Dragon's Lair Holdings, Inc. - FORM 10-K

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EX-31.1 - EX311 - Dragon's Lair Holdings, Inc.	ex311.htm
EX-32.1 - EX321 - Dragon's Lair Holdings, Inc.	ex321.htm
EX-23.1 - EX231 - Dragon's Lair Holdings, Inc.	ex231.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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: 000-52202

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 No.)

785 NE 83rd Terrace

Miami, Florida 33138

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (786) 554-2771

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, no par value

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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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 o

Non-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 þ No o

The aggregate market value of the registrant’s Common Stock held by non-affiliates was $88,140, based on the price of a share of Common Stock on January 31, 2010, which was sold in the registrant’s initial public offering. Shares of Common Stock known by the registrant to be beneficially owned as of January 31, 2010 by the registrant’s directors and the registrant’s executive officers subject to Section 16 of the Securities Exchange Act of 1934 are not included in the computation. The registrant, however, has made no determination that such persons are “affiliates” within the meaning of Rule 12b-2 under the Securities Exchange Act of 1934.

At January 31, 2010, there were 8,001,078 shares of the registrant’s Common Stock issued and outstanding.

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DRAGON'S LAIR HOLDINGS, INC.

FORM 10-K

For The Fiscal Year Ended December 31, 2009

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	3

Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	8
Item 2.	Properties	8
Item 3.	Legal Proceedings	8
Item 4.	Submission of Matters to a Vote of Security Holders	8

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	9
Item 6.	Selected Financial Data	11
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	17
Item 8.	Financial Statements and Supplementary Data	18
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	29
Item 9A.	Controls and Procedures	29
Item 9B.	Other Information	30

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	31
Item 11.	Executive Compensation	33
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	36
Item 13.	Certain Relationships and Related Transactions, and Director Independence	37
Item 14.	Principal Accounting Fees and Services	38

PART IV
Item 15.	Exhibits and Financial Statement Schedules	38
	Signatures	39

Explanatory Notes

In this Annual Report on Form 10-K, Dragon’s Lair Holdings, Inc. is sometimes referred to as the “Company”, “we”, “our” or “The Dragon’s Lair” and U.S. Securities and Exchange Commission is sometimes referred to as the “SEC”.

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PART I

Item 1. Business.

Introduction

Dragon’s Lair Holdings, Inc., a development stage company, is a provider of personal care products by means of a network of direct sales consultants, which currently only provides one product and has recently commenced doing so. Substantially all of our entire sales and distribution channel is based upon our network or multi-level marketing program. Our business strategy is to provide quality products, operate at a profit and enable our direct sales consultants to operate at a profit; however, we have never operated profitably. In July, 2008, we commenced providing to the marketplace our first product, the Sore-EezÔ Chinese herbal body liniment, and have generated revenues of $1,241 as of the date of this report. All of our revenues have come from the sale of the Sore-EezÔ Chinese herbal body liniment and from no other sources. We have candidates for other personal care products that are currently under development; however, we currently do not have any other products available for commercial sale. Neither the Food and Drug Administration nor any other regulatory authority or similar regulator has approved the Sore-EezÔ Chinese herbal body liniment or our candidates for other personal care products.

We commenced our initial public offering on October 2, 2008, pursuant to that certain Registration Statement on Form S-1 (Commission File No. 333-150751), which was declared effective by the Securities and Exchange Commission on that date. We registered 50,000 shares of Series A Convertible Preferred Stock for sale by the Company for an aggregate offering price of $500,000 and also registered the shares of Common Stock into which the shares of our Series A Convertible Preferred Stock may then be converted. We terminated the offering and withdrew the Form S-1 Registration Statement pursuant to that certain Post-Effective Amendment No. 1 thereto, which was filed with the SEC on February 26, 2009. We sold 6,780 shares of Series A Convertible Preferred Stock in the offering, which were subsequently converted into 1,762,800 shares of our Common Stock. The offering provided proceeds to us in the amount of $67,800.

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)

As of December 31, 2009, we had an accumulated deficit of $94,043. Our auditors have raised substantial doubt as to our ability to continue as a going concern, as expressed in its opinion on our financial statements included in this report. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. There can be no assurance that we will operate at a profit or such additional financing will be available, or if available, can be obtained on satisfactory terms.

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. We were incorporated under the laws of the State of Florida on October 4, 2007.

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Company Description

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)

We seek to provide personal care products, which have a broad consumer appeal. Our business plan uses a distribution strategy for direct selling and marketing through direct sales consultants. Our business plan provides that these direct sales consultants, who will be independent contractors, will purchase products from us and sell them directly to their customers. We will provide recruitment and training activities for the direct sales consultants. We will provide assistance to the direct sales consultants through support tools, such as sales brochures, product samples and demonstration aids. We have established a web site, which we anticipate will serve as an additional marketing tool and support the efforts of our direct sales consultants.

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 the exclusive worldwide use of the Sore-EezÔ Chinese herbal liniment recipe. 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. The term of the license agreement is five (5) years and 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-EezÔ Chinese herbal liniment recipe by October 4, 2012. We may not sublicense or assign any of our rights under the license agreement. 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. We do not have any future payments obligations to Yamit Lemoine under the license agreement.

Products

We are committed to building a brand name and direct sales consultant and customer loyalty by selling quality personal care products that have broad consumer appeal. The Company is committed to developing and providing quality products that direct sales consultants can sell at attractive retail prices and allow the Company to operate at a profit.

In July, 2008, we commenced providing our first product to the marketplace, the Sore-EezÔ Chinese herbal body liniment. This is the only product currently being made available by us and we anticipate providing other product candidates to the marketplace; however, we currently do not have any other products available for commercial sale. Neither the Food and Drug Administration nor any other regulatory authority or similar regulator has approved the Sore-EezÔ Chinese herbal body liniment product or any other product candidates.

Industry Overview

We are in the direct selling industry. Direct selling is the sale of a consumer product or service, person-to-person, away from a fixed retail location. Independent salespeople market these products and services to customers. Products are sold primarily through in-home product demonstrations, parties, farmer’s markets, organizational and sports gatherings, and one-on-one selling. A majority of adult Americans have been affected by the direct selling industry.

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The success of direct sales is established in the reasons people choose direct selling as a career option. These include:

Direct selling is a good way to meet and socialize with people.

Direct selling offers flexible work schedules.

Direct selling is a good way to earn extra income.

Direct selling is a good way to own a business.

Earnings are in proportion to efforts.

Marketing plan

We are a direct sales company, which distributes products through a network marketing system. Under our system, direct sales consultants purchase products from us for resale and for personal use.

We believe network marketing is an effective vehicle to distribute our products because:

●

A consumer can be educated about a product in person by a direct sales consultant.

●

Direct sales allow for actual product testing by a potential consumer.

