ELRAY RESOURCES, INC. and SUBSIDIARIES
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION
Elray Resources, Inc. (“Elray” or the “Company”), a Nevada corporation formed on December 13, 2006, is a development stage company and has not yet realized any revenue from its planned operations. Elray has been in the process of developing an online gaming casino.
On February 23, 2011, the Company entered into an agreement (the “Splitrock Agreement”) to acquire 100% of the issued and outstanding shares of Splitrock Ventures (BVI) Limited (“Splitrock”) in exchange for 5,924,547 shares of the Company’s common stock. Splitrock is in the online gaming business. On the closing date, pursuant to the terms of the Splitrock Agreement, Anthony Goodman, representing the shareholders of Splitrock, shall acquire 5,924,547 shares of Elray’s common stock, which resulted in a change of control.
On December 9, 2011, Elray entered into an Amended Purchase Agreement (“Amended Splitrock Agreement”) which amended certain elements of the Splitrock Agreement. Under the Splitrock Agreement, the Company was to acquire 100% of the shares of Splitrock, pursuant to the Amended Splitrock Agreement, the Company shall instead acquire only certain assets and liabilities of Splitrock. As consideration for the acquisition of Splitrock’s assets, the Company issued 5,924,547 shares to the shareholders of Splitrock as full consideration.
The accompanying consolidated financial statements of Elray include the accounts of Elray and its wholly-owned subsidiary, Angkor Wat Minerals, Ltd. (“Angkor Wat”), and have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”). All intercompany balances have been eliminated.
NOTE 2 – GOING CONCERN
Elray has recurring losses and has an accumulated deficit during the development stage of $9,588,005 as of December 31, 2012. Furthermore, the Company had negative working capital of $3,109,635 at December 31, 2012, and no current source of revenue.
Elray’s financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Without realization of additional capital, it would be unlikely for Elray to continue as a going concern.
Elray’s management plans to raise cash from public or private debt or equity financing, on an as needed basis and in the longer term, revenues from the operation of online gaming. Elray’s ability to continue as a going concern is dependent on these additional cash financings, and, ultimately, upon achieving profitable operations through the development of its gaming and technology business.
NOTE 3 – SUMMARY OF ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
Under the FASB Codification, we are permitted to elect to measure financial instruments and certain other items at fair value, with the change in fair value recorded in earnings. We elected not to measure any eligible items using the fair value option. Consistent with Fair Value Measurement Topic of the FASB Codification, we implemented guidelines relating to the disclosure of our methodology for periodic measurement of our assets and liabilities recorded at fair market value.
Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. A three-tier fair value hierarchy prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
| · | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; |
| · | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| · | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one more significant inputs or significant value drivers are unobservable. |
Our financial instruments include cash, accounts payable and accrued liabilities, notes payable, convertible notes payable, loans from shareholder, and derivative liabilities. The carrying values of the Company’s cash, accounts payable and accrued liabilities, notes payable, convertible notes payable and loans from shareholder approximate their fair value due to their short-term nature. The derivative liabilities are stated at their fair value as a level 3 measurement. The Company used a Black-Scholes model to determine the fair values of these derivative liabilities. See Note 8 for the Company’s assumptions used in determining the fair value of these financial instruments.
Valuation of Long-Lived Assets
Recognition of impairment of long-lived assets is required in the event the net book value of such assets exceeds the estimated undiscounted future cash flows attributable to such assets. It requires that those long-lived assets to be disposed of by sale are to be measured at the lower of carrying amount or fair value less cost of sale, whether reported in continuing operations or in discounted operations.
Management of the Company reviews the carrying value of its long-lived properties on a regular basis. Reductions to the carrying value, if necessary, are recorded to the extent net book value of the property exceeds the estimate of future discounted cash flow or liquidation value.
Stock-Based Compensation
Stock-based compensation expense is recorded for stock and stock options awarded in return for services rendered. The expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is typically the vesting period. The Company estimates forfeitures that it expects will occur and records expense based upon the number of awards expected to vest.
Income Tax
Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of operations because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry forward has been recognized, as it is not deemed likely to be realized.
Basic Loss Per Share
Basic loss per share has been calculated based on the weighted average number of shares of common stock outstanding during the period. The Company has no potentially dilutive securities.
Recently Issued Accounting Standards
The Company does not expect that the future adoption of any recently issued accounting pronouncements will have a material impact on our financial statements.
NOTE 4 – ACQUISITION OF ASSETS
On February 23, 2011, the Company entered into a Purchase Agreement to acquire 100% of the issued and outstanding shares of Splitrock in exchange for 5,924,547 shares of the Company’s common stock (the “Splitrock Agreement”). On December 9, 2011, Elray entered into the Amended Splitrock Agreement which amended certain elements of the Splitrock Agreement. Whereas under the Splitrock Agreement, the Company was to acquire 100% of the shares of Splitrock, pursuant to the Amended Splitrock Agreement, the Company instead acquired only certain assets and liabilities of Splitrock. As consideration for the acquisition of Splitrock’s assets, the Company issued 5,924,547 shares to the shareholders of Splitrock as full consideration. These shares were valued at $2,369,819 based on the market price on the acquisition date of $0.4 per share.
