Item 405 of Regulation S-B contained in this Form, and no disclosure will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB o

As of December 19, 2007, Foundation is in default under the repayment terms of a promissory note which formed part of the purchase price.

InterAmerican Gaming Corp. Proposed Acquisition

Racino has signed a non-binding Letter of Intent pursuant to which it proposes to acquire all the issued and outstanding shares of InterAmerican Gaming Corp (“InterAmerican”), a Latin America focused casino management company. As part of the acquisition the board of directors will be reconstituted to include individuals with commensurate experience in the appropriate sectors and markets.

Saskatchewan Licensing Rights

The Company has an agreement with the Saskatchewan Standardbred Horseman’s Association pursuant to which it holds the rights to horseracing in a particular market in Saskatchewan, Canada. The Company operated horseracing under this agreement during the summer of 2006. Management unsuccessfully applied for additional race dates in 2007. The Company has opted to write down the licensing rights as impaired at September 30, 2007 but fully intends to pursue lobbying efforts to race under the agreement in the future.

Government Regulations

Horseracing under the Saskatchewan rights are controlled by the Saskatchewan Liquor and Gaming Authority and the Company must reapply with this regulatory group to operate and or add simulcasting rights to its operations.

In the event that the Company closes the InterAmerican transaction it will become involved with Latin American gaming regulators which are in the process of organizing a wagering license commission for the businesses the Company may operate in that market.

Employees

As of the date of this report, we have 3 employees, including our current officers, and independent contractors.

Risk Factors

The Company intends to begin to operate in Latin American markets where government regulations are evolving and changing. There are significant risks that will have to be considered with each transaction the Company enters in this market. Management, however, is of the opinion that there are methods in which the Company can operate in these markets at substantially lower risk profiles. These might include but are not limited to providing secured financing to gaming operators rather than assuming operational risk associated with direct ownership.

ITEM 2 - DESCRIPTION OF PROPERTY

Our executive offices are located at 144 Front Street, Suite 700, Toronto, Ontario, Canada M5J 2L7  (tel. 416-477-2303, fax 888-229-9711) at the offices of Eiger Technology, Inc. the former controlling shareholder of the Company.  The Company does not pay rent for the use of these facilities.

ITEM 3 - LEGAL PROCEEDINGS

We are unaware of any material pending legal proceedings to which we are a party or of which any of our property is subject.  Our management is not aware of any threatened proceedings by any person, organization or governmental authority.

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

No matters were submitted to a vote of our stockholders during the fourth quarter of fiscal 2007.

PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Our Common Stock currently is listed for trading on the OTC BB under the symbol "RCNR."  The table below sets forth the reported high and low bid prices for the periods indicated.  The bid prices shown reflect quotations between dealers, without adjustment for markups, markdowns or commissions, and may not represent actual transactions in our common stock.

 

2006 FISCAL YEAR :

High              Low

1st Quarter                                                              0.35              0.05

2nd Quarter                                                             0.07              0.07

3rd Quarter                                                              0.29              0.06

4th Quarter                                                              0.85              0.29

2007 FISCAL YEAR:

High              Low

1st Quarter                                                              0.75              0.30

2nd Quarter                                                             0.20              0.08

3rd Quarter                                                              0.10              0.05

4th Quarter                                                              0.08              0.07

At December 7, 2007 the closing bid price of our Common Stock was $0.10 per share.

There is currently only a limited public market for our common stock on the OTC Bulletin Board, and no assurance can be given that such a market will develop or that a stockholder will ever be able to liquidate his investment without considerable delay, if at all.  If such a market should develop, the price may be highly volatile.  Unless and until our common shares are quoted on the NASDAQ system or listed on a national securities exchange, it is likely that the common shares will be defined as "penny stocks" under the Exchange Act and SEC rules thereunder.  The Exchange Act and penny stock rules generally impose additional sales practice and disclosure requirements upon broker-dealers who sell penny stocks to persons other than certain "accredited investors" (generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly with spouse) or in transactions not recommended by the broker-dealer.

For transactions covered by the penny stock rules, the broker-dealer must make a suitability determination for each purchaser and receive the purchaser's written agreement prior to the sale.  In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the SEC.  So long as Racino’s common shares are considered "penny stocks", many brokers will be reluctant or will refuse to effect transactions in Racino’s shares, and many lending institutions will not permit the use of penny stocks as collateral for any loans.

 (b)  As of September 30, 2007, there were 45 stockholders of record of our common stock, including 44 beneficial holders.

