(A DEVELOPMENT STAGE COMPANY)CONSOLIDATED BALANCE SHEETSASSETSJune 30, 2009


December 31, 2008(unaudited)


(audited)CURRENT ASSETS:Cash and equivalents

$
33,416


$
66,613Inventory


402



402Total Current Assets


33,818



67,015FIXED ASSETS:Equipment, net


395



445OTHER ASSETS:License, net


780



900Total Assets

$
34,993


$
68,360LIABILITIES AND SHAREHOLDERS' EQUITYCURRENT LIABILITIES:Accounts payable & accrued expenses

$
800


$
6,051Total Liabilities


800



6,051SHAREHOLDERS' EQUITY:Preferred stock (15,000,000 authorized;par value $.001; none issued and outstanding)

$
-



-Common stock (100,000,000 shares authorized;no par value; 8,001,078 and 8,001,078 issued and outstanding, respectively)


88,587



84,741Deficit accumulated during the development stage


(54,394
)


(22,432
)Total Shareholders' Equity


34,193



62,309Total Liabilities and Shareholders' Equity

$
34,993


$
68,360





-3-


DRAGON'S LAIR HOLDINGS, INC.(A DEVELOPMENT STAGE COMPANY)CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)  Cumulative from October 4, 2007 (Inception) through June 30, 2009For the three months ended June 30, 2009


For the three months ended June 30, 2008


For the six months ended June 30, 2009


For the six months ended June 30, 2008Net Sales

$
-


$
-


$
-


$
-


$
1,242Cost of Sales


-



-



-



-



131Gross Profit


-



-



-



-



1,111Expenses:Amortization


60



60



120



120



420Depreciation


25



-



50



-



100General and Administrative


14,363



3,263



31,793



9,271



54,985Total Expenses


(14,448
)


(3,323
)


(31,963
)


(9,391
)


(55,505
)Net (loss) before Income Taxes


(14,448
)


(3,323
)


(31,963
)


(9,391
)


(54,394
)Provision for Income Taxes


-



-



-



-



-Net (loss)

$
(14,448
)

$
(3,323
)

$
(31,963
)

$
(9,391
)

$
(54,394
)Basic and diluted net loss per common share

$
-


$
-


$
-


$
-Weighted average number of common shares outstanding


8,001,078



6,138,278



8,001,078



8,001,078
  -4-
 DRAGON'S LAIR HOLDINGS, INC.(A DEVELOPMENT STAGE COMPANY)CONSOLIDATED STATEMENTS OFCASH FLOWS(Unaudited)
 Cumulative from October 4, 2007 (Inception) through June 30, 2009For the six months ended June 30, 2009


For the six months ended June 30, 2008OPERATING ACTIVITIES:Net loss

$
(31,963
)

$
(9,391
)

$
(54,394
)Issuance of common stock for services


3,846



4,008



7,854Increase in amortization


120



120



420Increase in prepaid printing


-



(787
)Increase in depreciation


50



-



100Increase in inventory


-



-



(402
)Increase (decrease) in accounts payable


(5,251
)


1,800



800Net cash used in operating activities


(33,198
)


(4,250
)


(45,622
)INVESTING ACTIVITIES:Increase in Equipment


-



(495
)


(495
)FINANCING ACTIVITIES:Proceeds from issuance of common stock


-



-



79,533NET INCREASE (DECREASE) IN CASH


(33,198
)


(4,745
)


33,416CASH BEGINNING BALANCE


66,614



11,200



-CASH ENDING BALANCE

$
33,416


$
6,455


$
33,416SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Taxes paid

$
-


$
-


$
-Interest paid

$
-


$
-


$
-CASH TRANSACTIONS AFFECTING OPERATING, INVESTINGAND FINANCING ACTIVITIES:Issuance of common stock for license

$
-


$
-


$
1,200
 -5-


DRAGON’S LAIR HOLDINGS, INC.


