<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 2054
FORM 20-F
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934 OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ________________________
Commission file number_________________________________________________________
PLAYSTAR WYOMING HOLDING CORP.
---------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
---------------------------------------------------------------------------
(Translation of Registrant's name into English)
Antigua, West Indies
---------------------------------------------------------------------------
(Jurisdiction of incorporation or organization)
Mutual Financial Center, Factory Road, St. John's, Antigua, British West Indies
---------------------------------------------------------------------------
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each Name of each exchange
class on which registered
N/A N/A
------------- ---------------------
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Ordinary Shares, $0.0001 par value
---------------------------------------------------------------------------
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
N/A
----------------
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period covered by the
annual report.
36,622,644 Ordinary Shares
--------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark which financial statement item the Registrant
has elected follow. Item 17 X Item 18
----- -----
<PAGE>
FORWARD LOOKING STATEMENTS
Many of the statements included in this Form 20-F contain
forward-looking statements and information relating to our company. We generally
identify forward-looking statements by the use of terminology such as "may,"
"will," "expect," "intend," "plan," "estimate," "anticipate," "believe," or
similar phrases. We base these statements on our beliefs as well as assumptions
we made using information currently available to us. Because these statements
reflect our current views concerning future events, these statements involve
risks, uncertainties and assumptions. Our actual future performance could differ
materially from these forward-looking statements. These forward-looking
statements involve a number of risks and uncertainties. Important factors that
could cause actual results to differ materially from our expectations include
matters not yet known to us or not currently considered material by us.
We caution you not to place undue reliance on these forward-looking
statements. All written and oral forward-looking statements attributable to us
or persons acting on our behalf are qualified in their entirety by those
cautionary statements.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
OVERVIEW OF BUSINESS DEVELOPMENT
PlayStar Wyoming Holding Corp. is a holding company which, through its
subsidiaries, PlayStar Limited, PlayStar Casino Limited and Players Limited
operates, promotes and commercializes an on-line gaming service that offers
interactive, software-based games of chance. PlayStar Wyoming is the successor
to PlayStar Corporation, a Delaware corporation, which was reincorporated in
Antigua on September 9, 1998. The reincorporation allowed us to commence our
on-line gaming operations on September 14, 1998.
Through the operation of our on-line gaming operation, management
recognized an opportunity to capitalize on the transaction processing that is an
element of any on-line sale. In furtherance of this initiative, we entered into
an agreement on March 25, 1999 with Cyberstation Limited to license
Cyberstation's suite of e-commerce transaction processing, encryption and other
technology with the goal of providing transaction processing services to
merchants in the Caribbean and other less developed countries. In March of 2000,
however, following disagreements over cost sharing, management fees and
technical support, we determined to abandon our transaction processing
initiative and sought to terminate our agreements with Cyberstation. This
resulted in a legal proceeding which, when settled in September of 2000, the
Cyberstation software license was terminated along with all of the related
agreements with Cyberstation and its affiliates. For further information on the
Cyberstation settlement, see Item 3 - Legal Proceedings.
-2-
<PAGE>
The termination of the Cyberstation agreements has led us to re-direct
our business on commercializing on our Internet gaming operations. In addition
to operating our on-line casino business, we intend to license our on-line
casino software to other Internet casino providers and enter into strategic
relationships with gaming companies to create additional revenue streams.
ON-LINE GAMING
Through our subsidiaries, PlayStar Limited and PlayStar Casino, we
operate, promote and commercialize interactive, software-based games of chance
which are offered as an on-line service accessible world-wide on the Internet.
PLAYSTAR LIMITED
Our "Shockwave" software system offers casino operators interactive,
software-based games of chance accessible world-wide through the Internet. These
products can be accessed at www.playstar.com. Although PlayStar Casino is the
sole licensee of PlayStar Limited's gaming software at the present time, we
intend to license our casino software to other Internet casino providers. In
this regard, on October 11, 2000, we entered into a Letter of Intent with
Richmond Investments Limited, a company that creates and maintains multiple
on-line casinos. Under the terms of the Letter of Intent, we will license our
Shockwave casino software to MagiCorp Inc. (a consultant to Richmond
Investments) and we will set-up an on-line casino and provide on-going technical
and operational support to MagiCorp in exchange for an initial fee of $75,000
plus a monthly percentage of revenues generated from MagiCorp's casino
operations. In addition, we have agreed to issue to Richmond Investments 5-year
warrants to purchase up to $75,000 of ordinary shares of PlayStar Wyoming at an
exercise price of $0.12 per share.
PLAYSTAR CASINO
PlayStar Casino operates our Internet-based casino which is located at
www.playstar.com. Our on-line casino offers a selection of interactive
casino-style games in real time, including blackjack, draw poker, baccarat,
roulette and three different slot machines. Using PlayStar Limited's proprietary
"Java" based casino software, PlayStar Casino's casino service allowed patrons
to play the casino games for free in our "Practice Casino" or by wagering real
money using our "Live Play" mode. Our Live Play patrons wager with chips
acquired using electronic money or "e-cash" that was purchased through credit
cards, wire-transfers and money-orders. On March 12, 2000, we shut down the Live
Play mode of our casino pending a complete upgrade of our old Java based
software. While we worked to upgrade the Java technology, we continued to
operate our casino services under our free play model to preserve customer
loyalty. During July of 2000, we determined to develop a new state-of-the-art
system rather than upgrading the original Java software and we engaged Capital
IT Inc. to develop a completely new software casino module, referred to as the
"Shockwave" casino module, on our behalf.
In November of 2000, we introduced our new Shockwave casino module for
beta testing. On December 24th, 2000, we re-commenced the Live Play mode of our
casino.
-3-
<PAGE>
The casino games are designed to be entertaining and captivating.
Moreover, the games have been adapted to the peculiarities of the Internet. For
example, at times, due to "noise" on telephone lines or other unpredictable
technical glitches, connections between computers may terminate. To respond to
such problems, our gaming software keeps track of the precise status of the
game. If a game is interrupted, the patron needs only to return to the casino
Website, and the game will be restored to the moment the disconnection occurred.
PlayStar Casino does not require patrons to maintain a minimum account
balance or place any restrictions on amounts accumulated through winnings.
PlayStar Casino, however, has established a maximum bet limit for new customers.
PlayStar Casino may, at its discretion, grant custom wagering and account
options to its regular customers based upon their established profiles. At the
present time, PlayStar Casino does not intend to extend credit services to its
patrons. In addition, we may suspend a patron's account activity at any time
if we suspect or observe compulsive gambling behavior.
PlayStar Casino attracts patrons to its service by providing quality
content through innovative use of animation, graphic design and sound effects.