●

The impact of the direct sales consultant’s and consumer’s testimonials is enhanced.

●

Direct sales consultants can give customers high levels of service and attention, by, among other things, delivering products directly to a consumer and following up on sales to ensure proper product usage and customer satisfaction, and to encourage repeat purchases.

We rely on our direct sales consultants to sponsor new direct sales consultants. While we anticipate providing sales tools, such as brochures, direct sales consultants are primarily responsible for educating new direct sales consultants with respect to products and how to build a successful home-based business.

The sponsoring of new direct sales consultants creates multiple levels in the network marketing structure. Persons whom a direct sales consultants sponsors are referred as “downline” or “sponsored” direct sales consultants. If downline direct sales consultants also sponsor new direct sales consultants, they create additional levels in the structure.

Sponsoring activities are not required of direct sales consultants. However, because of the financial incentives provided to those who succeed in building a direct sales consultant network that consumes and resells products, we believe that most of our direct sales consultants will attempt, with varying degrees of effort and success, to sponsor additional direct sales consultants. Generally, we believe that direct sales consultants will invite friends, family members, and acquaintances to sales meetings, the Company’s web site and conference calls in which the Sore-EezÔ Chinese herbal liniment and other product candidates are presented and the compensation plan is explained. We believe that people will be attracted to become direct sales consultants after using the Sore-EezÔ Chinese herbal liniment and other product candidates and becoming regular retail customers. A person becomes a direct sales consultant by completing a new distributor application and agreement. Once a person becomes a direct sales consultant, he or she is able to purchase products directly from us at wholesale prices for resale to consumers or for personal consumption. The direct sales consultant is also entitled to sponsor other direct sales consultants in order to build a network of direct sales consultants and product users. A potential direct sales consultant must enter into a standard direct sales consultant agreement with us that obligates the direct sales consultant to abide by our policies and procedures. These policies and procedures include but are not limited to:

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	·	A direct sales consultant must be of legal age to do business to be eligible to become a distributor.
	·	Once accepted as a distributor by the Company, the direct sales consultant will have the right to purchase and sell the Company’s products.
	·	The business relationship of the direct sales consultant with the Company will be an independent contractor relationship.
	·	The Company’s sales and marketing program is based upon retail sales to the ultimate consumer and has adopted a 70% rule. Under the rule, a direct sales consultant may not order additional products unless he or she has sold or used for personal or family use at least 70% of previously purchased products.
	·	A direct sales consultant is eligible to purchase products at wholesale prices, thus allowing him or her to sell the Company products to customers at retail prices, and may retain the difference between the wholesale cost and retail sales price as immediate cash income.
	·	The Company has established a retail price for each of its products that must be adhered to.
	·	There are no minimum order requirements for placing orders.
	·	A direct sales consultant may voluntarily cancel the distributor agreement at any time. The Company will pay 90% of the original cost for the unopened products being returned.
	·	The Company business opportunity is not a franchise and does not provide a direct sales consultant with exclusive rights to any region or territory.
	·	No income claims, income projections nor income representations may be made to prospective direct sales consultants. Any false, deceptive or misleading claims regarding the opportunity or products are prohibited.
	·	When conducting business, a direct sales consultant must safeguard and promote the reputation of the products offered by the Company. The direct sales consultant must refrain from all conduct which might be harmful to the Company’s reputation, or to the marketing of its products, or inconsistent with the public interest. As a distributor, a direct sales consultant must honestly promote and describe the products offered by the Company and avoid all discourteous, deceptive, disruptive, misleading, unethical or immoral conduct or practices.
	·	If a direct sales consultant violates the terms of the distributor agreement, the Company’s policies and procedures, applicable laws or the standards of fair dealing, he or she may be terminated by the Company.

Manufacturing

We have not engaged a contract packer at this time and we are preparing and packaging the Sore-EezÔ Chinese herbal liniment at our facilities, which has a production capacity of four (4) gallons per month. In the future, we anticipate using contract packers to manufacture the Sore-EezÔ Chinese herbal liniment and other product candidates according to our specifications.

Raw Materials and Suppliers

The Sore-EezÔ Chinese herbal liniment is composed of certain key raw materials, which include camphor and rubbing alcohol and Chinese herbs, such as angelica root, borneol, red peony root, rhubarb root, clover flower, aucklandia root, safflower, myrrh, cattail pollen, frankincense, peach kernal, root of psuedoginseng and xue jie. These raw materials are available from numerous sources. Our sole supplier for these Chinese herbs is Asia Natural Products, Inc., located in San Francisco, California. In a situation where this supplier is not able to supply the ingredients, other sources of supply will need to be identified. In the situation where we are not supplied with the necessary raw materials, it may result in a temporary delay in production until replacement supplies are obtained to meet our production requirements.

Trademarks, Patents and Intellectual Property

We intend to seek trademark protection for the Sore-EezÔ Chinese herbal liniment and other product candidates. We will do a search of existing trademarks prior to selecting trademarks for the Sore-EezÔ Chinese herbal liniment and other product candidates. We believe that trademark protection will be important to brand name recognition and distributor and consumer loyalty to the Sore-EezÔ Chinese herbal liniment and other product candidates. We intend to register our important trademarks in the United States. We will use our best efforts to maintain the confidentiality of the Sore-EezÔ Chinese herbal liniment and other product candidates' formulations through confidentiality agreements and physical security.

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Government Regulation

The Sore-EezÔ Chinese herbal liniment and other product candidates are not subject to pre-market regulatory approval in the United States. However, the processing, formulation, manufacturing, packaging, labeling, advertising and distribution of the Sore-EezÔ Chinese herbal liniment and other product candidates are subject to federal laws and regulations. The federal agencies regulating the Sore-EezÔ Chinese herbal liniment and other product candidates include the Food and Drug Administration, the Federal Trade Commission, the Department of Agriculture and the Environmental Protection Agency. These activities are also regulated by various state and local laws and agencies of the states and localities in which the Sore-EezÔ Chinese herbal liniment and other product candidates may be sold. Additional regulations may prevent or delay the introduction, or require the reformulation, of the Sore-EezÔ Chinese herbal liniment and other product candidates, which could result in lost sales and increased costs to us. The Food and Drug Administration may determine that a particular statement of support on the Sore-EezÔ Chinese herbal liniment and other product candidates, or that we want to use, is an unacceptable drug claim or the Food and Drug Administration or the Federal Trade Commission may determine that particular claims are not adequately supported by available scientific evidence. Any such regulatory determination would prevent us from marketing the Sore-EezÔ Chinese herbal liniment and other product candidates or using certain statements on the Sore-EezÔ Chinese herbal liniment and other product candidates, which could adversely affect our sales. The Food and Drug Administration also could require us to remove the Sore-EezÔ Chinese herbal liniment and other product candidates from the market.

