U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A-1
(Mark One)
(X) Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
( ) For the quarterly period ended March 31, 1999
( ) Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _____________ to _________
Commission File Number: 0-22443
PlayStar Wyoming Holding Corp.
------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Antigua 52-209-8787
------- -----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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, 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
As of March 31, 1999, the Registrant had outstanding 35,372,644 shares of its
Common Stock, par value $0.0001 per share.
Traditional Small Business Disclosure Format (check one):Yes ______ No X
<PAGE>
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31,
1999 and June 30,1998................................ 3
Interim Consolidated Statements of Operations
for the nine months ended March 31,1998
and 1999 and for the period from inception
(October 3, 1996) to March 31,1999.................... 5
Interim Consolidated Statements of Shareholders'
Equity the period from inception (October 3, 1996)
to June 30,1998 and for the nine months
ended March 31,1999.................................. 6
Interim Consolidated Statements of Cash Flows
for the nine months ended March 31,1998 and 1999
and for the period from inception (October 3,
1996) to March 31, 1999.............................. 11
Notes to Consolidated Financial Statements............. 13
Item 2. Management's Discussion and Analysis or
Plan of Operation................................ 17
Part II. OTHER INFORMATION.................................. 24
-2-
<PAGE>
Item 1. Financial Statements
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
March 31, June 30,
1999 1998
---- ----
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 596,377 $ 182,219
Subscriptions receivable 1,350 21,350
Prepaid expenses and other
current assets 91,616 150,922
------- -------
Total current assets 689,343 354,491
Property and equipment, net 270,109 242,410
Deferred offering costs - 6,795
Security deposits 97,442 75,000
Investment in 40% owned affiliate -
Cyberstation Computers & Support Inc. 339,800 -
Investment in 50% owned affiliate -
NetEngine Corporation 1,196,414 -
License 1,794,620 -
---------- --------
$ 4,387,728 $678,696
========== =========
-3-
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - affiliate -
Dreamplay Research Corp. $ - $ 53,702
Accrued expenses and other current
liabilities 147,141 264,374
-------- -------
Total current liabilities 147,141 318,076
Shareholders' equity
Preferred stock, $.0001 par value:
Authorized - 1,000,000 shares;
none issued or outstanding at
March 31, 1999 and June 30, 1998 - -
Common stock, $.0001 par value:
Authorized - 50,000,000 shares
Issued and outstanding -
35,372,644 shares at
March 31, 1999 and 19,661,274
shares at June 30, 1998 3,537 1,966
Additional paid-in capital 8,799,574 3,448,895
Deficit accumulated in the
development stage (4,562,524) (3,090,241)
----------- -----------
Total shareholders' equity $ 4,240,587 $ 360,620
----------- -----------
4,387,728 678,696
========== =========
-4-
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<S> <C> <C> <C>
Period from
October 3,
Three Three Nine Nine 1996
Months Months Months Months (Inception)
Ended Ended Ended Ended to
March 31, March 31, March 31, March 31, March 31,
1999 1998 1999 1998 1999
---- ---- ---- ---- ----
(Restated) (Restated) (Restated)
(Note 7) (Note 7) (Note 7)
Revenue: $ 51,926 $ - $ 133,071 $ - $ 133,071
Casino testing 7,420 1,105 34,377 1,628 45,448
Interest income ------ ------ ------- ------ ------
59,346 1,105 167,448 1,628 178,519
Expenses:
Development costs 221,485 121,484 1,030,619 350,820 2,814,569
Credit issued against
prior development costs - - - (171,489) (171,489)
Professional fees 38,894 181,224 227,742 206,890 870,806
Options granted as
employee compensation - - 140,450 - 822,950
General & adminstration 48,868 4,681 135,835 12,718 262,242
Bank charges &
processing fees 16,967 - 34,279 - 34,279
Chargeback expense 21,784 - 21,784 - 21,784
Depreciation and
amortization 16,356 9,676 49,022 20,913 82,446
Incorporation costs - - - - 3,456
-- -- -- -- -----
Total expenses
364,354 317,065 1,639,731 419,852 4,741,043
-------- -------- ---------- -------- ---------
Net loss (305,008) (315,960) (1,472,283) (418,224) (4,562,524)
========== =========== =========== ========== ==========
Basic loss per share $ (.01) $ (.02) $ (.05) $ (.02)
========== =========== =========== ==========
Weighted avergage
number of shares 29,732,644 18,271,107 27,250,680 16,880,607
========== =========== =========== ==========
</TABLE>
-5-
<PAGE>
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 Nine Months ended
March 31, 1999
(Unaudited)
<TABLE>
<S> <C> <C> <C>
Deficit
Accumulated