The PlayStar Casino Website has been designed with simplicity and effectiveness
in mind. Patrons are able to browse the Website and try any game without having
to bet real money. When a patron decides to open an account, PlayStar Casino
will process certain billing information, including the patron's name, address
and credit card or other payment information. Once an account is open, patrons
may elect to play any of PlayStar Casino games in "live" mode and wager against
the patrons' accounts. PlayStar Casino also allows patrons to review their
accounts and cash-out at any time.
PlayStar Casino protects all customer data and information with
high-level security systems and password encryption software. Patrons are issued
both an account identification number and a PIN number. Any wagering or patron
functions, such as an account review or a cash-out, requires the correct
identification numbers.
PRODUCT DEVELOPMENT
CASINO GAMING
Our Java-based software was originally developed for PlayStar Limited
by Dreamplay Research Corp. During July of 2000, we determined to develop a new
state-of-the-art system rather than upgrading the original Java software.
Capital IT Inc. was selected to develop a completely new software casino module,
referred to as the "Shockwave" casino module. In July of 2000, we entered into a
Letter of Intent with Raymond Gertner and Howard Mann, in trust ("Capital IT"),
pursuant to which Capital IT agreed to develop and implement for us the
Shockwave casino software in exchange for $115,000 (Cdn.), up to 1,500,000
ordinary shares of PlayStar Wyoming and reimbursement for certain expenses and
other costs. We will have the exclusive right to license the Shockwave software
to third parties and we will pay to Capital IT 15% of the net revenue win we
generate from any licenses arranged by Capital IT. In addition, as consideration
for serving as the exclusive marketing agent for the Shockwave software through
February 28, 2002 (provided that certain net revenue thresholds to be set forth
in the definitive agreement are met), Capital IT will receive 50% of the net
revenue we generate from licensing fees associated with the Shockwave software.
-4-
<PAGE>
SPORTS, ENTERTAINMENT AND STOCK POOLS
In addition to our on-line casino business, we are focusing on
acquiring software programs for sports wagering and sports pooling over the
Internet. Once acquired, we intend to enter into strategic relationships with
gaming and sports book companies to license such technology to third parties.
On August 1, 2000, we entered into an Agreement with SMP Data Inc., a
company which will be developing and implementing sports pool software programs
for us. Once developed by SMP Data, the sports pool software programs and all
source code related thereto will belong to us but we will share equally with
SMP Data all revenues generated from any and all licensing of this software
program to third parties. SMP Data also has the right, at any time until
August 30, 2001, to accept, instead of cash from such licensing revenues, up
to 2,000,000 ordinary shares of PlayStar Wyoming at a conversion price of
$0.10 per share.
We are currently in talks with Capital IT for it to develop, on our
behalf, an Internet sports wagering module which we would sell to
a third party. In this regard, we entered into a Letter of Intent with
Select Investments Ltd., d/b/a ABC Offshore Inc., in November of 2000 under
which we have agreed to provide and implement a sports wagering software
program referred to as "Sportsprops" and license our on-line casino software
to Select Investments. Select Investments shall retain all proprietary rights
to the Sportsprops software. Select Investments has agreed to pay us a fee of
$350,000 to provide these software programs. Under the terms of this agreement,
SMP Data Inc. will be retained to provide certain management services to Select
Investments and will receive 20% of the net revenues generated from the
sportsprops.com Website for such services. In the event that any of Select
Investments, ABC or Playstar Wyoming enter into licensing agreements with other
third parties, we shall receive 50% of the revenues generated from such
licensing arrangements and SMP Data and Select Investments shall each receive
25% of such licensing revenues. In addition, we will receive 80% of the net
win generated solely from the casino games.
SALES AND MARKETING
We have engaged a gaming consultant to advise on the marketing of our
products and services. We believe that his retention has significantly improved
our position in the Internet gaming industry. The increased quality and variety
of the products we offer, including enhanced graphics and software, has enabled
us to seek licensing opportunities on a worldwide basis. We are actively
promoting the products currently available as well as those in the developmental
stages. We intend to focus our marketing efforts on promoting and licensing our
technology to third parties. We do not limit our marketing and advertising
efforts to particular jurisdictions. However, we may exclude the United States
and any other jurisdiction from our marketing efforts if such efforts or
activities are determined to be prohibited by applicable law.
-5-
<PAGE>
COMPETITION
More and more companies, organizations and individuals are currently
offering or purporting to offer casino gambling services on the Internet similar
to those of PlayStar Casino. Our primary competition includes, but is not
limited to, Galaxiworld, Intercasino, Intertops, Sands of the Caribbean, Starnet
Communications, MicroGaming Systems and CryptoLogic Inc. We are aware of several
firms currently accepting wagers on various sporting events with financial
transactions being administered from off-shore accounts. Additionally, several
organizations currently offer lottery tickets for sale on the Internet for
international lotteries.
Most Internet markets, including the gaming segment, are relatively
accessible to a wide number of entities and individuals. We believe, however,
that there are certain market barriers facing potential providers, including
technology, commerce, regulation, management and reputation. First, providers
must utilize sophisticated systems to manage casino operations, process
financial transactions, encrypt information and provide an attractive user
interface. Providers must also develop relationships with financial institutions
and credit card processors to process gaming transactions. Additionally,
providers should obtain a casino license from an established regulatory agency
before offering Internet gaming services to the public. Providers must also
assemble a team of software, hardware, telecommunications, marketing, management
and gaming specialists to develop the casino`s operations. Finally, due to the
sensitive nature of the casino business, providers must develop and maintain an
impeccable reputation in order to attract and retain customers.
PATENTS, COPYRIGHTS AND TRADE SECRETS
As of the date hereof, neither we nor any of our subsidiaries own or
otherwise control any registered patents, copyrights or trademarks, although we
may maintain common law rights in our copyrights and trademarks. We, together
with our subsidiaries, attempt to protect our proprietary technology by relying
on trade secret laws and non-disclosure and confidentiality agreements with our
employees and consultants who have access to our proprietary technology.
REGULATION
POSSIBLE LEGISLATION IN THE UNITED STATES CONGRESS
As discussed further below, our operations are subject to various state
and federal regulations under U.S. law. Because electronic commerce in general,
and most of our products in particular, are so new, the application of many of
these regulations is uncertain and difficult to interpret. The agencies
responsible for interpreting and enforcing these regulations could alter their
interpretations or issue new laws.
In particular, it is possible that new legislation may be passed that
imposes additional burdens on our business. Any changes could lead to increased
operating costs and could also materially reduce the convenience, accessibility
and functionality of our products or services, possibly resulting in reduced
market access and acceptance.