A summary of the fair values of assets acquired and liabilities assumed as of the date of acquisition is as follows:
| Assets acquired: | | | |
| Intangibles | | $ | 3,254,546 | |
| Liabilities assumed: | | | | |
| Accounts payable and accrued interest | | | 566,798 | |
| Convertible notes payable | | | 25,000 | |
| Notes payable | | | 292,929 | |
| Total liabilities assumed | | | 884,727 | |
| | | | | |
| Net assets acquired | | $ | 2,369,819 | |
The $3,254,546 intangibles acquired includes gaming domains, trademarks and player databases. The intangibles were fully impaired in 2011.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment included assets of Angkor Wat for the Company’s mining operations. During the fourth quarter of 2011, management determined that it was no longer in the Company’s best interest to continue the exploitation of mineral resources and have reduced the carrying value of such assets to zero. Loss on disposal of assets of $39,044 was recorded as a result of the abandonment of all of Angkor Wat’s assets.
Depreciation expense for the years ended December 31, 2012 and 2011 was $0 and $20,826.
NOTE 6 – NOTES PAYABLE
Notes payable
Notes payable at December 31, 2012 and 2011 consisted of the following:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| C. Smith | | 9/18/11 | | | 8 | % | | $ | 14,850 | | | $ | 14,850 | |
| D. Radcliffe | | 9/18/11 | | | 8 | % | | | 49,500 | | | | 49,500 | |
| L. Kaswell | | 9/18/11 | | | 8 | % | | | 99,000 | | | | 99,000 | |
| M. Trokel | | 9/18/11 | | | 8 | % | | | 49,500 | | | | 49,500 | |
| Radcliffe Investment Partners I | | 9/18/11 | | | 8 | % | | | 34,650 | | | | 34,650 | |
| Morchester International Limited | | 7/14/12 | | | 15 | % | | | 35,429 | | | | 35,429 | |
| Morchester International Limited | | 7/14/12 | | | 8 | % | | | 10,000 | | | | 10,000 | |
| Total | | | | | | | | $ | 292,929 | | | $ | 292,929 | |
On December 9, 2011, as a result of the Splitrock transaction (See Note 4), the Company assumed $292,929 of notes payable. These notes are unsecured with an interest rate of 8% or 15%. As of December 31, 2012, seven notes with total principal outstanding of $292,929 were in default. The Company is currently negotiating with the note holders for extension.
Convertible notes payable
Convertible notes payable, net of discounts, at December 31, 2012 and 2011 consisted of the following:
| | | | | | | |
| | | | | | | | | Principal, net of Discounts | | | | | | | | | Principal, net of Discounts | |
| | | | | | | | | | | | | | | | | | | |
| Alan Binder | | $ | 25,000 | | | $ | - | | | $ | 25,000 | | | $ | 25,000 | | | $ | (4,704 | ) | | $ | 20,296 | |
| JSJ Investments, Inc. | | | - | | | | - | | | | - | | | | 25,000 | | | | (19,452 | ) | | | 5,548 | |
| JSJ Investments, Inc. | | | 25,000 | | | | (2,801 | ) | | | 22,199 | | | | - | | | | - | | | | - | |
| Asher Enterprises, Inc. | | | 32,500 | | | | (5,639 | ) | | | 26,861 | | | | | | | | | | | | | |
| Rousay Holdings Ltd. | | | 1,290,000 | | | | - | | | | 1,290,000 | | | | - | | | | - | | | | - | |
| Total | | $ | 1,372,500 | | | $ | (8,440 | ) | | $ | 1,364,060 | | | $ | 50,000 | | | $ | (24,156 | ) | | $ | 25,844 | |
On December 9, 2011, as a result of the Splitrock transaction, the Company assumed a $25,000 convertible note. The note was due on August 4, 2012 with 10% annual interest. The note was convertible to Splitrock’s common stock at $0.10 per share prior to December 9, 2011 and is now convertible to 75,453 shares of the Company’s common stock. The Company recorded a beneficial conversion feature of $5,181 on December 9, 2011 and amortized debt discount of $4,704 during year ended December 31, 2012. The Company did not repay the note on August 4, 2012 and this note is currently in default.
On October 12, 2011, the Company entered into a convertible note agreement with JSJ Investments, Inc. (“JSJ”) for $25,000 in cash. The note is for one year and bears interest at a rate of 8% per annum. From April 12, 2012 to April 12, 2013, the note holder has the option to convert the note to the Company’s common shares at a discount of 50% of the average closing price for the 7 consecutive trading days prior to the date on which the note holder elects to convert all or part of the note. On May 4, 2012, JSJ converted this note into 119,863 shares of common stock.
On January 19, 2012, the Company entered into an agreement with JSJ in which JSJ agreed to loan the Company $25,000 (the “Second JSJ note”). The note is for one year and bears interest at a rate of 10% per annum. From July 19, 2012 to July 19, 2013, the note holder has the option to convert the note to common shares in the Company at a discount of 50% of the average of the preceding seven days closing price.
On February 1, 2012, the Company entered into a convertible promissory note with Asher Enterprises, Inc. (“Asher”) for $42,500 (the “First Asher Note”). The note bears interest at 8% and matures on November 6, 2012. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into common shares in the Company at a rate equal to 58% of the average lowest three closing prices during the ten trading days prior to the conversion date. During the third quarter of year 2012, Asher converted this note into 705,696 shares of common stock.
On March 15, 2012, the Company entered into a convertible promissory note with Asher for $32,500 (the “Second Asher Note”). The note bears interest at 8% and matures on December 19, 2012. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 58% of the average lowest three closing prices during the ten trading days prior to the conversion date. During the fourth quarter of year 2012, Asher converted this note into 1,118,270 shares of common stock.
