UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended - December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________________________to____________________
Commission File Number: 000-24929
PLAYSTAR WYOMING HOLDING CORP.
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(Exact name of small business issuer as specified in its charter)
Antigua 52-209-8787
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
The Dollar Building, Top Floor, Nevis Street, St. John's, Antigua, West Indies
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(268) 562-0075
---------------------------
(Issuer's telephone number)
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(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
12, 13 or 15 (d) of the Exchange Act during the past 12 months (or 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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of January 29, 1999: 28,592,644 ordinary shares, $ .01 par value.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
<PAGE>
FORM 10-QSB
PLAYSTAR WYOMING HOLDING CORP.TABLE OF CONTENTS
PAGE
PART I. Financial Information
Item 1. Financial Statements
Unaudited Consolidated Balance Sheet as
of December 31, 1998 and June 30, 1998.....................3
Unaudited Consolidated Statements of Operations
for the three months and six months ended December 31,
1998 and December 31, 1997 and for the period from
inception (October 3, 1996) to December 31, 1998...........4
Unaudited Consolidated Statements of Shareholders'
Equity for the six months ended December 31, 1998
and for the period from inception (October 3, 1996)
to June 30, 1998...........................................5
Unaudited Consolidated Statements of Cash Flows
for the six months ended December 31, 1998 and
December 31, 1997 and for the period from inception
(October 3, 1996) to December 31, 1998.....................9
Notes to Consolidated Financial Statements................11
Item 2 Management's Discussion and Analysis
or Plan of Operation......................................14
PART II. Other Information.........................................20
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
Signatures ..........................................................21
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
December 31, June 30,
1998 1998
(Unaudited) (Audited)
----------- -----------
Current assets:
Cash and cash equivalents $ 1,267,220 $ 182,219
Subscriptions receivable 1,350 21,350
Other prepaid expenses and current assets 131,625 150,922
----------- -----------
Total current assets 1,400,195 354,491
Property and equipment, net 286,361 242,410
Deferred offering costs -- 6,795
Security deposits 87,687 75,000
----------- -----------
$ 1,774,243 $ 678,696
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - affiliate - Dreamplay
Research Corp. $ 62,500 $ 53,702
Accrued expenses and other current liabilities 164,920 264,374
----------- -----------
Total current liabilities 227,420 318,076
Shareholders' equity (Note 4):
Preferred stock, $.0001 par value:
Authorized - 1,000,000 shares; none
issued or outstanding at December 31, 1998
and June 30, 1998 -- --
Common stock, $.0001 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 28,592,644 shares at
September 30, 1998 and 19,661,274 shares at
June 30, 1998 2,859 1,966
Additional paid-in capital 5,801,480 3,448,895
Deficit accumulated in the development stage (4,257,516) (3,090,241)
----------- -----------
Total shareholders' equity 1,546,823 360,620
----------- -----------
$ 1,774,243 $ 678,696
=========== ===========
3
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<TABLE>
<CAPTION>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
Period from
October 3,
1996
Three Months Three Months Six Months Six Months (Inception)
Ended Ended Ended Ended to
December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998
----------- ----------- ----------- ----------- -----------
(Restated) (Restated) (Restated)
(Note 6) (Note 6) (Note 6)
<S> <C> <C> <C> <C> <C>
Revenue:
Casino testing $ 78,077 $ -- $ 81,145 $ -- $ 81,145
Interest income 10,489 252 26,957 523 38,028
----------- ----------- ----------- ----------- -----------
88,566 252 108,102 523 119,173
Expenses:
Development costs 482,512 136,740 809,134 229,336 2,593,084
Credit issued against prior development
costs -- -- -- (171,489) (171,489)
Professional fees 80,050 7,932 188,848 25,666 831,912
Options granted as employee and
consultant compenstation 70,225 -- 140,450 -- 822,950
General and administrative 58,574 1,645 86,967 8,037 213,374