-6-
<PAGE>
If legislation specifically prohibiting gaming or gaming advertising on
the Internet is enacted into law, that legislation could have a significant
adverse effect on our on-line gaming operations. For example, our gaming
subsidiaries, PlayStar Limited and PlayStar 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, we may be expected to lose a
significant portion of our on-line gaming customers. Furthermore, such
legislation could be interpreted to give federal and state law enforcement
officials the ability to obtain injunctions preventing third parties operating
in the United States from providing products or services to Internet gaming
entities such as PlayStar Limited and PlayStar Casino.
In addition, it is possible that new laws and regulations may be
enacted with respect to the Internet affecting issues such as user privacy,
pricing, content, and quality of products and services. The adoption of any of
these laws or regulations may decrease the growth of the Internet, which could
in turn decrease the demand for our products or services and increase our cost
of doing business or could otherwise have a material adverse effect on our
business, financial condition or operating results.
LICENSING; JURISDICTION
PlayStar Casino must adhere to the legal requirements of each
jurisdiction in which it operates or offers its services or is deemed to operate
or offer its services. Although our offices are located in Antigua, PlayStar
Casino maintains its computer servers in, and, accordingly, we operate out of,
Guatemala.
The gaming industry is highly regulated in many parts of the world,
including the United States, where the ownership and operation of land-based
gaming facilities, not including sports wagering, of the type conducted by
PlayStar Casino have traditionally been regulated on a state-by-state basis with
additional federal regulation of certain criminal activities connected to
gambling. Companies engaged in gaming activities must adhere to the legal
requirements of each jurisdiction in which they operate and offer their
services.
PlayStar Casino currently offers its services internationally,
including throughout the United States. In addition, PlayStar has future plans
to license its Internet casino technology to other companies seeking to engage
in Internet gaming activities. We do not intend to restrict or control access to
our services or technology based on user citizenship or location. However, the
law of the Internet is not well developed and there can be no assurance that a
jurisdiction in which the user is located will not successfully assert
jurisdiction over the gaming activities of PlayStar Casino. This may be an issue
in the United States, as discussed further below, as well as in the other
jurisdictions in which PlayStar Casino customers are domiciled. In the event
that it is determined that PlayStar Casino is subject to the laws of
jurisdictions other than Antigua, PlayStar Casino would have to obtain a license
in order to offer its gaming services to customers within those jurisdictions.
There can be no assurance that any such licenses could be obtained. Moreover, if
it is determined that PlayStar Casino is operating gaming operations in
jurisdictions without a license, PlayStar Casino and its officers and directors
may become subject to criminal and civil penalties imposed by such jurisdictions
for violating its laws. The occurrence of any of
-7-
<PAGE>
these events could have a material adverse effect on our business and, if many
jurisdictions were successful in asserting jurisdiction over PlayStar Casino,
PlayStar Casino could be forced to cease all gaming operations.
A number of United States federal and state statutes could be construed
to prohibit gaming through use of the Internet. Specifically, the State of
Illinois has enacted a criminal statute prohibiting all Internet gaming
activities within the state. All 50 states currently have statutes or
regulations restricting or even prohibiting gambling activities. In most states
it is illegal for anyone operating a gambling business either to accept or make
a wager, subject to certain state-by-state statutory exceptions. The Attorneys
General for at least three states, Florida, Minnesota and Texas, have issued
either formal opinions or warnings that certain Internet gaming activities are
illegal in those states. The Attorneys General for the states of Wisconsin and
New York have also taken action against Internet gaming companies.
In addition, the Federal Interstate Wire Act, 18 U.S.C. Sec. 1084,
contains provisions which may make it a crime for anyone in the business of
gambling to use an interstate or international telephone line to transmit
information in the placing of bets, unless the betting is legal in the
jurisdictions from which and into which the transmission is made. Other federal
laws impacting gaming activities include the Interstate Wagering Paraphernalia
Act, the Travel Act and the Organized Crime Control Act. As discussed below, in
March, 1998, the United States Attorney for the Southern District of New York
filed several criminal complaints against the owners and managers of six
Internet sports betting companies headquartered in the Caribbean or Central
America. Several defendants in these actions pled guilty. One went to trial and
was convicted. Those cases are the first federal prosecutions of sports betting
over the Internet. PlayStar believes the conduct at issue in those cases differs
from our business which involves casino gaming, not sports betting. Moreover,
unlike the defendants in the sports betting complaints, PlayStar does not plan
to maintain marketing offices in the United States or mail promotional
literature from locations in the United States. However, PlayStar makes no
representations with respect to whether limiting its marketing operations limits
its potential exposure to criminal laws.
A risk exists, however, that federal or state authorities may view us
as having violated criminal laws. Those authorities could initiate civil or
criminal proceedings against us and/or our employees. The results of such
proceedings could include substantial litigation expense, fines, incarceration
of company executives, diversion of the attention of key company employees, our
disqualification for licensing in the United States, and injunctions or other
prohibitions preventing us from engaging in our anticipated business activities.
It is uncertain whether the offshore operation of PlayStar Casino's
on-line gaming business would insulate us from either civil or criminal
liability under state or federal statutes regulating gambling. Courts
considering whether to exercise personal jurisdiction over a business operating
through the Internet have exercised jurisdiction over defendants who make a
conscious choice to conduct business with the residents of a foreign state. For
example, certain entities engaged in the Internet gaming business have been the
subject of criminal and civil complaints at the state level. In July of 1999,
the Supreme Court of the State of New York, New
-8-
<PAGE>
York County, ruled that the State of New York has jurisdiction to enjoin a
foreign corporation legally licensed to operate a casino in Antigua from
offering gambling to Internet users in New York. See People v. World Interactive
Gaming Corp., 1999 WL 591995 (Sup. Ct. N.Y. Jul. 28, 1999). Courts in several
other states, including Minnesota and Texas, have reached similar conclusions
regarding exerting jurisdiction over Websites based out of those states. See
e.g. Minnesota v. Granite Gate Resorts, Inc., 568 N.W.2d 715 (1997), aff'd, 576
N.W.2d 747 (Minn. 1998); Thompson v. Handa-Lopez, Inc., 1998 WL 142300 (W.D.
Tex. Mar. 28, 1998). As a result of this uncertainty, it is our desire to focus
more of our business on becoming a provider of on-line gaming technology over a
provider of on-line gaming services.
Further, various regulatory and legislative agencies are conducting or
have completed studies of interstate and interactive wagering, including the
National Gambling Impact Study Commission. No assurance can be given that new
legislation will not be adopted that limits, impedes or prohibits either the
activities in which PlayStar Casino is engaged and proposes to engage in with
respect to actual wagering or other activities associated with it, including the
licensing of its technology. Any change in either the substance or the
enforcement of the applicable rules and regulations in these areas could have a
material adverse affect on our business and prospects. As noted above,
legislation may be considered and adopted in Congress and individual states in
this area, and there is no assurance that such legislation may not adversely
affect our operations.