(c)   We did not pay any dividends on our Common Stock during the two years ended September 30, 2007.  Pursuant to the laws of the State of Nevada, a corporation may not issue a distribution if, after giving its effect, the corporation would not be able to pay its debts as they became due in the usual course of business, or such corporation's total assets would be less than the sum of their total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.  As a result, management does not foresee that we will have the ability to pay a dividend on our Common Stock in the fiscal year ended September 30, 2008.  See "Part II, Item 7, Financial Statements."

(d)  There are no outstanding options to purchase, or securities convertible into our common stock although the shareholders at a meeting held on November 12, 2001 approved an Incentive Stock Option Plan (under which no options have yet been granted) which would allow us to grant up to 1,000,000 incentive stock options to directors and employees at the board of directors’ discretion.

(e)  There are warrants outstanding to acquire 500,000 shares of Racino’s stock at $0.10 per share. Such warrants expire June 30, 2009.

ITEM 6 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS/ PLAN OF OPERATION

The following discussion should be read in conjunction with our audited financial statements and notes thereto included herein.  In connection with, and because we desire to take advantage of, the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission.  Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments.  Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change.  These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward looking statements made by, or on our behalf.  We disclaim any obligation to update forward looking statements.

 

Overview

The Company intends to focus on gaming opportunities in Latin America. As of September 30, 2007, the Company was a party to letter of intent pursuant to which it intends to acquire InterAmerican Gaming Corp., an entity focused on the Latin American gaming market.

Racino obtained a license or right from a horeseman’s association to operate horseracing in certain markets in Saskatchewan, Canada. In fiscal 2006, the Company successfully obtained race dates from the provincial government gaming authority and earned revenues and incurred expenses operating under the rights. The Company applied unsuccessfully for the race dates again in 2007. As no race dates were granted the Company did not earn revenue from these rights. Management intends to reapply for race dates again in 2008.

RESULTS OF OPERATION

Comparison of Results of Operations for the Fiscal Years Ended September 30, 2007 and 2006

The Company generated $nil in revenues during the year ended September 30, 2007 compared to $115,936 during the comparative period in the prior year. The prior year’s revenues arose from operating eight race dates under the Saskatchewan horseracing rights. As mentioned elsewhere in this report the Company was not awarded race dates during fiscal 2007 and therefore recorded no revenue. Fiscal 2006 revenues were $96,347 from provincial grants, $19,018 from pari-mutuel racing and $571 of miscellaneous income.  Provincial grant revenue represents funds advanced by the provincial regulator to assist operating the race dates and is primarily intended to be used for racing purses. Pari-mutuel revenues represent the Company’s share of horseracing wagering payments.

Cost of revenues incurred during fiscal 2006 totaled $72,716 and consisted of racing purses and wager costs paid out.

Total expenses during the year ended September 30, 2007 were $171,270 compared to $117,726 during the year ended September 30, 2006. Management fees to related parties were $51,743 in the current year and zero in the prior year. Current year’s management fees include payments made for the services of the Company’s officers. The Company did not compensate its officers during fiscal 2006. Professional fees totaled $39,965 in fiscal 2007 compared to $25,431 during fiscal 2006. Professional fees primarily include audit and accounting services costs. General and administrative expenses decreased from $92,295 during fiscal 2006 to $79,562. General and administrative costs include travel, foreign exchange translation losses, various consulting fees and other miscellaneous costs.

At September 30, 2007, management decided to record an impairment charge of $1,317,471 on its Sasketchewan licensing rights primarily due to the Company’s unsuccessful attempt to obtain race dates during fiscal 2007. Although the Company plans to continue lobbying efforts and reapply for race dates in 2008, it has written off the rights for accounting purposes. There can be no assurance that the provincial gaming authority will grant racing dates to the Company in the future.

As a result, the Company incurred a net loss of ($1,487,342) during the twelve month period ended September 30, 2007, (approximately $0.05 per share) compared to a net loss of ($59,998) in the same period ended September 30, 2006 (approximately $0.002 per share)

Management expects the operating losses to continue until breakeven operations are achieved under the new business opportunities. Additional financing will be required in order to fund operating losses.

PLAN OF OPERATION

The Company holds the horseman’s licensing rights in certain markets in Saskatchewan and the Company intends to acquire an entity focused on the Latin American gaming markets.

With the rights to planned acquisition and the existing rights the Company intends to realize revenues from these assets. These measures, in the short term, address markets known to the Company at this time. Management plans to develop the infrastructure and exploit gaming opportunities. Once these opportunities have been started, the Company will begin capitalizing on other worldwide opportunities.

Racino will need to raise additional cash to continue to pay its operating expenses in the next twelve months until the day to day operating costs are offset.