On April 25, 2012, the Company entered into a promissory note with Rousay Holdings Ltd. (“Rousay”) for $10,000,000. (“Original Rousay Note”). If funded in full, the note will be secured by the issuance of 9,232,060 shares of the Company’s common stock and will be due in one year at an interest rate of 20% payable in arrears. On maturity, the interest of $2,000,000 is payable in cash and the note holder may elect to take ownership of the shares held, in lieu of repayment of principal. During 2012, $2 million of the promissory note had been funded and $710,000 has been repaid. On October 8, 2012, the Company issued a new promissory note to Rousay to replace the Original Rousay Note, where the principal amount of the note is $1,290,000. The new note is due on April 26, 2013 with an interest rate of 20% per annum. On April 26, 2013, Rousay has an option to receive an amount of restricted common stock of the Company equal to 10% of the then outstanding and issued common stock of the Company in lieu of payment of principal and interest. In connection with the replacement of Original Rousay Note, the Company issued 1,018,648 common shares, valued at $81,492, to Rousay and recorded a loss on extinguishment of debt.
On June 5, 2012, the Company entered into a convertible promissory note with Asher for $32,500 (the “Third Asher Note”). The principal was received and recorded on July 3, 2012. The note bears interest at 8% and matures on March 7, 2013. In the event that the note remains unpaid at that date, the Company will pay default interest of 22%. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 58% of the average lowest three closing prices during the ten trading days prior to the conversion date.
The conversion feature of the JSJ Note, Second JSJ Note, the First Asher Note, Second Asher Note, and the Third Asher Note was valued at $37,162, $40,743, $54,486, $42,236, and $46,970, respectively, on the issuance date. As a result, these notes were fully discounted and the fair value of the conversion feature in excess of the principal amount of these notes totaled $51,934 and $5,548 was expensed immediately as additional interest expense during the year ended December 31, 2012 and 2011, respectively.
Loans from shareholders
On September 5, 2008, Elmside Pty Ltd, a company related to a former director, agreed to an interest free loan of $55,991 to the Company on an as-needed basis to fund the business operations and expenses of the Company until December 9, 2011, the due date of the loan. The note is in default.
Long-term note payable
On February 1, 2012, the Company entered into an agreement with Gold Globe Investments Limited ("GoldGlobe") whereby GoldGlobe would loan the Company $20,000 in tranches of $5,000 each, paid as needed by the Company. The loan is due in two years at an interest rate of 12% per annum. As of December 31, 2012, the Company had repaid the $10,000 received to GoldGlobe.
NOTE 7 – DERIVATIVE LIABILITIES – NOTE CONVERSION FEATURE
Due to the JSJ and Asher notes’ conversion feature, the actual number of shares of common stock that would be required if a conversion of the note as further described in Note 6 was made through the issuance of the Company’s common stock cannot be predicted, and the Company could be required to issue an amount of shares that may cause it to exceed its authorized share amount. As a result, the conversion feature requires derivative accounting treatment and will be bifurcated from the note and “marked to market” each reporting period through the income statement. The fair value of the conversion future of the JSJ and Asher notes was recognized as a derivative liability instrument and will be measured at fair value at each reporting period.
The Company remeasured the fair value of the instrument as of December 31, 2012 and 2011, and recorded an unrealized gain of $9,201 and $8,567 for the year ended December 31, 2012 and 2011. At December 31, 2012 and December 31, 2011, the derivative liability associated with the note conversion feature was $65,693 and $28,595. The Company determined the fair values of these liabilities using a Black-Scholes valuation model with the following assumptions:
| | | October 12, 2011 | | | December 31, 2011 | | Various Issuance Dates in 2012 | | December 31, 2012 | |
| Estimated market value of common stock on measurement date | | | 0.004 | | | $ | 1.65 | | | $1.25~$0.52 | | $ | 0.01 | |
| Exercise price | | | 0.002 | | | $ | 0.825 | | | $0.302~$0.625 | | $ | 0.005 | |
| Discount rate | | | 0.3050 | % | | | 0.3050 | % | | 0.1500%~0.3300% | | | 0.1100 | % |
| Expected volatility | | | 176 | % | | | 192 | % | | 218%~303% | | | 306 | % |
| Expected dividend yield | | | 0 | % | | | 0.00 | % | | 0.00% | | | 0.00 | % |
NOTE 8 – RELATED PARTY TRANSACTIONS
On September 5, 2008, Elmside Pty Ltd, a company related to a former director, agreed to an interest free loan to the Company on an as-needed basis to fund the business operations and expenses of the Company until December 9, 2011, the due date of the loan. As of December 31, 2012 and 2011, loans from Elmside, a shareholder, were $55,991. The loans were due on demand.
As of December 31, 2012 and 2011, the Company had accounts payable of $275,558 and $297,298 to its chief executive officer and a company owned by the chief executive officer for reimbursement of expense, compensation, and liabilities assumed from Splitrock.
As of December 31, 2012 and 2011, the Company had stock payable to its two non-executive directors of $600 and $17,000 for their services.
During 2011, Elray settled $100,000 of a debt carried forward since 2008 to Elmside Pty Ltd. for 1,070,000 shares of the Company’s common stock. The shares were valued at $1,284,000 ($1.2 per share based upon market price) and $1,184,000 was recorded as additional compensation expense due to Elmside Pty Ltd. being a related party.
NOTE 9 – EQUITY
On November 28, 2012, the Company's Board of Directors approved a reverse split of the Company's issued and outstanding shares of its common stock, par value $0.001, at a ratio of 100:1, such that every 100 shares of common stock becomes 1 share of common stock, without amending the Company's total number of authorized common shares. Shareholders holding a majority of the voting stock voted in favour of the amendment to our Certificate of Incorporation to effect a reverse stock split of one hundred-for-one on January 24, 2013. All share numbers or per share information presented gives effect to the reverse stock split.