(A DEVELOPMENT STAGE COMPANY)





NOTES TO CONSOLIDATEDFINANCIALSTATEMENTS





JUNE 30, 2009





NOTE 1 – BASIS OF PRESENTATION





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





NOTE 2 - DESCRIPTION OF BUSINESS AND DEVELOPMENT STAGE RISK





Description of Business





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


DRAGON’S LAIR HOLDINGS, INC.
a Florida corporation
 
 DRAGON’S LAIR HEALTH PRODUCTS, INC.
a Florida corporation
(100% Owned Subsidiary)




Our Company is a provider of personal care products by means of a network of direct sales consultants, which is in the development stage.  Our business strategy is to provide quality products, operate at a profit and enable our direct sales consultants to operate at a profit.  In July, 2008, we commenced providing
our first product, the Sore-EezÔ Chinese herbal body liniment.





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





Basis of Presentation





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


-6-





Going Concern





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





Management’s Plan to Continue as a Going Concern





The Company has met its historical working capital requirements from the sale of its capital shares.  In order to continue as a going concern, the Company will need, among other things, additional capital resources.  Management’s plans to obtain such resources for the Company include (1) obtaining capital from
the sale of the Series A Convertible Preferred Stock in this offering, (2) the sale of the Sore-EezÔ Chinese herbal body liniment and other product candidates, (3) loans from Talles Investments, Inc. to meet its minimal operating expenses, and (4) seeking out and completing a merger with an existing operating company.  However, management cannot provide any assurance that the Company will be successful in accomplishing any of its
plans.





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.  In order to minimize the financial burden on the Company, Talles Investments, Inc.,
the Company’s majority shareholder, has agreed to provide non-interest bearing demand loans to the Company to pay the Company’s annual audit fees, filing costs, legal fees and other costs as long as the Board of Directors of the Company and Talles Investments, Inc. deem it necessary.  The Company will account for each such payment as a demand loan and, accordingly, be recorded as a current liability on the Company’s books.  There can be no assurance that such financial support
shall be ongoing or available on terms or conditions acceptable to the Company.





Development Stage Risk





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





NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Cash and Cash Equivalents





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





Use of Estimates





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


-7-





Inventories





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





Revenue Recognition





The Company recognizes revenue when:





·
Persuasive evidence of an arrangement exists;





·
Shipment has occurred;





·
Price is fixed or determinable; and





·
Collectibility is reasonably assured.





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





Earnings (Loss) Per Share





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





Intangible Assets





Intangible assets consist of a license agreement which is recorded at cost and amortized over a straight-line basis.  The amortization expense for the periods from January 1, 2009 to June 30, 2009 and from October 4, 2007 (inception) to June 30, 2009 was $60 and $360, respectively.  The value of the license was determined
to be the legal costs to create the license, which was $1,200, as there were no other out-of-pocket costs for the license or the development of the recipe.





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





Income Taxes





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


-8-





Fair Value of Financial Instruments





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





Share Based Payments





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





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





NOTE 4 - EQUITY TRANSACTIONS





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





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





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




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






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




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





NOTE 5 – INCOME TAXES





The Company provides for income taxes under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases
of assets and liabilities and the tax rates in effect when these differences are expected to reverse.


-9-





SFAS No. 109 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.





The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 34% to the net loss before provision for income taxes for the following reasons:





June 30


December 31,2009


2008Income tax expense (asset) at statutory rate

$
(371
)

$
(371
)Valuation allowance


371



371Income tax expense per books

$
-0-


$
-0-





Net deferred tax assets consist of the following components as of:





June 30,


December 31,2009


2008NOL Carryover

$
54,394


$
22,432Valuation allowance


(54,394
)


(22,432
)Net deferred tax asset

$
-0-


$
-0-





Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forward as of June 30, 2009 was $54,394, and for federal income tax reporting purposes are subject to annual limitations. Should a change in our ownership occur the net operating loss carry forwards may be limited as to their use in future
years.