PROHIBITION ON WAGERING SERVICES
In the future, PlayStar Casino may seek to offer wagering services on
sporting and/or other events in addition to its present gaming services.
However, PlayStar Casino does not intend to offer wagering services at least
until the applicable legal and regulatory environment is clarified, if at all.
The use of the Internet for such wagering services may violate the United States
federal wire statute. Due to the relatively recent existence of wagering over
the Internet, the laws dealing with this application are not well developed.
However, on March 4, 1998, the United States Attorney for the Southern District
of New York indicted 14 owners and managers of six Internet sports wagering
companies headquartered in the Caribbean and Central America. Additional similar
indictments have since been issued. These individuals, all of whom are citizens
of the United States, were charged with conspiracy to transmit bets and wagers
on sporting events via the Internet in violation of the Federal wire statute.
The indictments were made in spite of the fact that the companies operated by
the defendants were licensed to conduct wagering operations, including one which
was licensed by the Government of Antigua.
INABILITY TO COLLECT AMOUNTS OWED BY GAMING CUSTOMERS
Recently, a number of Internet gaming customers brought suits against
banks and credit card companies to prevent those companies from collecting
amounts owed for Internet gambling activities. Those lawsuits relied on state
laws prohibiting the collection of gambling debts. Some of these customers have
succeeded in having their gambling debts cancelled. As a result, some credit
card companies have indicated that, rather than collecting disputed charges for
gaming activities from their customers, they will charge such disputed amounts
back to the accounts of the casinos. Other credit card companies have indicated
that they may no longer
-9-
<PAGE>
accept charges for Internet gaming activities altogether. These developments
create an increased risk that we may not be able to collect amounts owed to us
by our Internet gaming customers. Recently some credit card companies have
changed their policies to ensure that credits may not be charged back to the
credit cards. These recent changes in credit card company policies regarding
Internet gaming activities may have an adverse effect on our business.
EMPLOYEES; CONSULTANTS
We currently have 3 full-time employees who manage and administer our
on-line gaming operations. From time to time, we also retain consultants and
consulting firms which provide us with certain expertise in financing,
development, marketing and software technology.
On July 15, 2000, we entered into a Consulting Agreement with a gaming
consultant. Under the terms of this Consulting Agreement, the consultant has
agreed to provide gaming consultant services to PlayStar Wyoming and its
subsidiaries for a monthly cash payment and 1,000,000 ordinary shares of
PlayStar Wyoming. In addition, the consultant will receive a performance bonus
of 250,000 ordinary shares of PlayStar Wyoming for every $250,000 of gross
revenue generated by PlayStar Wyoming, for a maximum of up to 4,000,000 ordinary
shares. The term of the Consulting Agreement is a fixed term of three years and
shall automatically renew from year to year unless otherwise terminated by
either party. If, however, Playstar Wyoming's revenues during the first year of
this agreement is less than $400,000, the agreement shall terminate.
ITEM 2. DESCRIPTION OF PROPERTY.
PlayStar Casino currently occupies 2,800 square feet at the Mutual
Financial Centre located at 9 Factory Road, St. Johns, Antigua, of which 1,300
square feet has been sublet. Under the terms of our lease, which terminates on
August 31, 2004, PlayStar Casino pays a monthly rent of $5,000. Except for the
foregoing, we do not, nor do any of our subsidiaries, presently own or lease any
real property.
ITEM 3. LEGAL PROCEEDINGS.
Neither we nor our subsidiaries are currently parties to any pending
legal proceedings.
On March 25, 1999, we licensed from Cyberstation Limited a suite of
e-commerce transaction processing, encryption and other technology and entered
into a number of related agreements with Cyberstation and its affiliates. In
October of 1999, however, we discontinued payments to Cyberstation after
disagreements over cost sharing, management fees and technical support. In March
of 2000, we exercised our right to terminate our agreements with Cyberstation.
In response to our action, Cyberstation and certain related parties filed a
breach of contract suit against PlayStar Wyoming. We subsequently filed a
countersuit against Cyberstation and such related parties. In September of 2000,
we settled the proceeding. Under the terms of the settlement, the license and
related agreements were terminated, as were the options to purchase 5,000,000
ordinary shares of PlayStar that we had originally granted to
-10-
<PAGE>
Cyberstation. In addition, our remaining balance of $12,500 due to Cyberstation
was waived. Our net losses in connection with the Cyberstation settlement
equaled $3,308,795, $2,996,495 of which is attributable to the termination of
the software license to Cyberstation and $324,800 of which is attributable to
the write-off of our investment in Cyberstation.
ITEM 4. CONTROL OF REGISTRANT.
The Company is not directly or indirectly owned or controlled by
another corporation or by any foreign government.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information with respect to the
beneficial ownership of PlayStar Wyoming's ordinary shares as of December 27,
2000 by
each director of PlayStar Wyoming,
each executive officer of PlayStar Wyoming,
all directors and officers of PlayStar Wyoming as a group and
each person known by PlayStar Wyoming to be the beneficial
owner of more than ten percent (10%) of the ordinary shares of
PlayStar Wyoming.
The percentages below are based upon 41,872,644 outstanding ordinary
shares of PlayStar Wyoming as of December 27, 2000, and includes, with respect
to those persons holding warrants or options to purchase ordinary shares
exercisable within 60 days, the number of ordinary shares that are issuable upon
the exercise thereof.
<TABLE>
<CAPTION>
Beneficial Ownership of Current Percent
Name and Address Ordinary Shares of Class
---------------- --------------- --------
<S> <C> <C>
Stuart Brazier 500,000 1.19%
Barbados Mutual Building
9 Factory Road
St. Johns, Antigua
All directors and executive officers as a group 500,000 1.19%
(1 person)
</TABLE>
NO CHANGE OF CONTROL ARRANGEMENTS.
We know of no arrangements, the operation of which may at a subsequent
date result in a change in control of PlayStar Wyoming.
-11-
<PAGE>
ITEM 5. NATURE OF TRADING MARKET.