Preferred Stock – Series A
On March 22, 2012, Elray entered into a binding letter of intent with Golden Match Holdings Limited (“GM”), a company incorporated in the British Virgin Islands. Pursuant to the letter of intent, Elray and GM would enter into an acquisition agreement in which Elray was to acquire all of the outstanding shares of GM and the shareholders and consultants of GM was to acquire a minimum of 95% of the Company’s common stock. Pursuant to the agreement, Elray had 30 days to secure a $10,000,000 line of credit or loan before Elray and GM enter into a definitive purchase agreement.
On May 3, 2012, in anticipation of the imminent closing of the GM acquisition, the Company authorized the creation of 300,000,000 shares of Series A preferred stock. Prior to a reverse split of common shares at a ratio of 100:1, the Series A Preferred Series shares are convertible at a rate of 100 common shares for each Series A Preferred Share. After the Reverse Stock Split, the Class A Preferred Series shares are convertible at a rate of 1 common shares for each Series A Preferred Share.
On May 4, 2012, the Company entered into an acquisition agreement under which the Company acquired all of the outstanding shares of GM. This follows the letter of intent previously signed on March 22, 2012. Under the terms of the acquisition agreement, Elray acquired 100% of GM, an investment holding company which has a profit sharing agreement with CALI Promocao de Jogos Sociedade Unipessoal Lda., a company incorporated under the laws of the Special Administrative Region of Macau. In the agreement, the Company transferred to the principals of GM 211,018,516 of its Series A Preferred Stock, which on a fully diluted basis, was equal to 95% of the Company's then outstanding shares. In accordance with the above-referenced agreement, Mr. Lao Sio I had been appointed to the Company’s Board of Directors. On July 1, 2012, the Board of Directors held a special board meeting, wherein a motion was approved to remove Mr. Lao Sio I as a director. As of the date of this report, the Company is seeking rescission of the transaction and seeking damages; the Company has filed a counterclaim and is engaged in legal proceedings with Mr. Lao Sio I.
As of December 31, 2012, the 211,018,516 shares of Series A Preferred Stock issued had been recorded at $211,019, par value, with a subscription receivable at the same amount.
Preferred Stock – Series B
On July 1, 2012, the Company authorized the creation of 100,000,000 shares of Series B preferred stock. One share of Series B preferred stock is convertible to 0.01 share of the Company’s common stock and has voting rights of 10:1 with common stock. On September 24, 2012, the authorized Series B Preferred Stock was increased from 100,000,000 to 280,000,000.
On July 3, 2012, the Company entered into an agreement with Maxwell Newbould to acquire certain assets and intellectual property related to Penny Auction Technology, in exchange for 88,000,000 shares of the Company’s Series B preferred stock. The shares were issued to Gold Globe Investments acting as an escrow agent. The Series B preferred shares are to be held by Gold Globe Investments until such time as the Company concludes its due diligence. Gold Globe Investments holds the voting rights to these shares whilst the due diligence is conducted. On completion of the due diligence to the satisfaction of the Company, Maxwell Newbould will be granted a seat on the Board of Directors of the Company and an additional 20,000,000 Series B Preferred Shares. The Company has recently extended the due diligence period for a further 240 days and expects to conclude its due diligence within year 2013.
The 88,000,000 shares of Series B Preferred stock issued had been recorded at $88,000, par value, with a subscription receivable at the same amount.
Common Stock
On April 12, 2012, the Company issued 60,000 shares of common stock valued at $42,000, based on the stock price of issuance date, to two directors in consideration of their services.
On April 30, 2012, the Company issued 25,000 shares for cash of $10,000.
On August 1, 2012, the Company issued 600,000 shares of common stock valued at $246,000, based on the stock price of issuance date, for services related to the development of certain financial applications. 200,000 shares were issued to Mark Frost and 400,000 shares were issued to Gold Globe Investments acting as escrow agent. On achievement of certain benchmarks by Mark Frost, Gold Globe Investments will transfer 300,000 shares to Mark Frost. The balance of 100,000 shares will remain with Gold Globe Investments in consideration for its services.
On October 8, 2012, the Company reached a Stipulation and Order of Settlement with Rousay Holdings Ltd. in the United States District Court of New York. In terms of this Stipulation and Order of Settlement with Rousay, the Company agreed to issue 10% of the then outstanding and issued common stock of the Company to Rousay. On October 13, 2012, the Company issued 1,018,648 restricted shares of common stock to Rousay equaling 10% of the then outstanding and issued common stock. These shares are valued at $81,492 and recorded as a loss on extinguishment of debt.
On September 19, 2012, the Company increased authorized capital to a total of 1,700,000,000 common shares of stock, par value to remain unchanged at $0.001.
During the year ended December 31, 2012, the Company issued 235,000 shares of common stock for services, valued at $124,550, based on the market price on the issuance date. The value of stock issued is amortized over the service period according to the related agreements.
During the year ended December 31, 2012, the Company issued 1,943,829 shares of common stock for JSJ and Asher Notes conversions (see note 6).
On February 10, 2011 and May 26, 2011, the Company issued a total of 1,070,000 shares of common stock to settle $100,000 loans from a shareholder as described in Note 8. During the year ended December 31, 2011, the Company issued 867,904 shares of common stock to consultants for services valued at $800,371. Additionally, the Company issued 5,924,547 common shares to acquire certain assets of Splitrock and issued 10,000 shares for $10,000 in cash.
On October 27, 2011, the Board of Directors of the Company granted 3,000,000 shares of the Company’s common stock to each of the two non-executive directors as compensation. 1,000,000 shares were vested immediately and were recorded as stock payable of $17,000 as of December 31, 2011 based on the market price on the date the shares were issuable. The remaining shares vested during the year ended December 31, 2012.