Because of our direct marketing approach of personal care products, our current and prospective operations are not restricted to a material extent by any current or proposed governmental laws or regulations, nor is governmental approval required for the conduct of our business. We are subject to the Federal Trade Commission Act, Florida Deceptive and Unfair Trade Practices and Act and other similar state consumer protection laws and regulations governing network or multi-level marketing companies. These laws and regulations prohibit unfair and deceptive trade practices in the sale of products and services, including illegal pyramid schemes. Federal and state consumer protection laws and regulations do not materially limit or materially impact our current or prospective operations, nor does compliance with any consumer protection laws or regulations impose a material cost on our business.

Competition

The market for personal care products and direct sales consultants is large and intensely competitive. We compete directly with direct selling organizations and companies that manufacture personal care products. Many of the Company’s competitors have much greater name recognition and financial resources than the Company. In addition, personal care products can be purchased in a wide variety of channels of distribution. While the Company believes that consumers appreciate the convenience of ordering products from home through a sales person, or through a catalog, the buying habits of many consumers accustomed to purchasing products through traditional retail channels are difficult to change. The Company’s product offerings are also small compared to the wide variety of products offered by many other personal care products companies and direct selling organizations.

We compete with other direct selling organizations and personal care products companies, some of which have a longer operating history and higher visibility, name recognition, and financial resources. The leading direct selling company in our existing market is Amway Corporation and its affiliates. We compete for new direct sales consultants on the strength of our business opportunities, product offerings, the compensation plan, and management strength. We envision the entry of many more direct selling organizations into the marketplace as this channel of distribution expands over the next several years.

Research and Development Activities

No research and development expenditures have been incurred, either on our account or sponsored by customers since our inception.

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Employees

As of January 31, 2010, we had two part-time employees. All of our employees are “at will” which means that our employees are neither covered by employment agreements nor by collective bargaining agreements. We believe that our relations with our employees are good.

Item 1A. Risk Factors.

Not applicable.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our executive offices are located at 785 N.E. 83rd Terrace, Miami, Florida 33138. We occupy approximately 400 square feet of office space, which we currently occupy rent-free.

Item 3. Legal Proceedings.

We are not a party to any legal proceedings, nor are we aware of any threatened litigation whatsoever.

Item 4. Submission of Matters to a Vote of Security Holders.

There were no matters submitted to a vote of security holders during the fourth quarter of 2009.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock has been approved for quotation on the over-the-counter bulletin board market under the symbol “DRGA.” While we anticipate that a public trading market for our shares of common stock will develop, a public trading market for our shares of Common Stock has not yet commenced and no shares of our common stock have been traded on the over-the-counter bulletin board market. There can be no assurance that such a public trading market will develop, or, if such a trading market is developed, that it can be maintained with liquidity. On December 31, 2009, there were 41 registered holders of our common stock.

Dividends

We have not paid any dividends on our common stock, and it is not anticipated that any dividends will be paid in the foreseeable future. The declaration and payment of dividends in the future will be determined by the Board of Directors in light of conditions then existing, including our earnings, financial condition, capital requirements and other factors.

Recent Sales of Unregistered Securities

The following is a summary of transactions by us from October 4, 2007, which is our inception, through January 31, 2010 involving sales of our securities that were not registered under the Securities Act. 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 purchasers were “accredited investors,” officers, directors or employees of the registrant or known to the registrant and its management through pre-existing business relationships, family, friends and employees. All purchasers were provided access to all material information which they requested, and all information necessary to verify such information and were afforded access to management of the registrant in connection with their purchases. All holders of the unregistered securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to the registrant. All certificates or agreements representing such securities that were issued contained restrictive legends, prohibiting further transfer of the certificates or agreements 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.

Founders Share Issuances

On October 4, 2007, the date of our inception, we issued 975,000 shares of our restricted common stock to Yamit Lemoine for the license to the recipe to the Sore-EezÔ Chinese herbal liniment, our initial product. 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 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).

On November 4, 2007, we issued 5,000,000 shares of our restricted common stock to Talles Investments, Inc., pursuant to its investment of $11,100 in the Company. 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).

On December 31, 2007, we issued the Company issued 63,278 shares of common stock to our Michel Lemoine, our initial Chairman, Chief Executive Officer, President, Secretary and Treasurer, for cash in the amount of $633. 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).

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Directors Share Issuances

On March 27, 2008, the Company issued 25,000 shares of common stock to each of our initial directors, Michel Lemoine, Steve Kravitz, H. Bradley Ress and Joseph Pierre-Louis, or an aggregate of 100,000 shares of common stock, for services rendered by each of our directors valued at $1,002, or an aggregate of $4,008. 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).

Transfer Agent Share Issuance

On April 1, 2009, the Company issued 100,000 shares of common stock to Island Capital Management, LLC, our transfer agent, for services rendered in the amount $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 December 31, 2009, as follows:

Marketing, Promotion and Advertising	$	4,256
Printing expenses		7,453
Executive Compensation		3,080
Legal fees and expenses		32,173
Accounting fees and expenses		12,100
Blue sky fees and expenses		1,292
Transfer Agent fees		6,061
Miscellaneous		1,385

Total	$	67,800

Other than executive compensation paid to our Chief Executive Officer, President, Secretary and Treasurer in the amount of $3,080, 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.

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Item 6. Selected Financial Data.

The following financial data has been derived from and should be read in conjunction with (i) our audited financial statements for the years ended December 31, 2009 and December 31, 2008, together with the notes to these financial statements; (ii) and the sections of this report entitled “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included elsewhere herein or filed with the SEC. Our historical results are not necessarily indicative of the results we may achieve in any future period.

	Year Ended December 31, 2009
Consolidated Statement of Operations Data:	Year Ended December 31, 2009			Year Ended December 31, 2008		Period from October 4, 2007 (inception) through December 31, 2009
Revenue:	$	-	$	1,241	$	1,241
Cost of Goods Sold:		-		131		131
Gross Profit:		-		1,110		1,110

Expenses:
Depreciation and Amortization		340		290		690
General and administrative		71,271		21,723		94,463

Total expenses		71,611		22,013		95,153

Net (loss)	$	(71,611	) $	(20,903)	$	(94,043)

Basic and diluted net (loss) per share	$	-	$	-
Weighted average number of common shares outstanding		7,976,420		6,119,597

		As of	As of December 31, 2008
Consolidated Balance Sheet Data:		December 31, 2009	As of December 31, 2008

Cash and cash equivalents	$	137	$	66,613
Working capital		(6,461)		60,964
Total assets		1,544		68,360
Total long-term liabilities		-		-
Total liabilities		7,000		6,051
Total shareholders’ equity/(deficit)		(5,456)		62,309

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Item 7. Management’s Discussion And Analysis Of Financial Condition And Results 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-K 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.