Common Stock Additional in the Total
----------------- Paid-In Development Shareholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----------- ------------
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
Issuance of 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>
-6-
<PAGE>
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 Nine Months ended
March 31, 1999
<TABLE>
<S> <C> <C> <C> <C>
Deficit
Accumulated
Common Stock Additional in the Total
----------------- Paid-In Development Shareholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----------- ------------
Balance at June 30,
1997 (restated)
(brought forward) 15,812,500 $1,581 $1,980,104 $(1,926,732) $ 54,953
Issuance of 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
Issuance of 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
Issuance of 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 ($173,596) - - 51,530 - 51,530
-- -- ------- -- ------
Totals carried forward 18,321,774 $1,832 $2,935,559 (1,926,732) 1,010,659
----------- ------ ----------- ----------- ---------
</TABLE>
-7-
<PAGE>
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 Nine Months ended
March 31, 1999
<TABLE>
<S> <C> <C> <C> <C>
Deficit
Accumulated
Common Stock Additional in the Total
----------------- Paid-In Development Shareholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----------- ------------
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 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 $(1,926,732) $1,524,129
---------- ------ ----------- ---------- ----------
</TABLE>
-8-
<PAGE>
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 Nine Months ended
March 31, 1999
<TABLE>
<S> <C> <C> <C> <C>
Deficit
Accumulated
Common Stock Additional in the Total
----------------- Paid-In Development Shareholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----------- ------------
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
connection with
private placement
offerings in May,
July, August and
September 1998
(fair market value
$.39 per share
$362,454) 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
-- -- ------- -- ------
Totals carried forward 28,592,644 $ 2,859 $5,418,882 $(3,090,241) $2,331,500
---------- ----- --------- ---------- ---------
</TABLE>
-9-
<PAGE>
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 Nine Months ended
March 31, 1999
<TABLE>
<S> <C> <C> <C> <C>
Deficit
Accumulated
Common Stock Additional in the Total
----------------- Paid-In Development Shareholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----------- ------------
Totals brought forward 28,592,644 $2,859 $5,418,882 $(3,090,241) $2,331,500
Issuance of common
stock in February 1999,
in connection with
exercise of stock
options at $.05 per
share 280,000 28 13,972 - 14,000
Options granted in
March 1999 to a
consultant for
the purchase of
150,000 shares
of common stock
stock for services
provided through March
31, 1999 - - 39,460 - 39,460
Issuance of common
stock in March 1999
in connection
with the acquisition of
50% owned affiliate -
NetEngine Corporation,
License and related
fees at fair market
value - $.453125 per
share 6,500,000 650 2,944,662 - 2,945,312
Amortization of cost
of options granted
in prior periods - - 382,598 - 382,598
Net loss, March 31, 1999 - - - (1,472,283) (1,472,283)
-- -- -- ---------- ----------
Balance at March 31, 1999 35,372,644 $3,537 $8,799,574 $(4,562,524) $4,240,587
========== ===== ========== =========== ===========
</TABLE>
-10-
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
Period from
October 3,
Nine Nine 1996
Months Months (Inception)
Ended Ended to
March 31, March 31, March 31,
1999 1998 1999
--------- ---------- ----------
(Restated) (Restated)
(Note 7) (Note 7)
Cash flows from operating activities:
Net loss $(1,472,283) $(418,224) $(4,562,524)
Adjustments to reconcile net
loss to net cash used in operating
activities:
Depreciation and amortization 49,022 20,913 82,446
Development costs and
professional fees
paid through the issuance
of common stock and granting
of stock options 324,415 52,716 1,136,242
Options granted as employee
compensation 140,450 - 822,950
Change in assets and
liabilities:
Prepaid expenses and
other current assets 59,306 (196,082) (91,616)
Accounts payable -
affiliate -
Dreamplay Research Corp. (53,702) 47,324 -
Accrued expenses (117,233) (17,219) 147,141
--------- -------- -------
Net cash used in operating activities (1,070,025) (510,572) (2,465,361)
----------- --------- -----------
Cash flows from investing activities:
Payment of security deposits (22,442) (75,000) (97,442)
Purchase of property and equipment (76,721) (243,667) (352,555)
Investment in 40% owned affiliate -
Cyberstation Computers &
Support Inc. (339,800) - (339,800)
Costs related to acquisition of
License (45,722) - (45,722)
-------- ------- --------
Cash used in investing
activities (484,685) (318,667) (835,519)