NOTE 10 – INCOME TAXES
No net provision for refundable federal income tax has been made in the accompanying statement of operations because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry forward has been recognized, as it is not deemed likely to be realized. Additionally, as a result of the change in control in common stock transactions, the utilization of some or all of the net operating losses may be restricted as defined under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended.
NOTE 11 – COMMITMENTS AND CONTINGENCIES
On June 1, 2012, the Company entered into an agreement with Ludlow Capital, Inc. (“Ludlow”) to provide investor relations services to the Company for six months. In consideration for such services, the Company agreed to issue 20,000 shares to Ludlow. The Company has recorded consulting expense of $166 for the year ended December 31, 2012. As of December 31, 2012, none of these shares had been issued.
NOTE 12 – SUBSEQUENT EVENTS
On January 5, 2013, the Company entered into an agreement with Ludlow to provide investor relations services to the Company for six months. In consideration for such services, the Company agreed to issue 150,000 shares to Ludlow. As of April 4, 2013, none of these shares had been issued.
On January 5, 2013, the Company entered into an agreement with South Street Media, Inc. ("South Street") to provide investor relations services to the Company for six months. In consideration for such services, the Company agreed to issue 150,000 shares to South Street. As of April 4, 2013, none of these shares had been issued.
On January 30, 2013, the Company entered into a convertible promissory note with Asher Enterprises, Inc. (“Asher”) for $47,500. The note bears interest at 8% and matures on October 28, 2013. In the event that the note remains unpaid at that date, the Company will pay default interest of 22% of the outstanding principal and unpaid interest. Asher has the right after a period of 180 days to convert the balance outstanding into the Company’s common stock at a rate equal to 45% of the average lowest three closing prices during the ten trading days prior to the conversion date. An additional derivative will be recorded related to the conversion feature of this note.
On February 21, 2013, Asher converted $17,000 of the Third Asher Note into 854,271 shares of common stock.
On February 22, 2013, the Company issued 857,143 shares of its common stock to settle accounts payable of $30,000 to Portspot Consultants Limited.
On March 19, 2013, Asher converted $15,500 of the Third Asher Note along with the accrued interest of $1,300 into 606,498 shares of common stock.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
There have been no changes in or disagreements with our accountants on accounting and financial disclosure from the inception of our company through to the date of this Report, except as follows.
Item 9A. Controls and Procedures.
Disclosure controls and procedures
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the year ended December 31, 2012 covered by this Form 10-K. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Management’s Annual Report on Internal Control over Financial Reporting
The management of the Company is responsible for the preparation of the consolidated financial statements and related financial information appearing in this Annual Report on Form 10-K. The consolidated financial statements and notes have been prepared in conformity with accounting principles generally accepted in the United States of America. The management of the Company is also responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. A company’s internal control over financial reporting is defined as a process designed 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. Our internal control over financial reporting 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 issuer 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. |
Management, including the Chief Executive Officer and Chief Financial officer, does not expect that the Company’s disclosure controls and internal controls will prevent all error and all fraud. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable, not absolute, assurance that the objectives of the control system are met and may not prevent or detect misstatements. Further, over time, control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.
With the participation of the Chief Executive Officer and Chief Financial Officer, our management evaluated the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012 based upon the framework in Internal Control –Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management has concluded that our internal control over financial reporting was not effective as of December 31, 2012. The Company had material weaknesses in its internal control over financial reporting. Specifically, management identified the following material weaknesses at December 31, 2012:
| 1. | Lack of oversight by independent directors in the establishment and monitoring of required internal controls and procedures; |
| 2. | Lack of functioning audit committee, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; |
| 3. | Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting and to allow for proper monitoring controls over accounting; |
| 4. | Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes. |
To remediate our internal control weaknesses, management intends to implement the following measures:
| | ▪ | The Company will add sufficient number of independent directors to the board and appoint an audit committee. |
| | ▪ | The Company will add sufficient knowledgeable accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements. |
| | ▪ | Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures. |
The additional hiring is contingent upon the Company’s efforts to obtain additional funding through equity or debt for its continued operational activities and corporate expenses. Management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.
We understand that remediation of material weaknesses and deficiencies in internal controls are a continuing work in progress due to the issuance of new standards and promulgations. However, remediation of any known deficiency is among our highest priorities. Our management will periodically assess the progress and sufficiency of our ongoing initiatives and make adjustments as and when necessary.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant rules of the SEC that permit us to provide only management’s report in this annual report. On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Included in the Act is a provision that permanently exempts smaller public companies that qualify as either a Non-Accelerated Filer or Smaller Reporting Company from the auditor attestation requirement of Section 404(b) of the Sarbanes-Oxley Act of 2002.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
The Company’s management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth information with respect to persons who are serving as directors and officers of the Company. Each director holds office until the next annual meeting of shareholders or until his successor has been elected and qualified.
| Name of Director | | Age | | Position |
| Anthony Brian Goodman | | 54 | | President, Chief Executive Officer, Chief Financial Officer and Director |
| Michael Silverman | | 68 | | Director |
| Roy Sugarman | | 58 | | Director |
| Sio I Lao | | 40 | | Director (appointed May 4, 2012, removed July 1, 2012) |
| David Price | | 49 | | Secretary |
Biographical Information of Directors and Officers
Brian Goodman: Mr. Goodman was appointed as President, Chief Executive Officer, Chief Financial Officer and Director on February 23, 2011. He has over 20 years of senior management and business development experience with technology and the internet gaming industry. Mr. Goodman’s online gaming experience in start-up casino and poker operations includes the use of leading gaming software platforms such as Boss Media, Playtech Ltd, and Real Time Gaming. He has in depth knowledge and understanding of the statistical workings and configurations of online games and loyalty systems and has established an international reputation for his expertise, has a wide network of key relationships, and is well known and respected in the online gaming world.