Bank charges and processing fees 13,142 -- 17,312 -- 17,312
Depreciation and amortization 16,497 8,644 32,666 11,237 66,090
Incorporation costs -- -- -- -- 3,456
----------- ----------- ----------- ----------- -----------
Total expenses 721,000 154,961 1,275,377 102,787 4,376,689
----------- ----------- ----------- ----------- -----------
Net loss (632,434) (154,709) (1,167,275) (102,264) (4,257,516)
=========== =========== =========== =========== ===========
Basic loss per share $ (.02) $ (.01) $ (.05) $ (.01)
=========== =========== =========== ===========
Weighted average number of shares 1,592,649 16,558,212 25,114,865 16,040,505
=========== =========== =========== ===========
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Shareholders' Equity
For the Period from October 3,
1996 (Inception) to June 30,
1998 and the Six Months ended
December 31, 1998
(Unaudited)
Deficit
Accumulated
Common Stock Additional in the Total
------------------------- Paid-in Development Shareholders'
Shares Amount Capital Stage Equity
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
October 3, 1996 (inception) -- $ -- $ -- $ -- $ --
Common stock issued in exchange for all
of the issued and outstanding shares of
Playstar Limited in October 1996
(at $.0001 per share) 12,000,000 1,200 -- -- 1,200
Options granted to employees
and consultants for
development costs and
services -- -- 1,143,500 -- 1,143,500
Issuanceof common stock in October 1996
and January 1997 for development
costs based on fair market value
of services performed 1,750,000 175 174,825 -- 175,000
Issuance of common stock
in November 1996 at $.40
per share in a private
placement offering, less
costs of $163,015 2,062,500 206 661,779 -- 661,985
Net loss, June 30, 1997
(restated) -- -- -- (1,926,732) (1,926,732)
----------- ----------- ----------- ----------- -----------
Balance at June 30, 1997
(restated) (carried forward) 15,812,500 1,581 1,980,104 (1,926,732) 54,953
----------- ----------- ----------- ----------- -----------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Shareholders' Equity (continued)
For the Period from October 3,
1996 (Inception) to June 30,
1998 and the Six Months ended
December 31, 1998
Deficit
Accumulated
Common Stock Additional in the Total
------------------------ Paid-in Development Shareholders'
Shares Amount Capital Stage Equity
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1997
(restated) (brought forward) 15,812,500 $ 1,581 $ 1,980,104 $(1,926,732) $ 54,953
Issuanceof common stock in November
1997 in connection with a private
placement offering at $.40 per share,
less related costs of $50,000 1,250,000 125 449,875 -- 450,000
Issuanceof common stock in December
1997, in a private placement offering
at $.50 per share, less related costs
of $36,211 724,274 72 325,854 -- 325,926
Issuance of common stock in January
1998, in a private placement
offering at $.50 per share, less
related costs of $14,250 285,000 29 128,221 -- 128,250
Issuanceof common stock in January
1998, as a fee in connection with
the November 1997 private placement
offering ( fair market value $.85
per share $212,500) 250,000 25 (25) -- --
Options granted during December 1997
through April 1998 for the purchase of
315,000 common shares to consultants as
compensation for development costs,
less unearned portion ($173,409) -- -- 51,530 -- 51,530
---------- ----------- ----------- ----------- -----------
Totals carried forward 18,321,774 $ 1,832 $ 2,935,559 $(1,926,732) $ 1,010,659
---------- ----------- ----------- ----------- -----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Shareholders' Equity (continued)
For the Period from October 3,
1996 (Inception) to June 30,
1998 and the Six Months ended
December 31, 1998
Deficit
Accumulated
Common Stock Additional in the Total
------------------------- Paid-in Development Shareholders'
Shares Amount Capital Stage Equity
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Totals brought forward 18,321,774 $ 1,832 $ 2,935,559 $(1,926,732) $ 1,010,659
Issuance of common stock in
January 1998, in connection
with exercise of stock options
at $.05 per share 30,000 3 1,497 -- 1,500
Issuance of common stock in
February 1998, in connection
with exercise of stock options
at $.05 per share 27,000 2 1,348 -- 1,350
Issuance of common stock in May
1998, at $.50 per share, less
costs of $15,936 437,000 44 202,520 -- 202,564
Issuance of common stock in May
1998, at $.40 per share, less
costs of $14,441 445,500 45 163,714 -- 163,759
Issuance of common stock in May
1998, in connection with exercise