--------- --------- ---------
Totals carried forward $(1,554,710) $(829,239) (3,300,880)
----------- --------- -----------
-11-
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Concluded)
Period from
October 3,
Nine Nine 1996
Months Months (Inception)
Ended Ended to
March 31, March 31, March 31,
1999 1998 1999
--------- ---------- -----------
(Restated) (Restated)
(Note 7) (Note 7)
Totals brought forward $(1,554,710) $(829,239) $(3,300,880)
Cash flows from financing activities:
Net proceeds from issuance of
common shares 1,928,073 904,176 3,861,757
Decrease in deferred offering costs 6,795 - -
Received on exercise of stock options 34,000 - 35,500
------- -- ------
Net cash provided by financing
activities 1,968,868 904,176 3,897,257
---------- -------- ---------
Net increase in cash and cash equivalents 414,158 74,937 596,377
Cash and cash equivalents, beginning of
period 182,219 109,138 -
-------- -------- -
Cash and cash equivalents, end of period $ 596,377 $184,075 $ 596,377
=========== ========== ===========
Supplemental Schedule of Non-Cash Investing
and Financing Activities
Common stock issued in connection
with raising of capital $ 362,454 $ 212,500 $ 574,954
=========== ========== ===========
Common stock issued in connection
with the acquisition of 50% owned
affiliate - NetEngine Corporation
and License $ 2,945,312 $ - $2,945,312
=========== ========== ===========
Receivable from shareholders in
connection with exercise of
stock options $ - $ 2,850 $ 1,350
=========== ========== ==========
-12-
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
(FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Unaudited)
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-K for the year ended June 30, 1998. The results for the nine months ended
March 31,1999 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 Antigua corporation and Antigua Casino
and Sports Book Limited, an Antigua corporation (collectively "the
Company"). All intercompany accounts and transactions have been eliminated
in consolidation.
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 world-wide through the Internet.
Effective September 4, 1998, pursuant to a Merger Agreement, and an
Application for Certificate of Transfer, Playstar Corporation was merged
with and into Playstar Wyoming Holding Corp., a newly formed Wyoming
corporation that 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 $.0001 of Playstar Antigua.
-13-
<PAGE>
Since the effective time of the reorganization, PlayStar Wyoming has
continued to conduct the business previously carried on by PlayStar
Delaware. Except for PlayStar Wyoming's new domicile, the activities of
PlayStar Wyoming are identical to that of PlayStar Delaware prior to the
effective time of the reorganization. Accordingly, references in the
discussion of the business of PlayStar Wyoming include the operations of
PlayStar Wyoming and PlayStar Delaware.
On March 25, 1999, the Company acquired, 40% of the common stock of
Cyberstation Computers & Support, Inc. for Cdn.$ 500,000 ($339,800). In
addition to this transaction, Players Ltd., entered into a license agreement
with Cyberstation Limited, a St.Kitts corporation ("Cyberstation"). Players
was granted an exclusive irrevocable perpetual royalty-free license to
Cyberstation`s software and intellectual property, presently owned or
hereafter to be acquired or developed, for use in certain designated
countries and geographic territories. In consideration for the grant of the
license, the Company issued to Cyberstation 5,000,000 of its common stock.
In addition, the Company issued 1,500,000 of its common stock to third
parties as fees in connection with this transaction.
Players also received, as part of the transaction the following:
1. 50% ownership in the common stock of NetEngine Corporation, a St.
Kitts corporation)("NetEngine").
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 for use in
marketing, administration, and/or game playing activities related to
casino style gaming on the Internet.
3.An option to purchase 100% of the common stock of Dreamplay Research
Corp., an Ontario, Canada corporation for $100. Dreamplay served as
the Company's software developer until December 29, 1998.
The Company also entered into a management agreement with Cyberstation,
whereby Cyberstation provides management services to the Company's operating
subsidiaries, which terminates on June 30, 2002. Cyberstation will receive a
base management fee of Cdn.$ 160,000 (US $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 the Company.
-14-
<PAGE>
In addition, the Company has granted Cyberstation three options to
acquire an aggregate of 5,000,000 common stock 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.
Note 3. New Accounting Pronouncements
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.
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.