Dr. Roy Sugarman: Dr. Sugarman was appointed as a Director on February 23, 2011. He is a Neuropsychologist having held senior managerial and consultant roles at universities and large businesses. Dr. Sugarman has extensive management and operational experience in the corporate sector having most recently held a senior role at Brain Resource Limited, a company listed on the Sydney Stock Exchange. His corporate experience and understanding of customer behavior patterns will add considerable value to the company.
Michael Silverman: Mr. Silverman was appointed as a director on October 27, 2011. Michael Silverman is a Chartered Accountant and graduated from Stanford University California with an M.B.A. He has extensive experience in senior management in middle and large size companies including property development, real estate, financial services, manufacturing and technology. He has also been involved in the listing of numerous public companies.
David Price, Esq.: Mr. Price was appointed as Secretary on February 23, 2011. His legal practice specializes in corporate law, securities matters, internal investigations, white collar issues and arbitration / mediation. Mr. Price has a B.A. from the University of Maryland and a Juris Doctor from Antioch (DC) School of Law (Law Review, Who’s Who of American Law Students). He is a member of Corporate Lawyer’s Association, Euro-American Lawyers Group, Association of US Securities Attorneys, and American Bar Association. Mr. Price’s Bar affiliations are Maryland (since 1996), eligible for District of Columbia, United States District Court (District of Maryland), Court of Appeals, District of Columbia, United States District Court for the District of Columbia; United States Court of Appeals, 4th Circuit; Supreme Court of the United States.
There are no family relationships among any of our directors and executive officers.
Our directors are elected at the annual meeting of the shareholders, with vacancies filled by the Board of Directors, and serve until their successors are elected and qualified, or their earlier resignation or removal. Officers are appointed by the board of directors and serve at the discretion of the board of directors or until their earlier resignation or removal. Any action required can be taken at any annual or special meeting of stockholders of the corporation which may be taken without a meeting, without prior notice and without a vote, if consent of consents in writing setting forth the action so taken, shall be signed by the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office, its principle place of business, or an officer or agent of the corporation having custody of the book in which the proceedings of meetings are recorded.
Indemnification of Directors and Officers
Delaware Corporation Law allows for the indemnification of officers, directors, and any corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities, including reimbursement for expenses, incurred arising under the 1933 Act. The Bylaws of the Company provide that the Company will indemnify its directors and officers to the fullest extent authorized or permitted by law and such right to indemnification will continue as to a person who has ceased to be a director or officer of the Company and will inure to the benefit of his or her heirs, executors and Consultants; provided, however, that, except for proceedings to enforce rights to indemnification, the Company will not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred will include the right to be paid by the Company the expenses (including attorney’s fees) incurred in defending any such proceeding in advance of its final disposition.
The Company may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Company similar to those conferred to directors and officers of the Company. The rights to indemnification and to the advancement of expenses are subject to the requirements of the 1940 Act to the extent applicable.
Furthermore, the Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another company against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.
Significant Employees and Consultants
We have no employees other than our executive officer. We do not intend any material change in the number of employees over the next 12 month. We are conducting and intend to conduct our business largely through professionals and consultants on an as needed contract basis.
Conflicts of Interest
Although Messrs. Goodman, Sugarman and Silverman do not work with technology companies or gaming companies other than ours, they may do so in the future. We do not have any written procedures in place to address conflicts of interest that may arise between our business and the future business activities of Messrs. Goodman, Sugarman and Silverman, other than a requirement that any deemed conflict is discussed at Board of Director meetings and reflected in the Board of Directors minutes.
Committees of the Board of Directors
We do not have any separately constituted committees.
Audit & Risk Management Committee
We do not have a separately constituted Audit & Risk management Committee. The Board has determined that because of the small size of the Board, Directors would comprise the Audit and Risk Management Committee.
Role and Responsibilities of the Board
The Board of Directors oversees the conduct and supervises the management of our business and affairs pursuant to the powers vested in it by and in accordance with the requirements of the Revised Statutes of Nevada. The Board of Directors holds regular meetings to consider particular issues or conduct specific reviews whenever deemed appropriate.
The Board of Directors considers good corporate governance to be important to the effective operations of the Company. Our directors are elected at the annual meeting of the stockholders and serve until their successors are elected or appointed. Officers are appointed by the Board of Directors and serve at the discretion of the Board of Directors or until their earlier resignation or removal.
There are no family relationships among directors or executive officers of the Company.
Directors’ and Officers’ Liability Insurance
Elray does not have directors’ and officers’ liability insurance insuring our directors and officers against liability for acts or omissions in their capacities as directors or officers.
Code of Ethics
The Company has adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K of the Securities Exchange Act of 1934. The Code of Ethics applies to directors and senior officers, such as the principal executive officer, principal financial officer, controller, and persons performing similar functions.
Item 11. Executive Compensation.