NOTE 6 - CONCENTRATION OF CREDIT RISK





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





NOTE 7 - LICENSE AGREEMENT





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


-10-





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





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





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


Year Ending December 312007

$
602008

$
2402009


2402010


2402011


2402012


180$
1,200




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





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




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




For a discussion of the factors that could cause actual results to differ materially from the forward-looking statements see the “Liquidity and Capital Resources” section under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this item of this report and the other
risks and uncertainties that are set forth elsewhere in this report or detailed in our other Securities and Exchange Commission reports and filings.  We believe it is important to communicate our expectations. However, our management disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
 -11-




Overview




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




Going Concern




Our financial statements have been prepared on the basis of accounting principles applicable to a going concern. As a result, they do not include adjustments that would be necessary if we were unable to continue as a going concern and would therefore be obligated to realize assets and discharge our liabilities other than in the normal
course of operations.  As reflected in the accompanying financial statements, the Company is in the development stage with limited revenues, has used cash flows in operations of $45,622 from inception of October 4, 2007 to June 30, 2009 and has an accumulated deficit of $54,394 through June 30, 2009. This raises substantial doubt about our ability to continue as a going concern, as expressed by our auditors in its opinion on our financial statements included in this report. The ability of the Company
to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.





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




Critical Accounting Policies




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





Stock Compensation




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




Revenue Recognition




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


-12-




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




Outlook




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




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




Revenues




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





General and Administrative Expenses


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





Summary of Consolidated Condensed Results of Operations





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





Results for the Six Months Ended June 30, 2009 Compared to June 30, 2008





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




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




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


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Executive, Marketing and Promotion Expenses.  Executive, marketing and promotion expenses for the six months ended June 30, 2009 were $4,980 compared to $0 for the six months ended June 30, 2008.  Executive, marketing and promotional expenses consist primarily
of salary and promotional, public relations expenses and travel relating to participation in our direct sales consultants’ marketing efforts.  We expect our executive, selling and marketing expenses to increase in the future due to an increase in direct expenses related to executive compensation, sales and marketing, including increases to salaries to personnel in marketing and business development, as well as increased bonus payments and sales commissions on our revenues.




General and Administrative Expenses. General and administrative expenses for the six months ended June 30, 2009 were $26,983 compared to $9,391 for the six months ended June 30, 2008.  General and administrative expenses consisted primarily of professional service fees
associated with the Company its initial public offering, stock compensation expense and amortization of a license.




Net Loss. Net loss for the six months ended June 30, 2009 was $31,963 as compared to $9,391 for the six months ended June 30, 2008.  The net loss for the six months ended June 30, 2009 and June 30, 2008 was primarily related to general and administrative expenses and
no revenues for the periods indicated.





As of six months ended June 30, 2009, we had an accumulated deficit of $54,394.





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




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




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




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




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




General and Administrative Expenses. General and administrative expenses for the three months ended June 30, 2009 were $14,363 compared to $3,323 for the three months ended June 30, 2008. General and administrative expenses consisted primarily of professional service fees associated
with the Company its initial public offering, stock compensation expense and amortization of a license.




Net Loss. Net loss for the three months ended June 30, 2009 was $14,448 as compared to $3,323 for the three months ended June 30, 2008.  The net loss for the three months ended June 30, 2009 and June 30, 2008 was primarily related to general and administrative expenses
and no revenues for the periods indicated.


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Impact of Inflation




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





Liquidity and Capital Resources




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





As of June 30, 2009, total current assets were $33,818 which consisted of $33,416 of cash and $402 of inventory.  As of December 31, 2008, total current assets were $67,015 which consisted of $66,613 of cash and $402 of inventory.





As of June 30, 2009, total current liabilities were $800, which consisted of accounts payable.  As of December 31, 2008, total current liabilities were $6,051, which consisted of accounts payable.  We had net working capital of $33,018 as of June 30, 2009, compared to net working capital of $60,964 as of December
31, 2008.





During the six months ended June 30, 2009, operating activities used cash of $33,198 as compared to the six months ended June 30, 2008, where we used cash of $4,250 in operating activities.  The cash used by operating activities for the six months ended June 30, 2009 and June 30, 2008 was due primarily to general and administrative
expenses.





For the six months ended June 30, 2009, we had a net decrease in cash of $33,198 as compared to $4,745 for the six months ended June 30, 2008. Cash flows from financing activities represented the Company’s principal source of cash since October 4, 2007 (inception) through June 30, 2009.




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





Intangible Assets





Intangible assets consist of a license agreement, which is recorded at cost and amortized over a straight-line basis.  The amortization expense for the six month period ended June 30, 2009 and December 31, 2008 was $120 and $120, respectively.  The value of the license was determined to be the legal costs to create
the license, which was $1,200 and less amortization expense, it was valued at $780 as of June 30, 2009 and $900 as of December 31, 2008.