-15-
<PAGE>
Note 4. Investment in 50% owned affiliate - NetEngine Corporation and License
Shares issued at fair market value $.453125
Cyberstation Limited 5,000,000 shares $2,265,625
Fees 1,500,000 shares 679,687
Related costs 45,722
----------
$2,991,034
Note 5. 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 and warrants 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 10,668,000 at March 31, 1999 could have a dilutive
effect on future earnings per share calculations in those periods.
Note 6. 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 the Company'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.
-16-
<PAGE>
Note 7. 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.
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
$1,143,500 ($.08 per share).
Note 8. Subsequent Events
On April 8, 1999 Stuart Brazier joined the Company as its new President,
Chairman of the Board and Chief Executive Officer. At that time, Mr. Brazier
was the beneficial owner of the remaining 50% of NetEngine not owned by the
Company. He had underway negotiations involving millions of processing
dollars and it was agreed that the Company would acquire his interest in
NetEngine for 2,000,000 shares of its common stock (1,000,000, of which,
would be not issued until January 8, 2000); and grant him an option to
acquire an additional 500,000 shares of common stock at $1.25 until March
31, 2001.
During May the Company agreed to acquire from Hanver Trust Company a 90%
interest in VirtualCard PLC, a Nevis public liability company for 2,000,000
shares of its common stock plus an additional 100,000 shares in fees.
Item 2. Management's Discussion and Analysis or Plan of Operation
The information contained in this report on Form 10-QSB contains "forward
looking statements" within the meaning of Section 27A of the Securities Act,
and Section 21E of 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 we
believe that the assumptions made and expectations reflected in the forward
looking statements are reasonable, actual results may differ materially from
those suggested by the forward looking statements for various reasons.
-17-
<PAGE>
PlayStar/PlayStar Wyoming
PlayStar is a holding company which, through its subsidiaries, PlayStar
Limited, Antigua Casino and NetEngine, operates, promotes and commercializes
e-commerce transactions and an on-line gaming service, that 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
March 31, 1999, the cumulative earned interest and casino revenue of
PlayStar was $178,519 and its accumulated deficit was $4,562,524.
NetEngine will conduct the e-commerce activities of the Company.
During 1996 and 1997, PlayStar raised an aggregate of $825,000 in cash
through three private placements. In November and December 1997, and January
1998, PlayStar raised an additional $1,004,637 through two additional
private placements. In May, July and August 1998, PlayStar raised an
additional $2,469,700 through additional private placements. These
financings have been sufficient to satisfy PlayStar's cash requirements.
From these proceeds, the Company and its subsidiaries paid approximately
$1,215,000 for products and services provided by Dreamplay and approximately
$1,000,000 for legal, accounting, public relations and administrative
services through March 31, 1999. At that date PlayStar had available
approximately $550,000 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 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.
-18-
<PAGE>
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.
Since the opening of its casino, 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 first quarter of 1999 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 then being carried out. With
concern being expressed over possible changes in North American legislation,
it was felt that such a solution would be required to be offshore.
-19-
<PAGE>
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 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, 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. Management also believed 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 and this contract was terminated
in late December 1998.
For the March 1999 quarter, casino results were adversely affected by a
number of large winners outside of a considered norm. However, we believe
that long-term benefits are derived from favourable word of mouth publicity
in meeting payments to such winners.
While negotiations with Cyberstation were taking place during the
quarter, Cyberstation personnel conducted a full examination of the gaming
and back office software with a view towards its enhancement.
The casino intends shortly to introduce a unique two-tiered affiliate
business opportunity called QuickConnect. Under the program, webmasters,
from anywhere on the Internet, are encouraged to host a direct link from
their websites into our casino games. Webmasters who become program
"Associates" use this casino gateway to feed players into our new cash
management system, CashEngine. This product allows all players to be tracked
back to the originating website, and provides the Associate with the ability
to earn a 30% participating commission in the casino's net win. Associates
become members of the Master Associate Program by signing up two new
QuickConnect Associates, thereby earning an additional 20% override
commission.
With each QuickConnect application, Associates and Master Associates
will be offered a CashEngine eCash account for easy tracking of commissions
(see also possible use of a VirtualCard discussed below).
During May we have introduced player incentive contests and have
undertaken some direct e-mail programs, which have resulted in a significant
increase in player activity.
-20-
<PAGE>
NETENGINE
A significant amount commerce is now being conducted over the Internet.