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 $78,901 from inception of October 4, 2007 to December 31, 2009 and has an accumulated deficit of $94,043 through December 31, 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.

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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 collectibility of the resulting receivable is reasonably assured.

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.

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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 Year Ended December 31, 2009 Compared to December 31, 2008

Revenues. The Company’s revenues for the year ended December 31, 2009 were $0. The Company’s revenues for the year ended December 31, 2008 were $1,241. No revenues occurred in the 2009 period, because no there were no product sales. The revenues in the 2008 period were from sales of the SoreEez Chinese herbal liniment.

Cost of Revenues. The Company’s cost of revenues for the year ended December 31, 2009 were $0. The Company’s cost of revenues for the year ended December 31, 2009 were $131. No costs of revenues occurred in the 2009 period, because no there were no product sales. The costs of revenues in the 2008 period were in connection with the sales of the SoreEez Chinese herbal liniment.

Gross Profit/Loss. The Company’s gross profit/loss for the year ended December 31, 2009 was $0. The Company’s gross profit/loss for the year ended December 31, 2009 was $1,110. No gross profit resulted in the 2009 period, because no there were no product sales. The gross profit in the 2008 period was made in connection with the sales of the SoreEez Chinese herbal liniment.

General and Administrative Expenses. General and administrative expenses for the year ended December 31, 2009 were $71,271 compared to $21,723 for the year ended December 31, 2008. General and administrative expenses consisted primarily of professional service fees associated with the Company’s initial public offering, stock compensation expense and amortization of a license. The increase in administrative expenses from the 2009 period compared to 2008 period was due to an increase in the payment of professional service fees.

Net Loss. Net loss for the year ended December 31, 2009 was $(71,611) as compared to $(20,903) for the year ended December 31, 2008. The increase in the net loss from the 2009 period compared to 2008 period was due to an increase in the payment of professional service fees.

As of the year ended December 31, 2009, we had an accumulated deficit of $(94,043).

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 December 31, 2009, total current assets were $539 which consisted of $137 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 December 31, 2009, total current liabilities were $7,000, which consisted of accounts payable. As of December 31, 2008, total current liabilities were $6,051, which consisted of accounts payable. We had negative net working capital of $(6,461) as of December 31, 2009, compared to net working capital of $60,964 as of December 31, 2008.

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During the year ended December 31, 2009, operating activities used cash of $66,476 as compared to the year ended December 31, 2008, where we used cash of $11,892 in operating activities. The cash used by operating activities for the year ended December 31, 2009 and December 31, 2008 was due primarily to general and administrative expenses.

For the year ended December 31, 2009, we had a net decrease in cash of $(66,476) as compared to a $55,413 net increase for the year ended December 31, 2008. Cash flows from financing activities represented the Company’s principal source of cash since October 4, 2007 (inception) through December 31, 2009.

We acquired certain equipment during the year ended December 31, 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 year ended December 31, 2009 and December 31, 2008 was $240 and $240, 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 $660 as of December 31, 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 year ended December 31, 2009 and December 31, 2008.

Material Commitments

There were no material commitments during the year ended December 31, 2009 and December 31, 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.

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 in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Cash and Cash Equivalents

We consider all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. We have no cash equivalents.

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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.

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

We recognize revenue when:

·	Persuasive evidence of an arrangement exists;

·	Shipment has occurred;

·	Price is fixed or determinable; and

·	Collectibility is reasonably assured.

Earnings (Loss) Per Share

We compute 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 from October 4, 2007 (inception) through December 31, 2007 and the year ended December 31, 2008.

Intangible Assets

Intangible assets consist of a license agreement, which is recorded at cost and amortized fiver years over a straight-line basis. The value of the license was determined to be the legal costs to create the license, which was $1,200.

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.

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.

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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 on a basis consistent with the pro forma disclosures required for those periods under SFAS 123.

Effective October 4, 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 share-based payments.

Recent Accounting Pronouncements

The company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

Item 7A. Quantitative and Qualitative 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 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

LAKE & ASSOCIATES, CPA’s LLC

To the Board of Directors and

Stockholders of Dragon’s Lair Holdings, Inc.

We have audited the accompanying balance sheet of Dragon’s Lair Holdings, Inc. (a development stage enterprise)(the “Company”) as of December 31, 2009 and 2008 and the related statements of operations, stockholders’ deficit, and cash flows for the years then ended, and for the period October 4, 2007 (inception) through December 31, 2009. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dragon’s Lair Holdings, Inc. (a Florida corporation) as of December 31, 2009 and 2008 and the results of its operations and its cash flows for the years then ended and the period October 4, 2007 (inception) through December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed further in Note 1, the Company has been in the development stage since its inception (October 4, 2007) and continues to incur significant losses. The Company's viability is dependent upon its ability to obtain future financing and the success of its future operations. These factors raise substantial doubt as to the Company's ability to continue as a going concern. Management's plan in regard to these matters is also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Lake & Associates CPA’s LLC

Lake & Associates, CPA’s LLC

Schaumburg, Illinois

February 4, 2010

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

(Audited)



	December 31, 2009			December 31, 2008
CURRENT ASSETS:
Cash and equivalents	$	137		$	66,613
Inventory		402			402
Total Current Assets		539			67,015

FIXED ASSETS:
Equipment, net of accumulated depreciation of $150 and $50, respectively		345			445

OTHER ASSETS:
License, net		660			900

Total Assets	$	1,544		$	68,360


LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
Accounts payable & accrued expenses	$	7,000		$	6,051
Total Liabilities		7,000			6,051

SHAREHOLDERS' EQUITY/(DEFICIT):
Preferred stock (50,000,000 authorized;
par value $.001; none issued and outstanding)	$	-		$	-
Common stock (100,000,000 shares authorized;
no par value; 8,001,078 issued and outstanding)		88,587			84,741
Deficit accumulated during the development stage		(94,043	)		(22,432	)
Total Shareholders' Equity (Deficit)		(5,456	)		62,309

Total Liabilities and Shareholders' Equity/(Deficit)	$	1,544		$	68,360

The accompanying notes are an integral part of these statements.