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





Material Commitments





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




Off-Balance Sheet Arrangements





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


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Recent Accounting Pronouncements




In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51 “. This statement improves the relevance, comparability, and transparency
of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require; the ownership interests in subsidiaries held by parties other than the parent and the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income, changes in a parent’s ownership interest while the parent retains its
controlling financial interest in its subsidiary be accounted for consistently, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value, entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners.




SFAS No. 160 affects those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The adoption
of this statement is not expected to have a material effect on the Company’s financial statements.




In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments
and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures
and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement.




In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 162 identifies the sources of accounting principles and provides entities with a framework for selecting the principles used in preparation of financial statements that are presented in conformity with
GAAP. The current GAAP hierarchy has been criticized because it is directed to the auditor rather than the entity, it is complex, and it ranks FASB Statements of Financial Accounting Concepts, which are subject to the same level of due process as FASB Statements of Financial Accounting Standards, below industry practices that are widely recognized as generally accepted but that are not subject to due process. The Board believes the GAAP hierarchy should be directed to entities because it is the entity (not its
auditors) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. The adoption of FASB 162 is not expected to have a material impact on the Company’s financial position.




In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60.” Diversity exists in practice in accounting for financial guarantee insurance contracts by insurance enterprises under FASB Statement No. 60, Accounting and Reporting
by Insurance Enterprises. This results in inconsistencies in the recognition and measurement of claim liabilities. This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality
of information provided to users of financial statements. The adoption of FASB 163 is not expected to have a material impact on the Company’s financial position.





Item 3. QuantitativeandQualitative Disclosures About Market Risk




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


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Item 4.  Controls and Procedures





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





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





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





Management’s Report on Internal Control over Financial Reporting





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





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


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


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





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





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





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





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





/s/ Michel Lemoine


President, Secretary, Treasurer and Director


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PART II OTHER INFORMATION





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





Unregistered Sales of Equity Securities





The following is a summary of unregistered sales of equity securities by us during the three months ended June 30, 2009.  Each offer and sale was made in reliance on Section 4(2) of the Securities
Act, or Regulation D promulgated under Section 4(2) of the Securities Act, as transactions by an issuer not involving any public offering.  The purchaser was an “accredited investor” known to usthrough apre-existing business
relationship.  The purchaser was provided access to all material information which it requested, and all information necessary to verify such information and was afforded access to ourmanagement
in connection with its purchase. The purchaser of the unregistered securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to the registrant. The stock certificate representing such securities that were issued contained a
restrictive legend, prohibiting further transfer of the stockcertificate representing such securities, without such securities either being first registered or otherwise exempt from registration under the Securities Act, in any further resale or disposition.





On April 1, 2009, we issued 100,000 shares of common stock to Island Capital Management, LLC, our transfer agent, for services rendered by the transfer agent valued at $3,846.  We believe that the issuance of the shares was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by
virtue of Section 4(2).





Use of Proceeds from Initial Public Offering





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








Marketing, Promotion and Advertising

$
4,256Printing expenses


6,656Executive Compensation


1,080Legal fees and expenses


16,382Accounting fees and expenses


6,100Blue sky fees and expenses


1,292Transfer Agent fees


4,661Miscellaneous


1,385Total

$
41,812


Other than executive compensation paid to our Chief Executive Officer, President, Secretary and Treasurer in the amount of $1,080, no cash payments were made to the directors or officers of the Company or associates or affiliates of the Company from the proceeds of our initial public offering.




Item 6.  Exhibits




(a)                 Exhibits




Exhibit 31.1302 Certification – Michel Lemoine


Exhibit 32.1906 Certification – Michel Lemoine
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SIGNATURES







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








DRAGON’S LAIR HOLDINGS, INC.








DATE:  August 7, 2009                                                                      By:/s/
Michel Lemoine


Michel Lemoine


President, Secretary and Treasurer


(Principal Accounting Officer and Authorized Officer)


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Dragon’s Lair Holdings, Inc.





Index to Exhibits


Exhibit Number       Description


Exhibit 31.1302 Certification – Michel Lemoine
 Exhibit 32.1906 Certification – Michel Lemoine
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