Most of this e-commerce is conducted using credit cards, as consumers reach
a comfort level that allays security concerns.
As merchants accept the Internet as a place for doing business, many
will recognize that they have much to gain by going offshore because it is
relatively easy for them to set up [email protected].
They are the first generation of merchants who can choose their
business domicile. With the right corporate structure in place, they can
select the jurisdiction under which their profits are settled and taxed.
As traditional businesses expand online and become truly global, the
Company believes that there will be a shift to multi-national thinking with
merchants identifying the opportunity and benefits of processing e-commerce
transactions in an offshore jurisdiction.
Recognizing the huge potential of providing credit card processing
services, NetEngine has licensed a number of "Software Engines" for this
purpose.
Card Engine
Using 2,048 bit RSA keys that are rated military grade cryptography
allows merchants to perform credit card processing in an ultra secure
manner. The keys are used to sign the merchant and transaction hub
certificates for cross verification purposes. In addition, the certificates
provide control over access to reviewing online reports outlining the
transactions.
Transactions occur live and only take a few seconds of real time
processing. As part of this function, access is made to an effective
database set up to limit possible consumer and merchant fraud.
The system submits each transaction to online monitoring and real time
accounting from the standpoint of both the merchant and its Bank. These
financial institutions in turn use the system to monitor their total
merchant network.
As developed outside the United States, without participation of US
citizens, it allows the technology to be used world-wide without violating
any cryptographic export restrictions.
-21-
<PAGE>
Cash Engine
The product works in conjunction with CardEngine. While the merchant
uses CardEngine to process and report credit card transactions, CashEngine
provides customers and marketing partners with electronic cash.
Using its licensed proprietary 2,048 bit encryption technology, it
allows for a software product with a set of functions associated to a unique
computer certificate.
The creation of an eCash account allows customers and affiliates to
purchase goods or services from member merchants or transfer funds to other
eCash account holders. In this way, eCash develops into a product that
becomes used across numerous websites as a form of tender.
The eCash management system allows users to review transactions that
have occurred within their accounts and the status of their eCash account
balance. Without the creation of a unique certificate being allocated to
each user, this would not be possible.
The possession of an eCash account also allows the user access to our
newly acquired product namely VirtualCard.
VirtualCard
This product serves as a secured credit card/debit card matched against
funds within eCash account. Balances within the account govern useable
limits. Upon request, and subject to an annual fee, the user may request a
physical Master Card that can be used to purchase goods and services, not
only on the Internet, but elsewhere. These transactions are administered
using the Bank's existing technical infrastructure; with an interface
provided by CashEngine to monitor available spending.
Similar review and reporting capabilities as eCash are available, again
governed by the existence of a unique certificate.
Marketing
Management believes that the most effective way to penetrate into new
markets will be through a network of joint ventures. These joint ventures
will make up what will be known as the "NetEngine Network." NetEngine and
the joint venture partner will jointly own each company within the NetEngine
Network. NetEngine will provide the CashEngine and CardEngine technologies
while the joint venture partner will provide the local contacts and
resources.
NetEngine will work with the local partner to set up the NetEngine
operation. The ideal partner is one with a good relationship with Acquiring
Banks and other strategic entities such as Internet Service Providers.
NetEngine will provide a turnkey solution including but not limited to:
1. The NetEngine name, logo and business plan;
2. The CardEngine and CashEngine Software Technologies;
3. Credit Card Processing Agreements for the local
Acquiring Bank;
4. Merchant application forms and contracts; 5. Cardholder application
forms and contracts; and 6. Customer Service and Sales training
manuals;
NetEngine recently announced its first such joint venture with MasterPay
Limited, a Nevis company. Using Banks based in Guatemala City, management
project that the Company will earn over $2 million in processing income by
the end of 1999.
The Company's investment in Cyberstation Computers and Support allows it
to participate in revenues obtained in marketing similar products in
territories not covered in the Cyberstation license.
-22-
<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
Treasurer and Secretary
-23-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1999
<CASH> 596,377
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 689,343
<PP&E> 270,109
<DEPRECIATION> 49,022
<TOTAL-ASSETS> 4,387,728
<CURRENT-LIABILITIES> 147,141
<BONDS> 0
0
0
<COMMON> 3,537
<OTHER-SE> 8,799,574
<TOTAL-LIABILITY-AND-EQUITY> 4,387,728
<SALES> 0
<TOTAL-REVENUES> 59,346
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 364,354
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,472,283)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,472,283)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,472,283)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