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DRAGON'S LAIR HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS

(Audited)
							Cumulative from
	For the year ended ended			For the year ended			October 4, 2007 (Inception) through
	December 31, 2009			December 31, 2008			December 31, 2009

Net Sales	$	-		$	1,241		$	1,241

Cost of Sales		-			131			131

Gross Profit		-			1,110			1,110

Expenses:
Amortization		240			240			540
Depreciation		100			50			150
General and Administrative		71,271			21,723			94,463

Total Expenses		(71,611	)		(22,013	)		95,153

Net (loss) before Income Taxes		(71,611	)		(20,903	)		(94,043	)

Provision for Income Taxes		-			-			-

Net (loss)	$	(71,611	)	$	(20,903	)	$	(94,043	)

Basic and diluted net loss per common share	$	-		$	-

Weighted average number of common shares outstanding		7,976,420			6,119,597

The accompanying notes are an integral part of these statements.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FROM OCTOBER 4, 2007 (INCEPTION) THROUGH DECEMBER 31, 2009

(Audited)
									Accumulated			Total
	Preferred Stock				Common Stock				(Deficit) During			Shareholders'
	Shares		Amount		Shares		Amount		Development Stage			Equity

Balance at October 4, 2007		-	$	-		975,000	$	1,200	$	-		$	1,200
Common stock issued for license

Founder's shares		-		-		5,000,000		11,100		-			11,100
November 4, 2007, $0.00222/share

Common stock issued for cash		-		-		63,278		633		-			633
December 31, 2007, $0.01/share

Net (loss) for the period		-		-		-		-		(1,529	)		(1,529	)

Balance at December 31, 2007		-		-		6,038,278		12,933		(1,529	)		11,404

Common stock issued for services		-		-		100,000		4,008		-			4,008
March 27, 2008, $0.04008/share

Common stock issued for cash
December 31, 2008, $0.03846/share						1,762,800		67,800					67,800

Net (loss) for the period		-		-		-		-		(20,903	)		(20,903	)

Balance at December 31, 2008		-		-		7,901,078		84,741		(22,432	)		62,309

Common stock issued for services		-		-		100,000		3,846		-			3,846
April 1, 2009, $0.03846/share

Net (loss) for the period		-		-		-		-		(71,611	)		(71,611	)

Balance at December 31, 2009		-		-		8,001,078		88,587		(94,043	)		(5,456	)

The accompanying notes are an integral part of these statements.

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DRAGON'S LAIR HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Audited)
							Cumulative from
	For the year ended			For the year ended			October 4, 2007 (Inception) through
	December 31, 2009			December 31, 2008			December 31, 2009
OPERATING ACTIVITIES:
Net loss	$	(71,611	)	$	(20,903	)	$	(94,043	)
Issuance of common stock for services		3,846			4,008			7,854
Increase in amortization		240			240			540
Increase in depreciation		100			50			150
(Increase) decrease in inventory		-			131			(402	)
Increase in accounts payable		949			4,582			7,000

Net cash used in operating activities		(66,476	)		(11,892	)		(78,901	)

INVESTING ACTIVITIES:
Increase in equipment		-			(495	)		(495	)

FINANCING ACTIVITIES:
Proceeds from issuance of common stock		-			67,800			79,533

NET INCREASE (DECREASE) IN CASH		(66,476	)		55,413			137

CASH BEGINNING BALANCE		66,613			11,200			-

CASH ENDING BALANCE	$	137		$	66,613		$	137

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Taxes paid	$	-		$	-		$	-
Interest paid	$	-		$	-		$	-

CASH TRANSACTIONS AFFECTING OPERATING, INVESTING
AND FINANCING ACTIVITIES:
Issuance of common stock for license	$	-			-		$	1,200

The accompanying notes are an integral part of these statements.

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DRAGON’S LAIR HOLDINGS, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND DECEMBER 31, 2008

NOTE 1 - 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 principal executive office is located at 785 N.E. 78th Street, 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.

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.

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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 its securities, (2) the sale of the Sore-EezÔ Chinese herbal body liniment and other product candidates, and (3) 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.

Development Stage Risk

The Company has earned minimal revenues from operations. Accordingly, the Company's activities have been accounted for as those of a "Development Stage Enterprise" as set forth in Accounting Standards Codification (“ASC”) 915 “Development Stage Entities”, which was previously Financial Accounting Standards Board Statement No. 7 ("SFAS 7"). Among the disclosures required by ASC 915 are that the Company's financial statements be identified as those of a development stage company, and that the statements of operations, stockholders' equity/(deficit) and cash flows disclose activity since the date of the Company's inception

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 2 - 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

Inventories

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

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful life of five years.

Advertising Costs

Advertising costs are expensed as incurred. For the years ended December 31, 2009 and 2008, advertising expenses totaled $3,900 and $156, respectively.

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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 ASC 605, “Revenue Recognition”, which includes the guidelines of Staff Accounting Bulletin No. 104 as described above. For the periods from October 4, 2007 (inception) to December 31, 2007 and January 1, 2008 to June 30, 2008, respectively, 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 December 31, 2008, the Company recognized revenues in the amount of $1,241. For the year ended December 31, 2009, the Company recognized no revenues.

Earnings (Loss) Per Share

The Company computes earnings per share in accordance with ASC 260, “Earnings Per Share”, which was previously 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 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 period from October 4, 2007 (inception) to December 31, 2009.

Income Taxes

The Company accounts for income taxes as outlined in ASC 740, “Income Taxes”, which was previously 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.

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. SFAS No. 123(R) is now included in ASC 718 “Compensation – Stock Compensation.” 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 on a basis consistent with the pro forma disclosures required for those periods under SFAS 123.

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Effective for 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.

Recently Issued Accounting Pronouncements

Subsequent Events

We evaluated subsequent events through the date and time our financial statements were issued on February 5, 2010.

NOTE 3 - 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 our initial 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 4 – INCOME TAXES

The Company provides for income taxes under ASC 740, “Income Taxes”, which was previously 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.

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.

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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:

	December 31,			December 31,
	2009			2008
Income tax expense (asset) at statutory rate	$	(24,348	)	$	(7,107	)
Valuation allowance		24,348			7,107

Income tax expense per books	$	-0-		$	-0-

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

	December 31,			December 31,
	2009			2008
NOL Carryover	$	94,043		$	22,432
Valuation allowance		(94,043	)		(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 forwards for the years ended December 31, 2009 and December 31, 2008, were $94,043 and 22,432, respectively, 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 5 - 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) up to $250,000. At December 31, 2009 and December 31, 2008, respectively, the Company had no amounts in excess of FDIC insured limit.

NOTE 6 - LICENSE AGREEMENT

We have entered into a license agreement with Yamit Lemoine, a significant shareholder and the wife of our former 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.

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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-EezÔ Chinese herbal liniment recipe by October 4, 2012. We have not achieved this level of sales as of December 31, 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 31
2007	$	60
2008	$	240
2009		240
2010		240
2011		240
2012		180
	$	1,200

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Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. 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 Securities Exchange Act of 1934 (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 fourth 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 fourth fiscal quarter ended December 31, 2009, 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

Our management of 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 officer 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.

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The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 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, as of December 31, 2009, is effective and provides reasonable assurance regarding the reliability of its financial reporting and the preparation of its financial statements in accordance with generally accepted accounting principles. Further, management has not identified any material weaknesses in internal control over financial reporting as of December 31, 2009.

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

/s/ Bobby R. Smith, Jr.