of stock options, at $.05 per
share 400,000 40 19,960 -- 20,000
Current year amortization of cost of
options granted in prior periods -- -- 45,617 -- 45,617
Options granted in October 1998 to
consultants for the purchase of
of 300,000 shares of common stock
for services provided through
June 30, 1998 -- -- 78,680 -- 78,680
Net loss, June 30, 1998 -- -- -- (1,163,509) (1,163,509)
----------- ----------- ----------- ----------- -----------
Balance at June 30, 1998
(carried forward) 19,661,274 $ 1,966 $ 3,448,895 $(3,090,241) $ 360,620
----------- ----------- ----------- ----------- -----------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Shareholders' Equity (concluded)
For the Period from October 3,
1996 (Inception) to June 30,
1998 and the Six Months ended
December 31, 1998
Deficit
Accumulated
Common Stock Additional in the Total
------------------------- Paid-in Development Shareholders'
Shares Amount Capital Stage Equity
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998
(brought forward) 19,661,274 $ 1,966 $ 3,448,895 $(3,090,241) $ 360,620
Issuance of common stock in July
1998 in a private placement
offering at $.50 per share, less
related costs of $ 750 30,000 3 14,247 -- 14,250
Issuance of common stock in August
1998 in a private placement
offering at $.40 per share, less
related costs of $ 100 5,000 1 1,899 -- 1,900
Issuance of common stock in August
and September 1998, in a private
placement offering at $.2580645
per share,less related costs of $144,077 7,967,000 796 1,911,127 -- 1,911,923
Issuance of common stock in September 1998,
as fees in respect of private
placement offerings in May, July
August and September 1998 (fair market
value $.39 per share $362454) 929,370 93 (93) -- --
Options granted in December 1998 to a
consultant for the purchase of 150,000
shares of common stock stock for services
provided through December 31, 1998 -- -- 42,807 -- 42,807
Current six months amortization of cost of
options granted in prior periods -- -- 382,598 -- 382,598
Net loss December 31, 1998 -- -- -- (1,167,275) (1,167,275)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 28,592,644 $ 2,859 $ 5,801,480 $(4,257,516) $ 1,546,823
=========== =========== =========== =========== ===========
</TABLE>
8
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Period from
October 3,
1996
Six Months Six Months (Inception)
Ended Ended to
December 31, December 31, December 31,
1998 1997 1998
----------- ----------- -----------
(Restated) (Restated)
(Note 6) (Note 6)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,167,275) $ (102,264) $(4,257,516)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 32,666 11,237 66,090
Development costs and professional fees
paid through the issuance of common
stock and granting of stock options 284,955 24,770 1,096,782
Options granted as employee
compensation 140,450 -- 822,950
Change in assets and liabilities:
Prepaid expenses and other
current assets 19,297 1,860 (131,625)
Accounts payable - affiliate -
Dreamplay Research Corp. 8,798 (129,943) 62,500
Accrued expenses (99,454) (29,255) 164,920
----------- ----------- -----------
Net cash used in operating activities (780,563) (223,595) (2,175,899)
----------- ----------- -----------
Cash flows from investing activities:
Payment of security deposits (12,687) (75,000) (87,687)
Purchase of property and equipment (76,617) (223,023) (352,451)
----------- ----------- -----------
Cash used in investing activities (89,304) (298,023) (440,138)
----------- ----------- -----------
Totals carried forward $ (869,867) $ (521,618) $(2,616,037)
----------- ----------- -----------
</TABLE>
9
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Concluded)
<TABLE>
<CAPTION>
Period from
October 3,
1996
Six Months Six Months (Inception)
Ended Ended to
December 31, December 31, December 31,
1998 1997 1998
----------- ----------- -----------
(Restated) (Restated)
(Note6) (Note 6)
<S> <C> <C> <C>
Totals brought forward $ (869,867) $ (521,618) $(2,616,037)
----------- ----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of common
shares 1,928,073 775,926 3,861,757
Decrease in deferred offering costs 6,795 -- --
Received on exercise of stock options 20,000 -- 21,500
----------- ----------- -----------
Net cash provided by financing activities 1,954,868 775,926 3,883,257
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents 1,085,001 254,308 1,267,220
Cash and cash equivalents, beginning of
period 182,219 109,138 --
----------- ----------- -----------
Cash and cash equivalents, end of period $ 1,267,220 $ 363,446 $ 1,267,220