The Company plans to raise additional funds, in the next twelve months, through the issuance of its common stock or through a combination of equity and debt security instruments. It is anticipated that the debt security instruments will have conversion features that would cause further dilution to existing shareholders.

LIQUIDITY AND CAPITAL RESOURCES

Our total assets decreased from $1,350,377 at September 30, 2006 to $29,901 at September 30, 2007.  The decrease is primarily the result of the write down of Saskatchewan licensing rights. The Company acquired these rights in fiscal 2006 for a package of securities of 5,000,000 shares of common stock and warrants to purchase an additional 500,000 common shares at $0.10 per share. As detailed elsewhere in this report the Company intends to continue to realize on the value of the rights but was unsuccessful in obtaining race dates in 2007 and there can be no assurance that 2008 race dates will be granted.

The most significant tangible asset held by the Company at September 30, 2007 was an advance of $27,170 to InterAmerican Gaming Corp. Pursuant to its letter of intent to acquire InterAmerican the Company is obligated to fund the development of certain of its business opportunities before closing of the acquisition.

Our total liabilities decreased from $188,431 at September 30, 2006 to $117,334 at September 30, 2007. The decrease is the result of the conversion of certain liabilities to related parties into common stock. Due to related parties balances decreased from $152,087 at September 30, 2006 to $78,297 at September 30, 2007. Due to related party amounts do not have specific repayment terms and it is expected that these amounts will be repaid as the financial position of the Company improves. Accounts payable increased from $20,913 at the beginning of the year to $31,037 at the end. Accrued liabilities decreased from $15,431 at September 30, 2006 to $8,000 at September 30, 2007. Accrued liabilities includes accrued professional fees.

The stockholders’ equity decreased from $1,161,946 at September 30, 2006 to a deficiency of ($87,433) at September 30, 2007.  The decrease is attributable to:

1.	the issuance of 5,000,000 common shares in satisfaction of $250,000 of related party debt,

2.	foreign exchange translation losses recorded in accumulated other comprehensive income, and

3.	the $1,487,342 net loss for the year.

 

At September 30, 2007, we had a working capital deficit of $87,433.  The Company had cash balances of $2,475 at September 30, 2007 and the Company is largely reliant upon its ability to arrange equity or debt private placements to
pay expenses as incurred.  In addition to normal accounts payable of $31,037 the Company also owes related companies $78,297 without specific repayment terms.  The Company’s only source for capital could be loans or private placements of common stock.

During the fiscal year ended September 30, 2007 the Company; 1) used $161,587 in cash in operating activities arising primarily from operating losses, and 2) generated $149,040 in cash from financing activities. Financing activities included cash proceeds of $149,040 from related parties.

The Company remains in the development stage and, since reentering the development stage, has experienced significant liquidity problems and has no significant capital resources now at September 30, 2007.

Our current cash resources are insufficient to support the business over the next 12 months and we are unable to carry out any plan of business without funding. We will need a cash infusion of additional debt or equity capital to fully implement our business plan in the future and there are no assurances that we will be able to raise this capital when needed.  However, while there are no definitive agreements in place as of the date of this Report, management are currently engaged in various discussions with interested parties to provide these funds or otherwise enter into a strategic alliance to provide such funding.  The inability to obtain sufficient funds from external sources when needed will have a material adverse affect on our results of operations and financial condition.

 

Management cannot predict to what extent our current lack of liquidity and capital resources will impair our new business operations. However management does believe we will incur further operating losses. There is no assurance that we can continue as a going concern without substantial funding. Management has taken steps to begin sourcing the necessary funding to begin to execute the business plan.

Management estimates that the Company will require additional financing to cover legal, accounting, transfer, consulting, management fees and the miscellaneous costs of being a reporting company in the next fiscal year.

Going concern qualification:  The Company has incurred significant losses from operations for the year ended September 30, 2007, and such losses are expected to continue.  In addition, we have a working capital deficit of $87,433 and an accumulated deficit of $6,910,160.  The foregoing raises substantial doubt about the Company's ability to continue as a going concern.  Management's plans include seeking additional capital and/or debt financing.  There is no guarantee that additional capital and/or debt financing will be available when and to the extent required, or that if available, it will be on terms acceptable to us.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of results of operations and financial condition are based upon the financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management evaluates the estimates on an on-going basis, including those related to bad debts, inventories, investments, customer accounts, intangible assets, income taxes, and contingencies and litigation. Management bases its estimates on historical experience and on various other assumptions that they believe 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. Note 2 of the “Notes to Financial Statements” includes a summary of the significant accounting policies and methods used in the preparation of the financial statements. The following is a brief description of the more significant accounting policies and methods the Company uses.