On March 19, 1997 the common stock of our predecessor, PlayStar
Delaware, was approved for trading on the Nasdaq Over-the-Counter Bulletin
Board. On September 22, 1998, following the reincorporation to Antigua, the
ordinary shares of PlayStar Wyoming were approved for trading on the Nasdaq
Over-the-Counter Bulletin Board. The following table sets forth, for the periods
indicated, the range of the high and low bid quotations as reported by the
Nasdaq Over-the-Counter Bulletin Board. The bid quotations set forth below,
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not reflect actual transactions:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal Year Ended June 30, 1999
First Quarter.......................................... $0.74 $0.30
Second Quarter......................................... $0.50 $0.15625
Third Quarter.......................................... $0.90 $0.26
Fourth Quarter......................................... $0.84 $0.36
Fiscal Year Ended June 30, 2000
First Quarter.......................................... $0.2344 $0.2031
Second Quarter......................................... $0.1406 $0.125
Third Quarter.......................................... $0.125 $0.1095
Fourth Quarter ........................................ $0.1094 $0.1094
</TABLE>
On December 27, 2000, the last reported sales price of our ordinary
shares, on the Over-the-Counter Bulletin Board, as reported by Nasdaq, was
$0.0625. As of December 27, 2000 there were 83 holders of record of PlayStar
Wyoming's ordinary shares, although management believes that there are many
other shareholders whose shares are held in street name. PlayStar Wyoming has
not declared or paid any cash dividends on its ordinary shares since its
inception, and our Board of Directors currently intends to retain all earnings
for use in the business for the foreseeable future. Any future payment of
dividends will depend upon our results of operations, financial condition, cash
requirements and other factors deemed relevant by our Board of Directors.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS.
EXCHANGE CONTROLS.
Under current Antigua regulations, any dividends or other distributions
paid in respect of securities purchased by nonresidents of Antigua with certain
non-Antigua currencies (including U.S. dollars) will be freely repatriable at
the rate of exchange prevailing at the time of conversion, provided that Antigua
income tax has been paid on, or withheld from, such payments. No Antigua income
tax is currently applicable to holders of ordinary shares who are
-12-
<PAGE>
not residents or citizens of Antigua. However, there can be no assurance that
such tax, and withholders requirements related thereto, will not be enacted in
the future. See "Item 7, Taxation." Neither Antigua law nor the Articles of
Association and other organizational documents of PlayStar limit the rights of
nonresidents or foreign owners to hold or vote our ordinary shares.
ITEM 7. TAXATION.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF HOLDING
PLAYSTAR WYOMING ORDINARY SHARES
The following is a summary of the material United States federal income
tax consequences generally applicable to the ownership and disposition of
PlayStar Wyoming ordinary shares, but it does not purport to be a comprehensive
description of all of the tax considerations that may be relevant to a decision
to own or dispose of ordinary shares. In addition, this summary does not address
special federal income tax situations, such as rules applicable to holders who
are securities dealers, financial institutions, insurance companies, or tax
exempt organizations; who are holding shares as part of a hedging or larger
integrated financial or conversion transaction; who are citizens or residents of
a possession or territory of the United States; who are United States holders,
as defined below, with a currency other than the U.S. dollar as their functional
currency; who are holding shares pursuant to certain retirement plans; or who
are holding shares pursuant to the exercise of an employee stock option or
otherwise as compensation.
This summary is based upon the federal income tax laws of the United
States as in effect on the date hereof, including the United States Internal
Revenue Code of 1986, as amended (the "Code"), which are subject to change,
possibly with retroactive effect. There are no regulations, published rulings or
judicial decisions directly on point with respect to certain aspects of our
continuing business operations. Accordingly, certain matters discussed below are
not entirely certain. Our stockholders should note that no rulings have been or
are expected to be sought from the Internal Revenue Service with respect to any
of the United States federal income tax considerations discussed below, and no
assurance can be given that the Internal Revenue Service or ultimately the
courts will not take contrary positions.
Stockholders should consult their own tax advisors as to the United
States federal income tax consequences of our business operations and of the
ownership and disposition of PlayStar Wyoming ordinary shares, in addition to
the effect of any state or local tax laws or the laws of any jurisdiction other
than the United States.
DEFINITION OF UNITED STATES HOLDER
As used herein, a "United States holder" means a beneficial owner of
PlayStar Wyoming ordinary shares who is a United States person. A "United States
person" means (i) a citizen or resident (as defined below) of the United States;
(ii) a corporation created or organized in or under the laws of the United
States or any State thereof; (iii) an estate, the income of which, from
-13-
<PAGE>
sources outside the United States, which is not effectively connected with the
conduct of a trade or business within the United States, is includible in gross
income under Subtitle A of the Code or (iv) a trust, if a court within the
United States is able to exercise primary jurisdiction over the administration
of the trust and one or more U.S. Persons or partnerships organized under U.S.
law have the authority to control all substantial decisions of the trust. In the
case of ordinary shares held by a partnership (whether such partnership is
organized under the laws of the United States or another jurisdiction), any U.S.
person who is a partner in the partnership will generally be subject to the tax
consequences described below for U.S. Holders.
A "resident" of the United States means an individual that
1) is lawfully admitted for permanent residence in the United States,
2) is present in the United States for 183 days or more during a
calendar year, or
3) (a) is present in the United States for 31 days or more during a
calendar year,
(b) is present in the United States for an aggregate of 183 days or
more, on a weighted basis, over a 3-year period ending in such
calendar year, and
(c) does not have a closer connection to a "tax home" that is
located outside the United States.
TAXATION OF PLAYSTAR WYOMING
PlayStar Wyoming is classified as a "corporation" for United States
federal income tax purposes.
As a foreign corporation, PlayStar Wyoming is subject to United States
federal income tax only to the extent that it has (i) United States source
income which consists of dividends, interest, royalties or similar fixed or
determinable annual or periodic income, or (ii) income which is effectively
connected with the conduct of a trade or business within the United States.
Although not free from doubt, under current United States federal
income tax law, PlayStar Wyoming's business of providing Internet gaming
services through business operations and activities conducted entirely outside
of the United States should not be characterized as the conduct of a U.S. trade
or business, and hence should not subject to United States federal income tax.
However, the United States federal income tax rules applicable to Internet
service providers, such as PlayStar Wyoming, are currently under review by the
Internal Revenue Service and the United States Congress. Pursuant to future
Internal Revenue Service public pronouncements and/or future United States
legislation, it is possible that all or a portion of the income derived by
PlayStar Wyoming from the conduct of its Internet business operations, to the
extent attributable to users of PlayStar Wyoming's gaming services who are
located in the United States, would be subject to United States federal income
tax. This result might be possible even though PlayStar Wyoming conducts its
business operations entirely outside of the United States.
-14-
<PAGE>
If PlayStar Wyoming were to become subject to U.S. income tax on its
income from its Internet gaming business, this could have a material adverse
effect on the business and operation of PlayStar Wyoming.
To the extent that PlayStar Wyoming licenses its software for use in
the United States, any royalties with respect to such license would be United
States source and would be subject to 30% withholding tax.