=========== =========== ===========
Supplemental Schedule of Non-Cash Investing and Financing Activities
Common stock issued in connection
with raising of capital $ 362,454 $ -- $ 574,954
=========== =========== ===========
Receivable from shareholders in connection
with exercise of stock options $ -- $ -- $ 1,350
=========== =========== ===========
</TABLE>
10
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
Note 1. Basis of Presentation
The financial statements included herein are unaudited and have been
prepared in accordance with generally accepted accounting principals for
financial reporting and Securities and Exchange Commission regulations. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management the financial statements reflect all adjustments (of a normal and
recurring nature) which are necessary to present fairly the financial position,
results of operations and cash flows for the interim periods. These financial
statements should be read in conjunction with the Annual Report of PlayStar
Wyoming Holding Corp. on Form 10-KSB for the year ended June 30, 1998. The
results for the six months ended December 31,1998 are not necessarily indicative
of the results that may be expected for the year ending June 30, 1999.
Note 2. Nature of Business and Basis of Consolidation
The consolidated financial statements include the accounts of PlayStar
Wyoming Holding Corporation ("PlayStar Wyoming")(formerly PlayStar Corporation)
and its wholly owned subsidiaries PlayStar Limited (a Jersey Island
corporation), Players Ltd.(an Antiguan corporation) and Antigua Casino and
Sports Book Limited (an Antigua corporation) (collectively "the Company"). All
intercompany accounts and transactions have been eliminated in consolidation.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which is effective for fiscal years beginning after December 15, 1997.
This Statement establishes standards for reporting and display of comprehensive
income and its components in financial statements. The Statement is effective
for PlayStar's financial statements commencing the year ending June 30, 1999.
The adoption of this Statement will not have a material effect on PlayStar's
financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. This Statement establishes standards for the
manner in which a public business enterprise reports certain information about
operating segments and discloses enterprise-wide information about its products
and services, activities in different geographic areas, and its reliance on
major customers. The Statement is effective for PlayStar's financial statements
commencing the year ending June 30, 1999. The adoption of this Statement will
not have a material effect on PlayStar's financial statements.
11
<PAGE>
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. This statement establishes standards that require
that all derivative instruments be recorded on the balance sheet at their fair
value. This statement is effective for PlayStar's financial statements
commencing the year ending June 30, 2000. The adoption of this statement will
not have a material effect on PlayStar's financial statements.
The Company has been in the development stage since its incorporation
on October 3, 1996. Through its subsidiaries the Company, designs, develops and
operates, an on-line gaming service operating interactive, software-based games
of chance, accessible worldwide through the Internet.
On June 30, 1998, effective September 4, 1998, pursuant to a Merger
Agreement, and an Application for Certificate of Transfer, the Company's board
of directors and holders of more than two-thirds of the outstanding shares of
its common stock approved the reorganization of Playstar Corporation pursuant to
which Playstar Corporation was merged with and into Playstar Wyoming Holding
Corp., a newly formed Wyoming corporation which became the surviving entity (the
"Merger"). Subsequently, pursuant to a Wyoming statutory continuation procedure,
Playstar Wyoming became an Antigua corporation ("Playstar Antigua"). In
accordance with the terms of the merger, each outstanding share of Playstar
Corporation's common stock was automatically converted into one outstanding
share of Playstar Wyoming common stock and subsequently, in connection with the
statutory continuation procedure referred to above, automatically converted into
one ordinary share, par value $.0001 of Playstar Antigua.
Since the effective time of the reorganization, PlayStar Wyoming has
continued to conduct the business previously carried on by PlayStar Delaware.