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to our executive officers for all services rendered in all capacities to us:
| Name and Principal Position | | Year | | | Salary ($) | | | Bonus ($) | | | Stock Awards ($) | | | Option Awards ($) | | | Non-Equity Incentive Plan Compen-sation ($) | | | Change in Pension Value and Nonqualified Deferred Compensation ($) | | | All Other Compen-sation ($) | | | Total ($) | |
| Barry J. Lucas. President, Director (Resigned 2/23/2011) | | | 2012 2011 | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | |
| Michael J. Malbourne. Secretary, Treasurer, Director (Resigned 2/23/2011) | | | 2012 2011 | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | |
| Neil R. Crang. Director (Resigned 2/23/2011) | | | 2012 2011 | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | |
Anthony B. Goodman President, Director, Chief Financial Officer (Appointed 2/23/2011) | | | 2012 2011 | | | | 240,000 60,000 | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | | | | - - | | | | 240,000 60,000 | |
| Donald Radcliffe (Appointed 2/23/2011, Resigned 10/27/2011) | | | 2011 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
| Dr. Roy Sugarman (Appointed 02/23/2011) | | | 2012 2011 | | | | - - | | | | - - | | | | 21,000 8,500 | | | | - - | | | | - - | | | | - - | | | | - - | | | | 21,000 8,500 | |
| Michael Silverman (Appointed 10/27/2011) | | | 2012 2011 | | | | - - | | | | - - | | | | 21,000 8,500 | | | | - - | | | | - - | | | | - - | | | | - - | | | | 21,000 8,500 | |
| David Price Secretary (Appointed 02/23/2011) | | | 2012 2011 | | | | 6,500 - | | | | - - | | | | - 4,500 | | | | - - | | | | - - | | | | - - | | | | - - | | | | 6,500 4,500 | |
| Sio I Lao (Appointed 05/04/2012, Removed 07/01/2012) | | | 2012 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | |
Compensation of Directors
The general policy of the Board of Directors is that compensation for independent Directors should be a nominal cash fee plus equity-based compensation. We do not pay employee Directors for Board service in addition to their regular employee compensation. The Board of Directors has the primary responsibility for considering and determining the amount of Director compensation.
The following summarizes amounts earned by each Director in the fiscal year ended December 31, 2012.
On April 12, 2012, the Company issued 30,000 shares of the Company's common stock each to Mr. Silverman and Dr. Sugarman as agreed on October 27, 2011.
On July 12, 2012, the Company approved the issuance of additional 30,000 shares of the Company's common stock as compensation to each non-executive director.
As of March 22, 2013, only 30,000 shares of the Company's common stock have been issued to both Mr. Silverman and Dr. Sugarman for the compensation mentioned above.
On May 8, 2012 the Company issued 1,500,000 shares to Mr. David Price as compensation for his services in 2011.
Mr. Goodman earned a salary of $20,000 per month. Part of the salary has been accrued until such time as the Company has adequate cash resources to pay the outstanding amount.
Option/SAR Grants
We made no grants of stock options or stock appreciation rights to Directors and Executive Officers during the period from our inception to December 31, 2012.
Employment contracts and termination of employment and change-in-control arrangements
There are no employment agreements between the Company and directors and executive officers.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information as of December 31, 2012 regarding the beneficial ownership of our common stock, taking into account the consummation of the Merger, by (i) each person or entity who, to our knowledge, beneficially owns more than 5% of our common stock; (ii) each executive officer and named officer; (iii) each director; and (iv) all of our officers and directors as a group. Unless otherwise indicated in the footnotes to the following table, each of the stockholders named in the table has sole voting and investment power with respect to the shares of our common stock beneficially owned. Except as otherwise indicated, the address of each of the stockholders listed below is: c/o 575 Madison Avenue, Suite 1006, New York, NY 10022.
| | | | | Relationship to | | Shares Beneficially | | | Percent | |
| Title of Class | | Name and Address Of Owner | | Company | | Owned (1) | | | Owned (1) | |
| Common Stock | | Barry J. Lucas | | Past Director and President | | | 100,000 | | | | 0.81 | % |
| | | # 15, 291 Street, | | | | | | | | | | |
| | | Sangkat Boeng Kok 1, | | | | | | | | | | |
| | | Tourl District, | | | | | | | | | | |
| | | Phnom Penh, Cambodia | | | | | | | | | | |
| | | | | | | | | | | | | |
| Common Stock | | Michael J Malbourne ( for Elmside Pty Ltd) | | Past Director, Secretary and Treasurer | | | 0 | | | | 0 | % |
| | | # 15, 291 Street, | | | | | | | | | | |
| | | Sangkat Boeng Kok 1, | | | | | | | | | | |
| | | Tourl District, | | | | | | | | | | |
| | | Phnom Penh, Cambodia | | | | | | | | | | |
| | | | | | | | | | | | | |
| Common Stock | | Neil R. Crang | | Past Director | | | 0 | | | | 0 | % |
| | | 4 Tullo Place | | | | | | | | | | |
| | | Richmond Victoria Australia | | | | | | | | | | |
| | | | | | | | | | | | | |
| Common Stock | | Brian Goodman | | Director (2) | | | 1,922,309 | | | | 15.6 | % |
| | | | | | | | | | | | | |
| Common Stock | | Donald Radcliffe | | Past Director | | | 241,449 | | | | 1.96 | % |
| | | | | | | | | | | | | |
| Common Stock | | Rousay Holding Ltd. | | 5% Shareholder | | | 1,018,648 | | | | 8.27 | % |
| | | 300 East 42nd Street | | | | | | | | | | |
| | | New York, NY 10022 | | | | | | | | | | |
| | | | | | | | | | | | | |
| Common Stock | | David Price | | Secretary | | | 25,000 | | | | 0.2 | % |
| | | | | | | | | | | | | |
| Common Stock | | Michael Silverman | | Director | | | 30,000 | (3) | | | 0.24 | % |
| | | | | | | | | | | | | |
| Common Stock | | Dr. Roy Sugarman | | Director | | | 30,000 | (3) | | | 0.24 | % |
| | | | | | | | | | | | | |
| Total | | | | | | | 3,367,406 | | | | 27.3 | % |
Presentation gives effect to the Reverse Stock Split
| (1) | Applicable percentage of ownership is based on 12,323,403 total shares comprised of our common stock outstanding (as defined below) as of December 31, 2012. Beneficial ownership is determined in accordance with rules of the Securities and Exchange Commission and means voting or investment power with respect to securities. Shares of our common stock issuable upon the exercise of stock options exercisable currently or within 60 days of December 31, 2012 are deemed outstanding and to be beneficially owned by the person holding such option for purposes of computing such person’s percentage ownership, but are not deemed outstanding for the purpose of computing the percentage ownership of any other person. |
| (2) | Includes 1,542,027 shares held by Articulate (Pty) Ltd, a company established for the benefit of the Goodman family. Also includes 244,467shares owned by family members residing with Mr. Goodman. |
| (3) | Not includes 30,000 shares approved as compensation on July 12, 2012 but not issued. |
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions with related persons
Except as disclosed below, none of the following parties has, since our inception, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
| Ÿ | Any of our directors or executive officers; |
| Any person proposed as a nominee for election as a director; |
| Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; |
| Any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of any of the foregoing persons |
| Any person sharing the household of any director, executive officer, nominee for director or 5% shareholder of our Company. |
On September 5, 2008, Elmside Pty Ltd, a company related to a former director, agreed to an interest free loan to the Company on an as-needed basis to fund the business operations and expenses of the Company until December 9, 2011, when the loan becomes payable.