CEO, President and Treasurer

Item 9B. Other Information.

There exists no information required to be disclosed by us in a report on Form 8-K during the fourth quarter ended December 31, 2009, but not reported.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Our directors and executive officers and their respective ages as of February 4, 2010, are as follows:

Name	Age	Principal Positions With Us
Bobby R. Smith, Jr.	46	Chairman of the Board, Chief Executive Officer, President and Treasurer
Frances Mize	63	Secretary and Director

The following describes the business experience of each of our executive officers and directors, including other directorships held in reporting companies, if any:

Bobby R. Smith, Jr. Since September 2002, Bobby R. Smith, Jr., has served as the president and owner of Four Star Investments, Inc., an Alabama corporation. Mr. Smith is a licensed builder and general contractor with the State of Alabama.

Frances Mize. Since February 2006, Frances Mize, has served as the manager and owner of Four Star Properties, LLC. For more than the past five years, Ms. Mize has served as the qualifying broker for properties owned by Four Star Realty, LLC and its affiliates. Ms. Mize is a licensed realtor in the State of Alabama.

Term of Office

All of our directors hold office until the next annual general meeting of the shareholders or until their successors are elected and qualified. Our officers are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.

Significant Employees

There are no significant employees other than our executive officers.

Committees of the Board of Directors

Our board of directors intends to establish an audit committee, a compensation committee and a nominating and corporate governance committee. Our board may establish other committees from time to time to facilitate the management of our company; however, we have not yet established any such committees.

Audit committee. Our audit committee will oversee a broad range of issues surrounding our accounting and financial reporting processes and audits of our financial statements, including by (1) assisting our board in monitoring the integrity of our financial statements, our compliance with legal and regulatory requirements, our independent auditor's qualifications and independence and the performance of our internal audit function and independent auditors, (2) appointing, compensating, retaining and overseeing the work of any independent registered public accounting firm engaged for the purpose of performing any audits, reviews or attest services, and (3) preparing the audit committee report that may be included in our annual proxy statement or annual report on Form 10-K. We will have at least three directors on our audit committee, each of whom will be independent under the requirements of the NASDAQ Capital Market, the Sarbanes-Oxley Act and the rules and regulations of the SEC. We have not yet formed our audit committee.

Compensation committee. Our compensation committee will review and recommend our policies relating to compensation and benefits for our executive officers and other significant employees, including reviewing and approving corporate goals and objectives relevant to compensation of our Chief Executive Officer and other executive officers, evaluating the performance of our executive officers relative to goals and objectives, determining compensation for these executive officers based on these evaluations and overseeing the administration of our incentive compensation plans. The compensation committee will also prepare the compensation committee report that may be included in a subsequent annual report on Form 10-K. We will have at least two directors on our compensation committee, each of whom will be independent under the requirements of the NASDAQ Capital Market. We do not yet have a compensation committee.

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Nominating and corporate governance committee. Our nominating and corporate governance committee will (1) identify, review and recommend nominees for election as directors, (2) advise our board of directors with respect to board composition, procedures and committees, (3) recommend directors to serve on each committee, (4) oversee the evaluation of our board of directors and our management, and (5) develop, review and recommend corporate governance guidelines and policies. We will have at least two directors on our nominating and corporate governance committee, each of whom will be independent under the requirements of the NASDAQ Capital Market. We do not yet have a nominating and corporate governance committee.

Compensation Committee Interlocks and Insider Participation

Our board of directors does not have a compensation committee. Since inception, all of our executive compensation decisions have been made by our board of directors.

Code of Ethics

Our board of directors intends to adopt a code of ethics for our principal executive and senior financial officers. This code of ethics will apply to our principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions. We intend to post the full text of this code on our Internet website, which is www.sore-eez.com. We intend to disclose future amendments to provisions of our code of ethics, or waivers of such provisions, applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as required by law or regulation. We have not yet adopted a code of ethics.

Family Relationships

None.

Involvement in Certain Legal Proceedings

None of our directors, executive officers or control persons has been involved in any of the events prescribed by Item 401(f) of Regulation S-K during the past five years, including:

1.	any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

2.	any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

3.	being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

4.	being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Compliance with Section 16(a) of the Act

Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than ten percent (10%) of our shares of common stock, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent (10%) stockholders are required by regulations promulgated by the SEC to furnish us with copies of all Section 16(a) forms that they file. With reference to transactions during the fiscal year ended December 31, 2009, to our knowledge, all Section 16(a) forms required to be filed with the SEC were filed.

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Item 11. Executive Compensation.

Compensation Discussion and Analysis

Philosophy and objectives

For the period October 4, 2007 (inception) through December 31, 2009, all compensation decisions were made by our board of directors. The primary objective of our compensation policies and programs with respect to executive compensation is to serve our shareholders by attracting, retaining and motivating talented and qualified individuals to manage and lead our business. We will focus on providing a competitive compensation package that provides significant short and long-term incentives for the achievement of measurable corporate and individual performance objectives. We intend to establish a compensation committee and future decisions regarding executive compensation will be the responsibility of that committee.

Elements of executive compensation

Base salary. We will seek to provide our senior management with a level of base salary in the form of cash compensation appropriate to their roles and responsibilities. Base salaries for our executives will be established based on the executive’s qualifications, experience, scope of responsibilities, future potential and past performance and cash available to pay executive compensation. Base salaries will be reviewed annually and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. We will consider four factors in determining the base salaries of our named executive officers. These four factors are, in order of significance, (1) creating an incentive to achieve corporate goals, (2) individual performance, (3) cash available to pay compensation and (4) the total compensation each executive officer previously received while employed with us, if any.

Incentive cash bonuses. Our practice will be to seek to award incentive cash bonuses to our executive officers based upon their individual performance, as well as our overall business and strategic objectives. In determining the amount of cash bonuses paid to our named executive officers, we will consider the same four factors as in determining their base salaries. We have not paid any incentive cash bonuses since inception.

Long-term equity compensation. We believe that successful long-term performance is achieved through an ownership culture that encourages long-term performance by our executive officers through the use of stock and stock-based awards. We intend to establish equity incentive plans to provide our employees, including our named executive officers, with incentives to help align those employees’ interests with the interests of our shareholders. We expect that our incentive plans will permit the grant of stock options, restricted shares and other stock awards to our executive officers, employees, consultants and non-employee board members. When we hire executive officers in the future, we expect to grant them stock-based awards that will generally vest over a four or five-year period. We believe that stock-based awards provide an incentive for these officers to continue their employment with us, provide our executive officers with an opportunity to obtain an ownership interest in our company and encourage them to focus on our long-term profitable growth. We believe that the use of stock-based awards will promote our overall executive compensation objectives and expect that equity incentives will continue to be a significant source of compensation for our executives. In determining amounts awarded to our named executive officers under our incentive plans, we will consider the same four factors (and use the same method of measurement) as in determining base salary. The third factor (cash available) has an indirect effect when determining long-term equity compensation. Specifically, to the extent that this factor causes us not to pay base salary or cash bonuses, it points toward providing long-term equity compensation. We have not issued any long-term equity compensation since our inception.