Except for PlayStar Wyoming's new domicile, the activities of PlayStar Wyoming
are identical to that of PlayStar Delaware prior to the effective time of the
reorganization. Accordingly, references in the discussion of the business of
PlayStar Wyoming include the operations of PlayStar Wyoming and PlayStar
Delaware.
Note 3. Computation of Net Loss per Common Share
The Company adopted SFAS No. 128, "Earnings per Share". This statement
requires that the Company report basic and diluted earnings (loss) per share for
all periods reported. Basic net income (loss) per share is calculated by
dividing net income (loss) by the weighted average number of common shares
outstanding for the period. Diluted net income (loss) per share is computed by
dividing net income (loss) by the weighted average number of common shares
outstanding for the period, adjusted for the dilutive effect of common stock
equivalents, consisting of dilutive common stock options and warrants using the
treasury stock method.
For all periods presented, common stock options are not included in
the computation as they would be anti-dilutive. In the event that the Company
was to report net income in future periods, these options and warrants,
aggregating 10,798,000 at December 31, 1998 could have a dilutive effect on
future earnings per share calculations in those periods.
12
<PAGE>
Note 4. Shareholders' Equity
Common Stock
On October 9, 1996, the Company issued 12,000,000 shares of its common
stock to the shareholders of PlayStar Limited in exchange for all of the issued
and outstanding shares of PlayStar Limited.
On October 22, 1996, the Company issued 1,750,000 shares of its common
stock. These shares were issued in consideration for services rendered to the
Company with an estimated fair value aggregating $175,000 or $0.10 per share.
This sale was exempt from registration in reliance upon Rule 504 promulgated
under the Securities Act of 1933 ("Securities Act") ("Rule 504"). On January 21,
1997, the Company and one of the purchasers agreed to rescind the purchase of
962,500 of these shares which were subsequently re-issued to another party in
January 1997 in consideration for services valued as above. The shares issued
are exempt from registration in reliance upon Rule 504 promulgated under the
Securities Act.
On October 25, 1996, the Company commenced an offering of 2,062,500
shares of its common stock. This offering was fully subscribed and closed on
November 29, 1996. These shares were issued at a price of $0.40 per share, for
gross offering proceeds of $825,000. The Company paid finders fees aggregating
$163,015. This sale was exempt from registration in reliance upon Rule 504
promulgated under the Securities Act.
In November 1997, the Company completed an offering of 1,250,000 shares
of its common stock at a price of $.40 per share, resulting in gross proceeds of
$500,000. The shares were issued in reliance upon an exemption from registration
pursuant to Section 4(2) of the Securities Act and Regulation D promulgated
under the Securities Act. Finders fees aggregating $50,000 were paid by the
Company. In addition, in January 1998, additional 250,000 shares were issued to
finders as compensation for their assistance in connection with the sale of the
1,250,000 shares.
In November 1997, the Company commenced an offering of shares of common
stock under Regulation S promulgated under the Securities Act. In December 1997,
the Company sold 724,274 shares of common stock at a price of $0.50 per share,
resulting in gross proceeds of $362,137. The Company paid finders fees of
$36,211 in connection with such sale. In January 1998, the Company sold
additional 285,000 shares of common stock at a price of $0.50 per share
resulting in gross proceeds of $142,500. The Company paid finders fees of
$14,250 in connection with such sale.
In May 1998, the Company sold 437,000 shares of its common stock at
$0.50 per share and 445,500 shares of its common stock at $0.40 per share in
reliance upon exemptions from registration pursuant to Regulation S of the
Securities Act. Costs incurred in connection with each were $15,936 and $14,441,
respectively.
During July, August and September 1998, through a private placement
offering, the Company issued 8,002,000 shares of its common stock at prices
ranging from $.2580645 to $.50
13
<PAGE>
per share, realizing total net proceeds of approximately $1,939,000.
