U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
(X) Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1997
( )Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _____________ to __________________
Commission File Number: 0-22443
PlayStar Corporation
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 51-0378588
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
50 Wellington Street East, Top Floor, Toronto, Ontario, Canada M5E 1C8
(Address of Principal Executive Offices)
(416) 360-4531
(Issuer's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes x No______
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date: __________
As of September 30, 1997, the Registrant had outstanding 15,812,500 shares
of its Common Stock, par value $0.0001 per share.
Traditional Small Business Disclosure Format (check one):
Yes x No _______
<PAGE>
INDEX
PAGE
Part I. FINANCIAL INFORMATION....................... 3
Item 1. Financial Statements..................... 3
Interim Consolidated Balance Sheet as of
September 30, 1997 and June 30, 1997......... 3
Interim Consolidated Statement of Loss for the
three months ended September 30, 1997 and 4
for the period from inception (October 3,
1996) to September 30, 1997..................
Interim Consolidated Statement of Accumulated
Deficit for the three months ended 5
September 30, 1997 and for the period from
inception (October 3, 1996) to September 30,
1997.........................................
Interim Consolidated Statement of Cash Flows
for the three months ended September 30, 6
1997 and for the period from inception
(October 3, 1996) to September 30, 1997......
Notes to Interim Consolidated Financial 7
Statements...................................
Item 2. Management's Discussion and Analysis or
Plan of Operation........................ 8
Part II. OTHER INFORMATION.......................... 11
Item 6. Exhibits................................. 11
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
PLAYSTAR CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30, 1997
(Unaudited)
(U.S.$)
ASSETS
SEPT. 30, 1997 JUNE 30, 1997
(Unaudited)
CURRENT
Cash and cash equivalents $33,961 $109,138
Accounts receivable - 166
Prepaid expenses 847 1,694
------- ----------
$34,808 $110,998
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $12,550 $56,045
SHAREHOLDERS' EQUITY
CAPITAL STOCK
Authorized
30,000,000 common shares at stated
value $.0001 per share
Issued and outstanding
15,812,500 common shares 1,581 1,581
ADDITIONAL PAID-IN CAPITAL 836,604 836,604
DEFICIT, accumulated during the development
stage (815,927) (783,232)
-------- --------
22,258 54,953
-------- --------
$34,808 $110,998
-------- --------
The accompanying notes to financial statements are an integral part of these
statements.
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<PAGE>
PLAYSTAR CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENT OF LOSS
FOR THE THREE MONTH PERIOD ENDING SEPTEMBER 30, 1997
(Unaudited)
(U.S.$)
Cumulative
SEPT. 30, 1997 SEPT. 30, 1997
(Unaudited) (Unaudited)
REVENUE
Interest income $ 271 $3,293
------ ------
EXPENSES
Professional fees 17,734 32,149
Development costs 8,840 763,367
Promotion 4,500 4,500
General and administrative 1,892 15,748
Incorporation costs - 3,456
------ -------
32,966 819,220
NET LOSS $(32,695) $(815,927)
LOSS PER SHARE $ 0.01 $ 0.05
--------- ---------
The accompanying notes to financial statements are an integral part of these
statements.
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<PAGE>
PLAYSTAR CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENT OF ACCUMULATED DEFICIT
FOR THE THREE MONTH PERIOD ENDING SEPTEMBER 30, 1997
(Unaudited)
(U.S.$)
Cumulative
SEPT. 30, 1997 SEPT. 30, 1997
(Unaudited) (Unaudited)
ACCUMULATED DEFICIT, beginning of period $ 783,232 $ NIL
NET LOSS 32,695 815,927
-------- ----------
ACCUMULATED DEFICIT, end of period $ 815,927 $ 815,927
---------- ----------
The accompanying notes to financial statements are an integral part of these
statements.
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<PAGE>
PLAYSTAR CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDING SEPTEMBER 30, 1997
(Unaudited)
(U.S.$)
Cumulative
SEPT. 30,1997 SEPT. 30,1997
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (32,695) $(815,927)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Development costs paid through
issuance of stock - 175,000
Changes in operating assets and
liabilities
- accounts receivable 166 -
- prepaid expenses 847 (847)
- accounts payable (43,495) 12,550
----------- ---------
Net cash used in operating activities (75,177) (629,224)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common
shares (net of issue costs) - 663,185
----------- ---------
Net cash provided from financing
activities - 663,185
----------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (75,177) 33,961
CASH AND CASH EQUIVALENTS, beginning of period 109,138 -
---------- -------
CASH AND CASH EQUIVALENTS, end of period $33,961 $ 33,961
---------- ---------
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company paid for development costs in the amount of $175,000 through the
issuance of common shares.