Other compensation. When we hire other executive officers, our executive officers will be eligible to receive the same benefits, including non-cash group life and health benefits, that are available to all employees. We may offer a 401(k) plan to our employees, including our executive officers. This plan will permit employees to make contributions up to a statutory maximum and will permit us to make matching or profit-sharing contributions. To date, we have not offered a 401(k) plan or made, or committed to make, any matching or profit-sharing contributions under a 401(k) plan or offered any other benefits to Michel Lemoine, our former sole executive officer, or to Bobby R. Smith, Jr. or Frances Mize, our current executive officers.

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Policies related to compensation

Guidelines for equity awards. We have not formalized a policy as to the amount or timing of equity grants to Michel Lemoine, our sole executive officer. We expect, however, that the compensation committee will approve and adopt guidelines for equity awards. Among other things, we expect that the guidelines will specify procedures for equity awards to be made under various circumstances, address the timing of equity awards in relation to the availability of information about us and provide procedures for grant information to be communicated to and tracked by our finance department. As of the date of this report, we have not established a finance department. We anticipate that the guidelines will require that any stock options or stock appreciation rights have an exercise or strike price not less than the fair market value of our common stock on the date of the grant.

Stock ownership guidelines. As of the date of this report, we have not established ownership guidelines for Michel Lemoine, our sole executive officer, or the Board of Directors.

Compliance with Sections 162(m) and 409A of the Internal Revenue Code

Section 162(m) of the Internal Revenue Code limits the deductibility of compensation in excess of $1 million paid to certain executive officers, unless such compensation qualifies as performance-based compensation. Among other things, in order to be deemed performance-based compensation for Section 162(m) purposes, the compensation must be based on the achievement of pre-established, objective performance criteria and must be pursuant to a plan that has been approved by our shareholders. At least for the next several years, we expect the cash compensation paid to our sole executive officer and other executive officers, if any, to be below the threshold for non-deductibility provided in Section 162(m), and our equity incentive plans will afford our compensation committee with the flexibility to make a variety of types of equity awards to our executive officers, the deductibility of which will not be limited under Section 162(m). However, our compensation committee, which we expect to form, will fashion our future equity compensation awards. However, we do not now know whether any such awards will satisfy the requirements for deductibility under Section 162(m).

We also currently intend for our executive compensation program to satisfy the requirements of Internal Revenue Code Section 409A, which addresses the tax treatment of certain nonqualified deferred compensation benefits.

Executive Compensation

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the following persons for services performed for us during 2007, 2008 and 2009 in all capacities.

Summary Compensation Table

		Year		Salary ($)		Bonus ($)		Stock Awards ($)(2)(3)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Name and Principal Position (a)		(b)		(c)		(d)		(e)		(f)		(g)		(h)		(i)		(j)
CEO Michel Lemoine(1)			2007	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0
			2008	$	0	$	0	$	1,002	$	0	$	0	$	0	$	0	$	1,002
			2009	$	3,080	$	0	$		$	0	$	0	$	0	$	0	$	3,080
CEO Bobby R. Smith, Jr.(4)			2009	$	0	$	0	$		$	0	$	0	$	0	$	0	$	0
Secretary Frances Mize(5)			2009	$	0	$	0	$		$	0	$	0	$	0	$	0	$	0


(1)	Mr. Lemoine became our Chief Executive Officer in October 2007. Mr. Lemoine was the only executive officer of the Company during the years 2007, 2008 and 2009. Mr. Lemoine also serves as Chairman, Principal Financial Officer and Principal Accounting Officer.
(2)	Mr. Lemoine also received compensation as a director for which he received $1,002 in common stock in 2008.
(3)	These stock awards are entirely related to Mr. Lemoine’s service on the Board of Directors as its Chairman.
(4)	Mr. Smith became our Chief Executive Officer on December 14, 2009.
(5)	Ms. Mize became our Secretary on December 14, 2009.

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Employment Agreements

We have not entered into any employment agreements with our executive officers. Our decision to enter into an employment agreement, if any, will be made by our compensation committee.

Potential Payments Upon Termination or Change in Control

There were no potential payments or benefits payable to our named executive officer upon his termination of employment or in connection with a change in control.

Grants of Plan-Based Awards in 2009

We have not granted any plan-based awards to our named executive officer, since our inception.

Outstanding Equity Awards at Fiscal Year-End

We did not have any outstanding equity awards to our named executive officer, as of December 31, 2009, our fiscal year-end.

Option Exercises and Stock Vested in 2009

Our named executive officer did not exercise any options, nor did any unvested shares of stock vest, during fiscal year 2009. Our named executive officer did not have any stock options or unvested shares of stock of the Company.

Equity Incentive Plan

We expect to adopt an equity incentive plan. The purposes of the plan are to attract and retain qualified persons upon whom our sustained progress, growth and profitability depend, to motivate these persons to achieve long-term company goals and to more closely align these persons' interests with those of our other shareholders by providing them with a proprietary interest in our growth and performance. Our executive officers, employees, consultants and non-employee directors will be eligible to participate in the plan. We have not determined the amount of shares of our common stock to be reserved for issuance under the proposed equity incentive plan.

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DIRECTOR COMPENSATION


	Fees Earned or Paid in Cash		Stock Awards		Option Awards		Non-Equity Incentive Plan Compensation	Change in Pension Value and Nonqualified Deferred Compensation Earnings	All Other Compensation	Total
	($)		($)		($)		($)	($)	($)	($)
Name (a)	(b)		(c)		(d)		(e)	(f)	(g)	(j)
Michel Lemoine		-	$	1,002	$	-				$	1,002
Joseph R. Pierre-Louis		-	$	1,002	$	-				$	1,002
Steve Kravitz		-	$	1,002	$	-				$	1,002
H. Bradley Ress		-	$	1,002	$	-				$	1,002
Bobby R. Smith, Jr.		-	$	-	$	-				$	-
Frances Mize		-	$	-	$	-				$	-

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth certain information regarding beneficial ownership of our common stock as of February 4, 2010, for:

• each person or group known to us to beneficially own 5% or more of our common stock;

• each of our directors and director nominees;

• each of our named executive officers; and

• all of our executive officers and directors as a group.

Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under applicable law. Unless otherwise indicated below, each entity or person listed below maintains an address of 785 N.E. 83rd Terrace, Miami, Florida 33138.