Additionally, the Company granted 929,370 shares as issuance costs and 6,500,000
of warrants to purchase shares of the Company's common stock. These warrants
were granted to investors, in addition to the shares they purchased, and as
payment for issuance costs. The warrants are exercisable as follows: 5,300,000
warrants at $.80 per share, 1,000,000 warrants at $1.25 per share, 100,000
warrants at $1.00 per share, and 100,000 warrants at $.50 per share. All of the
warrants expire in May 2000.
Note 5. Possible Legislation in the United States Congress
On July 23, 1998, the Senate passed an appropriations bill containing
an amendment by Senator John Kyl of Arizona, which would prohibit gaming on the
Internet in the United States. The proposed prohibition was not enacted into law
in 1998, but it or a similar bill may be reintroduced shortly. Several similar
bills were also introduced in the House of Representatives in the summer of
1998, and House Internet gaming legislation may be reintroduced this year as
well.
If legislation prohibiting gaming on the Internet is enacted into law,
that legislation could have a significant effect on PlayStar's online gaming
operations. If a law prohibiting Internet gaming passes, the Company's gaming
subsidiaries (Limited and Casino) might be forced to cease all marketing and
promotional activities in the United States to ensure that no solicitation of
United States citizens occurs. If such legislation prohibits United States
citizens from gaming on the Internet, the Company may be expected to lose a
significant portion of its online gaming customers.
Note 6. Restatement of 1997 Financial Information
The financial statements as of June 30, 1997 and for the period October
3, 1996 (inception) to June 30, 1997 have been restated to comply with the
requirements of APB No. 25 and SFAS 123 as disclosed in Note 2.
The effect of the correction with respect to the recording of stock
options granted to employees and consultants during the period has been to
increase development costs charged to operations by $461,000, and to increase
employee compensation charged to operations by $682,500.
In total, the effect of the restatement has been to charge operations
with $1,143,500 ($.08 per share).
Note 7. Subsequent Events
On January 2, 1999, PlayStar agreed to acquire, on closing, 40% of the
common stock of Cyberstation & Support, Inc. for Cdn.$ 500,000 (US$329,000). In
addition to the above transaction, Players Ltd., a wholly-owned subsidiary of
PlayStar Wyoming, will, on closing, enter into a license agreement with
Cyberstation International Limited which will grant Players an exclusive
irrevocable perpetual royalty-free license to Cyberstation International's
software
14
<PAGE>
and intellectual property, presently owned or hereafter to be acquired or
developed, for use in certain designated countries and geographic territories.
In consideration thereof, PlayStar will issue to Cyberstation
International 5,000,000 of its ordinary shares.
Players will also receive, on closing, the following:
1. 50% ownership in the common stock of Net Engine St. Kitts Limited.
2. An option to purchase for $100, at the termination of the
management services agreement (described below), the software programs,
including related source codes, developed by Cyberstation International for use
in marketing, administration, and/or game playing activities related to casino
style gaming on the Internet.
An option to purchase 100% of the common stock of Dreamplay for $100.
PlayStar, on closing, will enter into a management agreement with
Cyberstation Limited whereby Cyberstation Limited will provide management
services to the operating subsidiaries of PlayStar, which terminates on June 30,
2002. Cyberstation Limited will receive a base management fee of Cdn.$ 160,000
($105,000) per annum and a payment equal to 15% of the pre-tax profits of
Players; and 10% of the pre-tax profits, in excess of certain thresholds as
defined in the management agreement, of PlayStar.
In addition, Cyberstation Limited, upon closing and after the execution
of the management agreement, will be granted three options to acquire an
aggregate of 5,000,000 ordinary shares of PlayStar as follows:
Exercise
No. of Shares Price
------------- --------
1,000,000 $ .25
2,000,000 .50
2,000,000 1.00
---------
5,000,000
=========
These options vest over a three year period, and only then if the
pre-tax profits of PlayStar, as defined, exceed certain amounts described in the
management agreement.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion contains forward-looking statements and projections.
Because these forward-looking statements and projections are based on a number
of assumptions and are subject to significant uncertainties and contingencies,
many of which are beyond the PlayStar's control, there is no assurance that they
will be realized, and actual results may vary significantly from those shown.