For the purposes of presentation in the statement of cash flows, cash and
marketable securities with original maturities of less than three months, have
been classified as cash and cash equivalents.
The carrying value of these items approximates fair value.
The accompanying notes to financial statements are an integral part of these
statements.
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<PAGE>
PLAYSTAR CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDING SEPTEMBER 30, 1997
(Unaudited)
(U.S.$)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PRESENTATION
The unaudited consolidated balance sheet as of September 30, 1997 and
June 30, 1997 and unaudited consolidated statements of loss, accumulated
deficit, and cash flows for the three months then ended, together with
cumulative unaudited financial information since inception, October 3,
1996, have been prepared in accordance with generally accepted
accounting principles and include all adjustments, which in the opinion
of management, are necessary to present fairly the results of operations
for the periods then ended. All such adjustments are of a normal
recurring nature.
b) NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of PlayStar
Corporation (the "Company") and its wholly owned subsidiary PlayStar
Limited. All intercompany accounts and transactions have been eliminated
on consolidation.
The Company has been in the development stage since its incorporation on
October 3, 1996. The Company, through its subsidiary, designs, develops
and intends to operate, promote and commercialize an on-line gaming
service operating interactive, software-based games of chance,
accessible world-wide through the Internet.
c) DEVELOPMENT COSTS
Development costs associated with the design, development, operation,
promotion and commercialization are changed to expense in the period
incurred.
d) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
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<PAGE>
PLAYSTAR CORPORATION
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDING SEPTEMBER 30, 1997
(Unaudited)
(U.S.$)
2. BUSINESS ACQUISITIONS
PLAYSTAR LIMITED
On October 9, 1996, the Corporation acquired 100% of the issued and
outstanding common shares of PlayStar Limited, in exchange for 12,000,000
common shares of the Corporation.
3. STOCK OPTION PLANS
On October 9, 1996, the Company adopted a stock option plan authorizing
the granting of options to purchase an additional 10,000,000 common
shares.
A total of 4,100,000 options have been granted during the period. Two of
the Company's executive officers were granted stock options totaling
1,570,000 shares, exercisable at $0.05/share until October 9, 2001. No
stock options have been exercised to-date.
Item 2. Management's Discussion and Analysis or Plan of Operation.
The information contained in this Item 2, Management's Discussion and
Analysis or Plan of Operation, contains "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Actual results may materially differ from those
projected in the forward looking statements as a result of certain risks and
uncertainties set forth in this report. Although management believes that the
assumptions made and expectations reflected in the forward looking statements
are reasonable, there is no assurance that the underlying assumptions will, in
fact, prove to be correct or that actual future results will not be different
from the expectations expressed in this report.
PlayStar Corporation.
The Company is a development stage company which provides management,
business development, finance and marketing consulting services to companies
which primarily develop Internet-based products and software, including on-line
gaming and electronic commerce applications, and which, through its subsidiary,
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<PAGE>
PlayStar Limited, intends to operate, promote and commercialize an on-line
gaming service which will offer interactive, software-based games of chance. The
Company identifies new software and communications-based technologies and
provides certain management and financial expertise necessary to successfully
market and develop these technologies as commercial products. The Company also
provides business services, including financial transaction processing and
software technology sales, to support the development of these products. To
date, the Company's activities have focused primarily on PlayStar Limited, a
Jersey Channel Islands corporation, wholly-owned by the Company. The Company
expects to generate revenue through management and technical consulting fees and
through software royalties and licenses.
The Company was incorporated in the State of Delaware on October 3, 1996.
During the succeeding months, the Company raised an aggregate of $1,000,000 in
capital through three private placements completed pursuant to Rule 504
promulgated under the Securities Act. This financing has been sufficient to
satisfy the Company's cash requirements through the date hereof. From these
proceeds, the Company has paid approximately $435,000 for technical development
services provided by Dreamplay Research Corp. ("Dreamplay") of Toronto, Ontario
and approximately $325,000 for legal, accounting, public relations and
administrative services. The Company estimates, however, that the total amount
of "seed capital" required to proceed with current operations and to bring
PlayStar Limited's services to market will be between $12,000,000 and
$15,000,000, including approximately $1,000,000 for research and development,
approximately $5,000,000 for advertising, marketing and promotional efforts, and
approximately $6,000,000 for working capital. As the Company currently has only
$34,000 on hand, management intends to raise additional capital during the next
twelve months through additional private placements of unregistered shares of
its Common Stock conducted under an exemption provided by the Securities Act or
by the rules of the Securities and Exchange Commission. Since September 1997,
management has actively pursued initiatives to raise $2.75 million to satisfy
the Company's cash requirements for the next twelve months.