TAXATION OF STOCKHOLDERS - UNITED STATES HOLDERS
Taxation of Dividends
A United States holder will be required to include in gross income as a
dividend when received the gross amount of any cash or the fair market value of
any property distributed by PlayStar Wyoming to the extent of its current and
accumulated earnings and profits as determined under United States federal
income tax principles. A distribution by PlayStar Wyoming with respect to the
ordinary shares in excess of its current and accumulated earnings and profits,
as determined under United States federal income tax principles, will be treated
as a tax-free return of basis in the ordinary shares to the extent of a United
States holder's adjusted tax basis in such ordinary shares, with the balance of
the distribution, if any, treated as a gain realized by the United States holder
from the sale or disposition of the ordinary shares.
The dividends paid by PlayStar Wyoming will not be eligible for the
dividends received deduction generally allowed with respect to dividends paid by
domestic corporations. For purposes of the United States foreign tax credit
limitation, dividends paid by PlayStar Wyoming generally will constitute foreign
source "passive income" or, in the case of a holder who is a "financial services
entity" as defined in regulations under the Internal Revenue Code, "financial
services income".
Taxation of Dispositions of Ordinary Shares
A United States holder who sells or otherwise disposes of an ordinary
share will generally recognize gain or loss equal to the difference between his
adjusted tax basis in the ordinary share and the amount realized on the sale or
other disposition. In general, any gain or loss so recognized will be either
short-term capital gain or loss or, if held for more than one year, long-term
capital gain or loss.
For purposes of the United States foreign tax credit limitation, a
recognized gain arising on the disposition of an ordinary share will be United
States source income. There is a substantial risk, however, that a recognized
loss will be allocated against foreign source income by reference to the source
of income received or expected to be received from the ordinary share.
Effect of Other Rules
PlayStar Wyoming does not believe that it is currently, nor does it
anticipate that it will become, a passive foreign investment company, a foreign
personal holding company, a personal holding company or a controlled foreign
corporation. It is possible, however, that future changes in the nature of its
operations or in the identity of its shareholders could result in PlayStar
-15-
<PAGE>
Wyoming becoming one or more of those types of entities. Were it to do so, this
could have substantial adverse tax effects on U.S. Holders of ordinary shares
and you are urged to consult your own tax advisors in this regard.
TAXATION OF STOCKHOLDERS - NON-UNITED STATES HOLDERS
Subject to the discussion of United States backup withholding tax
below, a stockholder of ordinary shares other than a United States holder,
referred to as a "non-United States holder," will not be subject to United
States federal income or withholding tax on income derived by PlayStar Wyoming,
dividends paid to a stockholder by PlayStar Wyoming or gains realized on the
sale of ordinary shares, provided that:
such income items are not effectively connected with the conduct by the
non-United States holder of a trade or business within the United States,
and
there has not been a present or former connection between the non-United
States holder and the United States, including, without limitation, such
non-United States holder's status as a citizen or former citizen thereof or
resident or former resident thereof. Holders who have such a present or
former connection should consult their own tax advisors.
UNITED STATES BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Generally, a 31% "backup" withholding tax and information reporting
requirements apply to dividends paid on shares of stock, and to proceeds from
the sale of shares, to a noncorporate United States holder, if such a holder
fails to provide a correct taxpayer identification number and other information
or fails to comply with certain other requirements.
Dividends paid on ordinary shares will be subject to United States
backup withholding tax and information reporting if either (i) they are paid
within the United States, or (ii) they are paid through a U.S. Middleman (as
defined in applicable United States Treasury Regulations), unless the holder has
provided the required certification of its non-United States status or has
otherwise established an exemption. In addition, the proceeds from the sale of
ordinary shares through a United States or United States-related person will be
subject to United States backup withholding tax and information reporting,
unless the holder has provided the required certification of its non-United
States status or has otherwise established an exemption.
A United States holder or a holder which is a United States partnership
can establish an exemption from the imposition of backup withholding tax by
providing a duly completed Internal Revenue Service Form W-9 to the holder's
broker or to the paying agent, reporting the holder's taxpayer identification
number, which for an individual will be his or her social security number, or by
otherwise establishing its corporate or exempt status. A non-United States
holder can generally establish an exemption from the imposition of backup
withholding tax and information reporting by providing a duly completed Internal
Revenue Service Form W-8BEN to the holder's broker or to the paying agent or by
otherwise establishing the holder's non-United States status.
-16-
<PAGE>
Any amounts withheld under the backup withholding tax rules from a
payment to a holder will be allowed as a refund or a credit against such
holder's United States federal income tax, provided that the required
information is furnished to the Internal Revenue Service.
ITEM 8. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended June 30
-------------------
----------------------------------------------------------------------------------------------------
1997(1) 1998 1999 2000
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Casino revenue - - 211,658 117,845
----------------------------------------------------------------------------------------------------
Total expenses 1,929,754 1,171,558 1,865,329 4,149,229
----------------------------------------------------------------------------------------------------
Operating loss (1,929,754) (1,171,558) (1,653,671) (4,031,384)
----------------------------------------------------------------------------------------------------
Equity in loss of
unconsolidated affiliate - - (15,000) -
----------------------------------------------------------------------------------------------------
Interest income 3,022 8,049 47,075 13,537
----------------------------------------------------------------------------------------------------
Net loss (1,926,732) (1,163,509) (1,621,596) (4,017,847)
----------------------------------------------------------------------------------------------------
Net loss per share - basic
and diluted (.13) (.07) (.06) (.11)
----------------------------------------------------------------------------------------------------
Weighted average number of
shares outstanding -
basic
diluted 15,035,880 17,415,461 29,344,921 36,622,644
----------------------------------------------------------------------------------------------------
</TABLE>
(1) Period from October 3, 1996 (inception) to June 30, 1997.
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following discussion and analysis provides information that
management believes is relevant to an assessment and understanding of our
results of operations and financial conditions. The discussion should be read in
conjunction with our audited financial statements and the notes to the financial
statements. Any financial information that we have included for dates prior to
September 4, 1998 represents the operations of PlayStar Corporation, a Delaware
corporation which was the predecessor to PlayStar Wyoming.
OVERVIEW
PlayStar Wyoming Holding Corp. is a holding company which, through its
subsidiaries, PlayStar Limited, PlayStar Casino Limited and Players Limited
operates, promotes and commercializes an on-line gaming service that offers
interactive, software-based games of chance. PlayStar Wyoming is the successor
to PlayStar Corporation, a Delaware corporation, which was reincorporated in
Antigua on September 9, 1998. The reincorporation allowed us to
-17-
<PAGE>
commence our on-line gaming operations on September 14, 1998. We have been in
the development stage since our inception through June 30, 1999. For the period
from our inception on October 3, 1996 until June 30, 2000, our cumulative casino
revenue was $329,503 and interest earned was $71,683 and our accumulated loss
was $8,729,684.