The number of shares beneficially owned by each shareholder is determined under rules promulgated by the SEC. The information is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting or investment power and any shares as to which the individual or entity has the right to acquire beneficial ownership within 60 days after February 4, 2010, through the exercise of any stock option, warrant or other right. The inclusion in the following table of those shares, however, does not constitute an admission that the named shareholder is a direct or indirect beneficial owner.

Beneficial owner	Number of shares beneficially owned		Percentage of shares outstanding
Bobby R. Smith, Jr.		3,497,659		43.7	%
Frances Mize		2,430,576		30.4	%
All directors and executive officers as a group		5,928,235		74.1	%

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Item 13. Certain Relationships and Related Transactions, and Director Independence.

Related Party Transactions

On November 4, 2007, we issued 5,000,000 shares of our restricted common stock to Talles Investments, Inc., for a purchase price of $0.00222 per share, pursuant to its investment of $11,100 in the Company.

On December 31, 2007, we issued the Company issued 63,278 shares of restricted common stock to our Michel Lemoine, our initial Chairman, Chief Executive Officer, President, Secretary and Treasurer, for a purchase price of $0.01 per share, for cash in the amount of $633.

On March 27, 2008, the Company issued 25,000 shares of restricted common stock to each of our initial directors, Michel Lemoine, Steve Kravitz, H. Bradley Ress and Joseph Pierre-Louis, or an aggregate of 100,000 shares of common stock, for a purchase price of $0.04008 per share, for services rendered by each of our directors valued at $1,002, or an aggregate of $4,008.

All related party transactions involving provision of services or tangible assets were recorded at the exchange amount, which is the value established and agreed to by the related parties reflecting arms length consideration payable for similar services or transfers.

License Agreement

We have entered into a license agreement with Yamit Lemoine, a significant shareholder and the wife of our initial Chief Executive Officer, which grants us a license for a term of 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. 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. We do not have any future payments obligations to Yamit Lemoine under the license agreement.

Policies and Procedures for Related Party Transactions

We intend to adopt a written policy that requires any transaction, arrangement or relationship in which we will be a participant and the amount involved exceeds $120,000, and in which any of our directors, executive officers or shareholders owning at least 5% of any class of our voting securities, or any of their immediate family members or any entity in which any of the foregoing persons is employed or is a general partner or principal had or will have a direct or indirect material interest, to be submitted to our audit committee for review, consideration and approval. In the event that a proposed transaction with a related person involves an amount that is less than $120,000, the transaction will be subject to the review and approval of our Chief Executive Officer (or our Chief Financial Officer in the event our Chief Executive Officer, an immediate family member of the Chief Executive Officer, or an entity in which our Chief Executive Officer or a member of his immediate family is employed or is a general partner or principal is a party to such transaction). If the transaction is approved by our Chief Executive Officer or Chief Financial Officer, such officer will report the material terms of the transaction to our audit committee at its next meeting. The policy will provide for periodic monitoring of pending and ongoing transactions. In approving or rejecting the proposed transaction, our audit committee will consider the relevant facts and circumstances available to it, including, (1) the impact on a director’s independence if the related person is a director or his or her family member or related entity, (2) the material terms of the proposed transaction, including the proposed aggregate value of the transaction, (3) the benefits to us, (4) the availability of other sources for comparable services or products (if applicable), and (5) an assessment of whether the proposed transaction is on terms that are comparable to the terms available to an unrelated third party or to our employees generally. Our audit committee will approve only those transactions that the committee determines to be, in light of known circumstances, in, or not inconsistent with, our best interests and the best interest of our shareholders.

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Table of Contents

Annual Report on Form 10-K

Copies of our Annual Report on Form 10-K, without exhibits, can be obtained without charge from us at The Dragon’s Lair, 785 N.E 83rd Terrace, Miami, Florida 33138, or telephone (786) 554-2771.

Item 14. Principal Accountant Fees and Services.

The following table sets forth fees billed to us for principal accountant fees and services during the period from October 4, 2007 (inception) through December 31, 2007 and the years ended December 31, 2009 and December 31, 2008.

	2009		2008		2007

Audit Fees	$	8,050	$	6,500		$	—
Audit-Related Fees		—		—			—
Tax Fees		—		—			—
All Other Fees		—		—			—

Total Audit and Audit-Related Fees	$	8,050	$	6,500		$	—

Item 15. Exhibits.

(a)

Exhibits

The following exhibits are filed with this report on Form 10-K:

Exhibit No.	Description	Incorporated Herein by Reference to	Filed Herewith
3.1	Articles of Incorporation, as currently in effect	Previously filed with the SEC as an exhibit to our Registration Statement on Form S-1 (No. 333-150751)
3.2	Bylaws, as currently in effect	Previously filed with the SEC as an exhibit to our Registration Statement on Form S-1 (No. 333-150751)
4.1	Specimen common stock certificate	Previously filed with the SEC as an exhibit to our Registration Statement on Form S-1 (No. 333-150751)
10.1	Exclusive License Agreement with Yamit Lemoine dated October 4, 2007	Previously filed with the SEC as an exhibit to our Registration Statement on Form S-1 (No. 333-150751)
21.1	List of Subsidiaries	Previously filed with the SEC as an exhibit to our Registration Statement on Form S-1 (No. 333-150751)
23.1	Consent of Lake & Associates CPA's, LLC		X
31.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		X
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		X

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Table of Contents

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 4th day of February, 2010.

DRAGON’S LAIR HOLDINGS, INC.

By: /s/ Bobby R. Smith, Jr.

Bobby R. Smith, Jr.

CEO, President and Treasurer

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Table of Contents

DRAGON'S LAIR HOLDINGS, INC.

(the “Registrant”)

(Commission File No. 000-52202)

Exhibit Index

Annual Report on Form 10-K

for the Fiscal Year Ended December 31, 2009

Exhibit No.	Description	Incorporated Herein by Reference to	Filed Herewith
3.1	Articles of Incorporation, as currently in effect	Previously filed with the SEC as an exhibit to our Registration Statement on Form S-1 (No. 333-150751)
3.2	Bylaws, as currently in effect	Previously filed with the SEC as an exhibit to our Registration Statement on Form S-1 (No. 333-150751)
4.1	Specimen common stock certificate	Previously filed with the SEC as an exhibit to our Registration Statement on Form S-1 (No. 333-150751)
10.1	Exclusive License Agreement with Yamit Lemoine dated October 4, 2007	Previously filed with the SEC as an exhibit to our Registration Statement on Form S-1 (No. 333-150751)
21.1	List of Subsidiaries	Previously filed with the SEC as an exhibit to our Registration Statement on Form S-1 (No. 333-150751)
23.1	Consent of Lake & Associates CPA's, LLC		X
31.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		X
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		X

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Dragon's Lair Holdings, Inc. - FORM 10-K - February 5, 2010

Attached files

Dragon's Lair Holdings, Inc. Reports