To date, the Company has provided consulting services exclusively to its
subsidiary, PlayStar Limited. The Company has also closely supervised the
consulting services provided by Dreamplay to PlayStar Limited. During the next
twelve months, the Company intends to continue providing consulting services to
PlayStar Limited which will enable PlayStar Limited to complete its organization
and develop its products and services. Management also anticipates that the
Company will continue to supervise Dreamplay's efforts to develop PlayStar
Limited's software systems.
Recently, the Company began developing electronic cash systems and related
financial services. Management is currently negotiating with two providers of
credit card clearing services to permit the Company to authenticate and process
credit card and other financial transactions which occur over the Internet.
During the next twelve months the Company intends to continue developing these
services to facilitate Internet commerce. Management anticipates that the
Company will be able to offer such services to PlayStar Limited, as well as the
general marketplace, during the first quarter of 1998.
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<PAGE>
The Company expects to increase its number of employees during the next
twelve months. The Company currently has one full-time employee who serves as
the President, Chief Executive Officer, Chief Financial Officer and Treasurer.
Management anticipates increasing the Company's executive team to include
personnel who will supervise marketing, sales, business development and
international operations. The Company also intends to increase the number of
staff employees as its business may permit or require.
From time to time, the Company retains consultants and consulting firms
which provide the Company with certain expertise in financing, development,
marketing and software and telecommunications technologies. Management intends
to continue utilizing the services and expertise of consultants in specific
areas of the Company's business as necessary.
PlayStar Limited.
PlayStar Limited's initial efforts for its first twelve months centered on
the development of its on-line gaming and financial transaction processing
services. During this period, PlayStar Limited developed its software games and
system test site. In the five months during which PlayStar Limited operated its
system test site, visitors played more than 1.2 million games and provided
PlayStar Limited with valuable comments and feedback. PlayStar Limited also
began developing its casino management and financial processing systems during
this time. The casino management system recently entered the final stages of
development, and PlayStar Limited has begun alpha testing of the system.
Management expects that PlayStar Limited will continue to develop and test these
systems through the remainder of the year.
Management plans to continue negotiating licensing arrangements with
certain countries and intends to finalize the location of the operations base
for PlayStar Limited's on-line casino in the near future. The company has
secured the interest of three such countries, two of which are members of the
Organization for Economic Cooperation and Development (OECD). Provided that all
regulatory and financial requirements are satisfied, PlayStar Limited intends to
establish its operations base and begin operation of its on-line casino during
the first quarter of 1998. Management plans to organize a wholly-owned
subsidiary in the country in which PlayStar Limited's operations base is
eventually located which will manage and operate the casino.
The launch of the on-line casino will be a critical factor for PlayStar
Limited's success. Accordingly, management plans to announce the opening of the
casino through selected world media, press conferences and an advertising
campaign. Management is currently negotiating with an established marketing
communications firm and a media buying company to oversee PlayStar Limited's
promotional efforts and advertising needs.
Once PlayStar Limited's services are fully operational, management plans
to employ 5 "Crews", each of which will consist of a Gaming Supervisor, a
Computer Technician and a Customer Assistant. The Gaming Supervisor will be
responsible for overseeing all gaming activity and resolving any concerns
patrons may have. The Computer Technician will maintain and ensure the smooth
operation of play. The Customer Assistant will provide general support and
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<PAGE>
customer service. Customer Assistants will be responsible for the immediate
handling of players' questions and complaints. Management anticipates that
employee growth will be greatest in this area.
During the next twelve months, PlayStar Limited intends to acquire and
lease computer and telecommunications equipment to facilitate its operations
computer center. The estimated cost of this equipment will be approximately
$1,200,000.
Finally, since PlayStar Limited's revenues depend on casino winnings from
customers, management will endeavor to develop a loyal customer base. PlayStar
Limited's marketing will be directed to establish PlayStar Limited and its
"dancing star" logo as a symbol of integrity, quality and innovation in both the
Internet gaming and interactive entertainment markets. Ultimately, management
foresees that such efforts will establish the "PlayStar" name as a premier brand
in on-line gaming.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter for which this report is filed.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PLAYSTAR CORPORATION
Date: November 14, 1997
By: /s/ Julius Patta
Julius Patta
President, Chief Executive
Officer, Chief Financial Officer
and Treasurer
By: /s/ Simon Bramson
Simon Bramson
Secretary
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<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
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