PlayStar Limited licenses its gaming technology to PlayStar Casino and
we intend to license such technology to non-affiliated third parties, for the
operation electronic casinos. The technology allows patrons of an on-line casino
to play interactive games of chance, including blackjack, draw poker, baccarat,
roulette and three different slot machines, for free or using real money by
wagering with chips acquired using electronic money or "e-cash" that is
purchased through credit cards, wire-transfers and money orders.
From March of 2000 through the end of our fiscal year, PlayStar Casino
has operated under conditions of free play only, with no real money wagering due
to system failures and lack of ongoing upgrades of our Java based software and
hardware. Although we employed various technicians to upgrade our software and
hardware, we were unable to adequately address the problems associated with our
Live Play casino. Accordingly, for the year ended June 30, 2000, our financial
results were adversely affected by the fact that real play, live wagering had
not been possible on our on-line casino. Nevertheless, communications remained
open between PlayStar support staff and our customers to ensure that customer
loyalty remained.
In addition to our on-line casino business, we are focusing on
acquiring software programs for sports pooling and sports wagering over the
Internet. Once acquired, we intend to enter into strategic relationships with
gaming and sports book companies to license such technology.
RESULTS OF OPERATIONS
YEAR ENDED JUNE 30, 2000 COMPARED WITH YEAR ENDED JUNE 30, 1999
During the fiscal year ended June 30, 2000, all $117,845 of our
operating revenues consisted of casino revenues. Our casino revenues for the
fiscal year ended June 30, 1999 were $211,658. This decrease in revenue was
primarily due to the shut down of our real play, live wagering casino during
March through the end of fiscal 2000. We derived $13,537 of interest income
during fiscal 2000 compared to $47,075 during fiscal 1999.
Total expenses for the fiscal year ended June 30, 2000 were $4,149,229
compared with $1,865,329 for the year ended June 30, 1999. The increase in
expenses was exclusively attributable to the costs associated with the
Cyberstation settlement, most of which did not involve the payment of cash.
There was also a slight increase in salaries expense from $211,503 to $260,793.
Otherwise, our advertising costs decreased from $91,583 in the prior year to
$15,004 this year and all other general and administrative expenses (excluding
salaries, advertising and the Cyberstation settlement) decreased from $1,562,343
in 1999 to $597,137 this year.
These overall increase in expenses resulted in an operating loss of
$4,031,384 for the fiscal year ended June 30, 2000 compared with $1,653,671 for
the fiscal year ended June 30, 1999 and a net loss of $4,017,847 for fiscal 2000
compared with $1,621,596 net loss for fiscal
-18-
<PAGE>
1999. Net loss per share was $.11 per share for fiscal 2000 compared to a net
loss of $.06 per share during fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception we have financed our operations primarily through
sales of our equity securities and the issuance of convertible notes, which has
resulted in aggregate net proceeds of $4,231,106 through June 30, 2000. These
financings, together with cash flow from operations and proceeds received from
the exercise of options and warrants, have been sufficient to satisfy our cash
requirements. As of June 30, 2000, we had $193,975 in cash and cash equivalents.
Net cash used in operating activities was $585,143 for the year ended
June 30, 2000 and $1,189,918 for the year ended June 30, 1999. The principal use
of cash in each of these periods was to fund our losses from operations.
Net cash provided by financing activities was $270,000 for the year
ended June 30, 2000 and $2,032,718 for the year ended June 30, 1999. Cash
provided by financing activities in each of these periods was primarily
attributable to proceeds from sales of our equity securities.
As of June 30, 2000, we estimate our capital expenditures and our
operational expenditures for the next 12 months to be approximately $275,000
and $575,000, respectively. We also expect to expend significant capital
resources on operating expenses for day-to-day operations, infrastructure,
general corporate and business development personnel, sales and marketing
personnel and programs and other working capital needs to grow our business.
The amounts and timing of these expenditures may vary depending on a number of
factors, including the amount of cash generated by our operations, competitive
and technological developments, the nature of any acquisitions identified and
the rate of growth of our business.
We believe that fundings from private financing and our current cash
and projected casino operations, will be sufficient to meet our anticipated
cash needs for working capital and capital expenditures until at least July 1,
2001. However, we cannot assure you that the assumptions of revenue and expense
on which our forecasts are based will prove to be accurate. Our financial
results may vary as a result of a number of factors, many of which are beyond
our control and any of which could cause our business to suffer. In addition,
because the market for online gaming is relatively new and evolving, it is
difficult to predict future financial results. As a result, if our revenues do
not meet our expectations, our financial results will likely suffer.
If additional funding is required, we may seek such funding through
public or private financings or other arrangements. Adequate funds may not be
available when needed or may not be available on terms favorable to us. If
additional funds are raised by issuing equity securities, dilution to existing
stockholders may result. If funding is insufficient at any time in the future,
we may be unable to develop or enhance our services, take advantage of business
opportunities, respond to competitive pressures or grow our business as we hope.
This could have a material adverse effect on our business, financial condition
and results of operations.
-19-
<PAGE>
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable since PlayStar Wyoming uses the Eastern Caribbean Dollar
and the U.S. Dollar, and the Eastern Caribbean Dollar is at a fixed conversion
rate to the U.S. Dollar and does not fluctuate.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
The following table sets forth the names, ages and positions of the
directors and executive officers of PlayStar Wyoming as of June 30, 2000. A
description of their respective backgrounds follows below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Stuart Brazier..................................... 42 Chief Executive Officer, President and Director
</TABLE>
--------------------
Stuart Brazier has served as Chief Executive Officer and President of PlayStar
Wyoming since April 8, 1999. From 1996 until the present, Mr. Brazier has served
as the President of De Sage Capital Corporation, a Bahamas based consulting firm
specializing in advising start-up offshore businesses. From 1991 until 1996, Mr.
Brazier was the President of Vancouver Mailing Services, a company specializing
in laser printing and data management.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
The following table sets forth information for the fiscal years ended
June 30, 2000 concerning the compensation paid and awarded to all individuals
serving as executive officers and/or directors of PlayStar Wyoming.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation Awards
------------------------------------------------------------------------------------------------
Securities
Name and Fiscal Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options Compensation
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stuart Brazier 2000 $60,000 -0- (1) -0- -0-
President and Chief
Executive Officer
------------------------------------------------------------------------------------------------
</TABLE>
-20-
<PAGE>
(1) PlayStar Wyoming authorized the issuance of 500,000 of its ordinary
shares to Mr. Brazier during the fiscal year ended June 30, 2000 in
consideration for his service to the company. These shares had a value
of approximately $55,000 on their date of authorization.
No stock options were granted to our executive officers named in the
Summary Compensation Table during the fiscal year ended June 30, 2000.