PLAYSTAR/PLAYSTAR WYOMING
PlayStar is a holding company who, through its subsidiaries, PlayStar
Limited and Antigua Casino, operates, promotes and commercializes an on-line
gaming service, which offers interactive, software-based games of chance.
Antigua Casino conducts PlayStar's Internet gaming business, and
PlayStar Limited licenses gaming technology to Antigua Casino's Internet gaming
business. For the period from inception on October 3, 1996 until December 31,
1998, the cumulative earned interest and casino revenue of PlayStar was $119,173
and its accumulated deficit was $4,257,516.
During 1996 and 1997, PlayStar raised an aggregate of $825,000 in cash
through three private placements completed pursuant to Rule 504 promulgated
under the Securities Act. In November and December 1997, and January 1998,
PlayStar raised an additional $1,004,637 through two additional private
placements completed pursuant to Section 4(2) of the Securities Act and
Regulations D and S promulgated thereunder. In May, July and August 1998,
PlayStar raised an additional $2,469,700 through additional private placements
completed pursuant to Regulation S promulgated under the Securities Act. These
financings have been sufficient to satisfy PlayStar's cash requirements. From
these proceeds, Playstar and its subsidiaries paid approximately $1,140,000 for
products and services provided by Dreamplay and approximately $720,000 for
legal, accounting, public relations and administrative services through December
31, 1998. After the above financings, PlayStar had available approximately
$1,170,000 in working capital. Of this amount, PlayStar intends to pay for the
majority of its advertising, marketing and promotional efforts on a
performance-related commission and/or profit sharing basis.
Management believes that PlayStar will have sufficient funds to conduct
its operations for at least through, at least, June 30, 1999.
PLAYSTAR LIMITED
PlayStar Limited's efforts are centered on the purchase of on-line
gaming and financial transaction processing software incorporated into the
creation of an electronic casino operating over the Internet.
Effective April 1, 1998, PlayStar Limited and Dreamplay Research Corp.
entered into an agreement in which PlayStar Limited retained Dreamplay to
provide PlayStar Limited's gaming
16
<PAGE>
software. Pursuant to the terms of this agreement, Dreamplay assigned to
PlayStar Limited all right, title and interest in the software designed and
developed for PlayStar Limited, under a previous agreement for services.
PlayStar Limited licenses its gaming technology to Antigua Casino who
then operates the electronic casino.
ANTIGUA CASINO
Antigua Casino's Articles of Incorporation enable it to operate an
Internet-based casino. Using the technology developed by PlayStar Limited and
licensed to it, Antigua Casino's casino service, at www.antigua.org, allows
patrons to play interactive games in real time either in "free" mode or in
"live" mode. In "live" mode, patrons wager with chips acquired using electronic
money or "e-cash" that was purchased through credit cards, wire-transfers and
money orders. Antigua Casino initially offers a selection of casino-style games,
including, but not limited to blackjack, draw poker, baccarat, roulette and
three different slot machines.
In December 1997, PlayStar Limited, on behalf of Antigua Casino,
applied to the government of Antigua for an electronic casino gaming license. On
January 28, 1998, the Antigua government granted approval for the issuance of
the license to Antigua Casino. Antigua Casino began operations of this casino
immediately following the consummation of the reorganization on September 14,
1998.
During the balance of the quarter Antigua Casino continued to operate
in development mode under conditions of live play and real money wagering rather
than only the free play of its earlier testing.
This focus was carried forward into the last quarter of 1998 with
ongoing analysis of the performance and the functionality of the casino. In
addition, customer service systems and procedures were modified to reflect the
reality of being live on line. Limited marketing activities resulted in a
gradual build-up of the client and revenue base.
With credit cards proving to be the means whereby almost 100% of this
type of play is conducted, an important factor of operations is the ability to
ensure adequate facilitation capability, not only from the standpoint of costs
but also from the degree of fraud protection provided. This control enables
chargebacks to be held to a minimum.
Experience, during the last quarter of 1998, indicated the need for
substantial improvement in this area. Accordingly, management instituted a
search for an alternative solution to that being carried out through Bermuda.