On February 10, 2011, Elray settled $93,000 of a debt carried forward since 2008 to Elmside Pty Ltd. for 930,000 shares of the Company’s common stock. The shares were valued at $1,116,000 ($1.2 per share based upon market price) and $1,023,000 was recorded as additional compensation expense due to Elmside Pty Ltd. being a related party.
On May 26, 2011, Elray settled $7,000 of a debt carried forward since 2008 to Elmside Pty Ltd. for 140,000 shares of the Company’s common stock. The shares were valued at $168,000 ($1.2 per share based upon market price) and $161,000 was recorded as additional compensation expense due to Elmside Pty Ltd. being a related party.
As of December 31, 2012 and 2011, loans from Elmside were $55,991 and $55,991, respectively.
As of December 31, 2012, the Company had accounts payable of $275,558 to its chief executive officer and a company owned by the chief executive officer for reimbursement of expense, compensation, and liabilities assumed from Splitrock.
Promoters and control persons
The issued and outstanding shares of the common stock of Elray total 12,323,403 at December 31, 2012.
Item 14. Principal Accounting Fees and Services.
The following table sets forth the fees billed by our principal independent accountants for each of our last two fiscal years for the categories of services indicated.
| | | 2012 | | | 2011 | |
| Audit Fees | | | | | | |
| GBH CPAs, PC | | $ | 31,500 | | | $ | 28,800 | |
| Audit Related Fees | | | - | | | | - | |
| Tax Fees | | | - | | | | - | |
| All Other Fees | | | - | | | | - | |
Audit fees. Consists of fees billed for the audit of our annual financial statements and review of our interim financial information and services that are normally provided by the accountant in connection with year-end and quarter-end statutory and regulatory filings or engagements.
Audit-related fees. Consists of fees billed for services relating to review of other regulatory filings including registration statements, periodic reports and audit related consulting.
Tax fees. Consists of professional services rendered by our principal accountant for tax compliance, tax advice and tax planning.
Other fees. Other services provided by our accountants.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) Financial Statements
The financial statements are included under “ Item 8. Financial Statements and Supplementary Data.”
(b) Exhibits
The exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page 50 of this report, and are incorporated herein by this reference.
(c) Financial Statement Schedules
We are not filing any financial statement schedules as part of this report as such schedules are either not applicable or the required information is included in the financial statements or notes thereto.
INDEX TO EXHIBITS
| Number | | Exhibit Description |
| | | |
| 3.1 | | Articles of Incorporation of Elray Resources, Inc.* |
| | | |
| 3.2 | | Bylaws of Elray Resources, Inc.* |
| | | |
| 14.1 | | Code of Ethics** |
| | | |
| 31.1 | | Certificate of principal executive officer and principal accounting officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | | |
| 32.1 | | Certificate of principal executive officer and principal accounting officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| | | |
| 101.INS*** | | XBRL Instance Document |
| | | |
| 101.SCH*** | | XBRL Taxonomy Extension Schema Document |
| | | |
| 101.CAL*** | | XBRL Taxonomy Extension Calculation Linkbase Document |
| | | |
| 101.DEF*** | | XBRL Taxonomy Extension Definition Linkbase Document |
| | | |
| 101.LAB*** | | XBRL Taxonomy Extension Label Linkbase Document |
| | | |
| 101.PRE*** | | XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed as an exhibit to our registration statement on Form SB-2 filed June 11, 2007 and incorporated herein by this reference.
** Filed as an exhibit to our report on Form 10-K for the financial period ended March 31, 2008 and incorporated herein by reference.
*** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| ELRAY RESOURCES, INC. | |
| | |
| /s/ Anthony Goodman | |
| Anthony Goodman | |
| Chief Executive Officer and Principal Accounting Officer | |
| | |
| |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| /s/ Anthony Goodman | | | | |
| Anthony Goodman | | Director | | |
| | | | | |
| /s/ Michael Silverman | | | | |
| Michael Silverman | | Director | | |
| | | | | |
| /s/ Roy Sugarman | | | | |
| Roy Sugarman | | Director | | |