Intangibles, Goodwill and Other Assets

We regularly review all of its long-lived assets, including goodwill and other intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors as consider important that could trigger an impairment review include, but are not limited to, significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the acquired assets or the strategy for the Company’s overall business, and significant negative industry or economic trends. When we determine that an impairment review is necessary based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate commensurate with the risk inherent in our current business model. Significant judgment is required in the development

of projected cash flows for these purposes including assumptions regarding the appropriate level of aggregation of cash flows, their term and discount rate as well as the underlying forecasts of expected future revenue and expense. To the extent that events or circumstances cause assumptions to change, charges may be required which could be material.

Effective October 1, 2005, the Company adopted SFAS No 142, “Goodwill and Other Intangible Assets”. SFAS No. 142 no longer permits the amortization of goodwill and indefinite-lived intangible assets. Instead, these assets must be reviewed annually (or more frequently under prescribed conditions) for impairment in accordance with this statement. If the carrying amount of the reporting unit’s goodwill or indefinite-lived intangible assets exceeds the implied fair value, an impairment loss is recognized for an amount equal to that excess. Intangible assets that do not have indefinite lives are amortized over their useful lives.

Fair Value of Financial Instruments

The carrying value of advances to corporations, due to related parties, accounts payable and accrued liabilities approximates fair value because of the short maturity of these instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risk arising from these financial instruments.

Inflation

Although our operations are influenced by general economic conditions, we do not believe that inflation had a material affect on our results of operations during our fiscal year ended September 30, 2007.

 

ITEM 7 - FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

  and Stockholders of

Racino Royale, Inc.

(A Development Stage Company)

Nevada

 

We have audited the accompanying consolidated balance sheet of Racino Royale, Inc. (a development stage company) as of September 30, 2007, and the related consolidated statements of operations, changes in stockholders' equity and comprehensive loss, and cash flows for the year the ended.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit 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.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Racino Royale, Inc. as of September 30, 2007, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming Racino Royale, Inc. will continue as a going concern.  As discussed in Note 1 to the consolidated financial statements, the Company has incurred losses that have resulted in an accumulated deficit.  This condition raises substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans regarding this matter are described in Note 1.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Rotenberg & Co., llp

Rotenberg & Co., llp

Rochester, New York

  December 19, 2007

F1

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

 

 

Stockholders of Racino Royale, Inc.

 

 

We have audited the accompanying consolidated balance sheets of Racino Royale, Inc. (Formerly K-Tronik International Corp.) a company in the development stage, as of September 30, 2006 and 2005, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended September 30, 2006.  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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Racino Royale, Inc. as of September 30, 2006 and 2005, and the results of its operations and its cash flows for each of the years in the two-year period ended September 30, 2006 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the company will continue as a going concern. As discussed in note 1 to the consolidated financial statements, the company experienced operating losses and has a working capital deficiency. These factors raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

    “SF PARTNERSHIP, LLP”

Toronto, Canada                                                                           CHARTERED ACCOUNTANTS

December 22, 2006

      

        

    

F2

 

RACINO ROYALE, INC. AND SUBSIDIARY

(A Development Stage Company)

Consolidated Balance Sheet

September 30, 2007

ASSETS
		2007
Current assets
Cash and cash equivalents		$	2,475
Advances to corporation (Note 5)			27,170
Prepaid expenses
Total current assets			29,901
Total assets		$	29,901
LIABILITIES
Current liabilities
Due to related parties (Note 4)		$	78,297
Accounts payable			31,037
Accrued liabilities			8,000
Total current liabilities		$	117,334
STOCKHOLDERS’ DEFICIENCY
Common stock, $.00001 par value; 100,000,000 shares  authorized, 33,223,886 shares issued and outstanding (Note 6)		$
Additional paid-in capital			6,822,394
Accumulated deficit			(6,910,160	)
Total stockholders’ deficiency			(87,433	)
Total liabilities and stockholders’ deficiency		$	29,901

 

 

(The accompanying notes are an integral part of these financial statements)

      

              

    

F3

 

RACINO ROYALE, INC. AND SUBSIDIARY

(A Development Stage Company)

Consolidated Statements of Operations and Comprehensive Loss

Years Ended September 30, 2007 and 2006 and the Period from

Re-entering the Development Stage Through to September 30, 2007

		2007								(Note 1) Period from Re-entering the Development Stage Through to Sep. 30  2007
Revenues
Provincial grant income		$	-			$	96,347			$	96,347
Parimutuel betting income			-				19,018				19,018
Miscellaneous income