With concern being expressed over possible changes in North American
legislation, it was felt that such a solution would be required to be offshore.
Analysis of the market indicated that this was an area ill served and
suggested that a solution would provide the Company, not only with its internal
needs, but also offer the
17
<PAGE>
considerable possibility of taking it into highly profitable areas of business
activity outside the sphere of its casino operations.
As 1998 concluded, management found in Cyberstation Limited, St Kitts,
not only the possibility of meeting these needs through the licensing of its
ultra secure encryption technology and sophisticated data reporting
capabilities, but also access to excellent sources of software design to further
enhance the Company's Java based casino games. It was also felt that
Cyberstation would provide the Company with the ability to introduce substantial
savings in the cost infrastructure of its operations.
Accordingly, with negotiations underway for these enhancements to its
direction, the Company felt that its future would be best served by concluding
its relationship with Dreamplay Research and this contract was terminated in
late December.
The following comments represent a more detailed discussion of the
Cyberstation technology ("Cash Engine") and its potential. On conclusion of the
licensing negotiations PlayStar will carry out all its e-commerce related
business through its potential new St. Kitts subsidiary, NetEngine Corporation.
The anticipated growth in offshore centers is projected to be fueled by
lower taxes, favorable asset protection laws, and privacy. The lack of cost
effective and secure Internet credit card acquiring solutions for offshore
financial institutions represent a tremendous barrier to entry. In addition,
these institutions have different criteria for evaluating the potential risk
involved in credit card transactions where the card is not physically presented
to the merchant. This type of business is traditionally referred to as "card not
present" or "MO/TO" (mail order/telephone order). With the advent of the
Internet, additional concerns need to be addressed. Recognizing that very few
offshore financial institutions would be technologically prepared to address
these concerns, NetEngine, has a core corporate focus to address them.
NetEngine has strategic vision to provide Acquiring Banks and their
Internet Merchants with comprehensive Internet credit card processing solutions.
These solutions are based on CashEngine, a platform of products and services
designed to provide Acquiring Banks with a profitable credit card processing
solution that requires no capital expenditures; can be implemented within two
weeks; streamlines acquiring operations; provides immediate online reports;
provides immediate exception alarms; addresses risk by reducing merchant fraud;
is rated for military grade security; and minimizes customer service issues
because merchants have access to the same information.
In addition, the CashEngine technology provides Merchants with an
efficient solution that requires no capital expenditures; can be implemented
within two days; processes transactions in under 5 seconds; address risk by
reducing consumer fraud; provides immediate online reports; provides immediate
reconciliation resources; provides immediate exception alarms; and is rated for
military grade security.
Management believes that the CashEngine technology will also provide
PlayStar with a far more profitable online casino operation as it will provide
great assistance during the introduction of its Quick Connect Associates
marketing program. Information concerning this dynamic concept can be found on
the internet at www.playstar.com.
18
<PAGE>
Quick Connect represents a significant marketing resource that will
allow PlayStar to cross-sell other revenue generating activities to its base of
Associates.
With an expanding diversified base of operations, PlayStar believes
that it will be well prepared as it goes forward into the new millennium.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit Description
------- -----------
27 Financial Data Schedule
B. Reports on Form 8-K
20
<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 WYOMING HOLDING CORP.
By: /s/ WILLIAM F.E. TUCKER
----------------------------------
William F.E. Tucker
President
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
FINANCIAL STATEMENTS FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0001060205
<NAME> PLAYSTAR WYOMING HOLDING CORP.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,267,220
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
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<CURRENT-ASSETS> 1,400,195
<PP&E> 286,361
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<CURRENT-LIABILITIES> 227,420
<BONDS> 0
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0
<COMMON> 2,859
<OTHER-SE> 1,543,964
<TOTAL-LIABILITY-AND-EQUITY> 1,774,243
<SALES> 0
<TOTAL-REVENUES> 108,102
<CGS> 0
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<OTHER-EXPENSES> 721,000
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (1,167,275)
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<EXTRAORDINARY> 0
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<NET-INCOME> (1,167,275)
<EPS-PRIMARY> (.02)
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