Our directors do not receive any stated salary for their services as
directors or members of committees of the Board of Directors, but by resolution
of the Board a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Our directors may also serve us in other capacities
as an officer, agent or otherwise, and may receive compensation for their
services in such other capacity.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
As of December 27, 2000, we had options, warrants and convertible notes
to purchase an aggregate of 10,608,000 ordinary shares exercise of prices
ranging from $0.05 to $0.75 per share. None of such options, warrants or
convertible notes are held by any current director or officer.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
During the fiscal year ended June 30, 2000, we authorized the issuance
of 500,000 shares to Stuart Brazier who serves as our Chief Executive Officer
and President.
Other than the foregoing, PlayStar Wyoming has not entered into any
material transactions which resulted in a direct or indirect material interest
for any of our directors or officers or holders of more than ten percent (10%)
of our capital stock.
-21-
<PAGE>
PART II
Not applicable.
PART III
Not applicable.
PART IV
ITEM 17. FINANCIAL STATEMENTS.
The consolidated financial statements of PlayStar Wyoming Holding Corp.
and its subsidiaries including the notes thereto, together with the reports
thereof of Mahoney Cohen & Company, CPA, P.C. are presented beginning at page
F-1.
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
2.1 Plan of Agreement and Merger of PlayStar Delaware and PlayStar Wyoming.*
3.1 Articles of Incorporation of PlayStar Wyoming.*
3.2 Articles of Continuance of PlayStar Wyoming.*
3.3 By-Laws of PlayStar Wyoming.*
3.4 Certificate of Incorporation of PlayStar Corporation.*
4.1 Specimen Form of Stock Certificate of PlayStar Corporation.*
10.1 PlayStar Corporation Stock Option Plan.*
10.2 Warrant to Purchase Common Stock of PlayStar Wyoming, dated November
21, 2000, issued to Select Investments Ltd.
10.3 Regulation S Subscription Agreement, dated November 21, 2000, by and between
Select Investments Ltd. and PlayStar Wyoming for the purchase of a Convertible Note.
10.4 Form of Regulation D Subscription Agreement for the purchase of Convertible Notes.
</TABLE>
-22-
<PAGE>
<TABLE>
<S> <C>
10.5 Form of Convertible Promissory Note.
10.6 Tenancy Agreement dated June 15, 1999 by and between PlayStar Corporation and The
Barbados Mutual Life Assurance Society.
10.7 Letter of Intent dated July 17, 2000 by and between Raymond Gertner and Howard
Mann, in trust, and PlayStar Wyoming.
10.8 Consulting Services Agreement dated July 15, 2000 by and between PlayStar Wyoming
and Richard Levenstein, in trust.
10.9 Letter of Intent dated October 11, 2000 by and between Richmond Investments Limited
and PlayStar Wyoming.
10.10 Letter of Intent dated November 30, 2000 by and between Select Investments Ltd.,
d/b/a ABC Corporation and PlayStar Wyoming.
</TABLE>
----------------------------
* Filed as an exhibit to PlayStar's Registration Statement of Form F-1
as filed with the Commission on July 31, 1998.
-23-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
PLAYSTAR WYOMING HOLDING CORP.
Date: December 29, 2000
By: /s/ Stuart Brazier
--------------------------------
Stuart Brazier
President and CEO
-24-
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report F-1
Consolidated Balance Sheets as of June 30, 2000 and 1999 F-2
Consolidated Statements of Operations for the Years Ended
June 30, 2000, 1999 and 1998 F-3
Consolidated Statements of Shareholders' Equity (Deficit)
for the Years Ended June 30, 1998, 1999 and 2000 F-4
Consolidated Statements of Cash Flows for the Years Ended
June 30, 2000, 1999 and 1998 F-8
Notes to Consolidated Financial Statements F-9
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
PlayStar Wyoming Holding Corp.
We have audited the accompanying consolidated balance sheets of
PlayStar Wyoming Holding Corp. and Subsidiaries as of June 30, 2000 and 1999,
and the related consolidated statements of operations, shareholders' equity
(deficit) and cash flows for each of the three years in the period ended June
30, 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of PlayStar Wyoming Holding
Corp. and Subsidiaries as of June 30, 2000 and 1999 and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 2000, in conformity with generally accepted accounting principles.
/s/ Mahoney Cohen & Company, CPA, P.C.
New York, New York
November 16, 2000, except for the
last paragraph of Note 15, as to
which the date is November 21, 2000
F-1
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
June 30,
-------------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Current assets:
Cash $ 193,975 $ 529,308
Prepaid expenses and other current assets 12,978 60,145
-------------- --------------
Total current assets 206,953 589,453
Property and equipment, net (Note 5) 213,616 255,318
Software license (Notes 4 and 12) - 2,996,495
Equity investment in unconsolidated affiliate (Notes 6 and 12) - 324,800
Security deposits 85,638 101,300
-------------- --------------
$ 506,207 $ 4,267,366
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable - affiliate (Notes 3 and 12) $ - $ 25,842
Accrued expenses (Note 7) 131,329 228,199
-------------- --------------
Total current liabilities 131,329 254,041
Commitments (Note 14)
Redeemable ordinary shares (Note 9) 379,400 -
Shareholders' equity (Note 8):
Preferred shares, $.0001 par value:
Authorized - 1,000,000 shares; none issued
Ordinary shares, $.0001 par value:
Authorized - 50,000,000 shares
Issued and outstanding - 36,622,644 shares at
June 30, 2000 and 1999 3,663 3,663
Additional paid-in capital 8,721,499 8,721,499
Accumulated deficit (8,729,684) (4,711,837)
-------------- --------------
Total shareholders' equity (deficit) (4,522) 4,013,325
-------------- --------------
$ 506,207 $ 4,267,366
============== ==============
</TABLE>
See accompanying notes.
F-2
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------
2000 1999 1998
--------------- -------------- -----------
<S> <C> <C> <C>
Casino revenue $ 117,845 $ 211,658 $ -
--------------- -------------- -----------
Expenses:
Professional fees 162,852 455,461 628,649
Development costs 79,543 433,042 396,934
Selling, general and administrative 520,485 911,305 112,551
Depreciation and amortization 77,554 65,521 33,424
Litigation settlement (Note 12) 3,308,795 - -
--------------- -------------- -----------
Total expenses 4,149,229 1,865,329 1,171,558
--------------- -------------- -----------
Operating loss (4,031,384) (1,653,671) (1,171,558)
Other income (expense):
Equity in loss of unconsolidated affiliate
(Note 6) - (15,000) -
Interest income 13,537 47,075 8,049
--------------- -------------- -----------
Net other income 13,537 32,075 8,049
--------------- -------------- -----------
Net loss $ (4,017,847) $ (1,621,596) $(1,163,509)
=============== ============== ===========
Basic and diluted loss per share $ (.11) $ (.06) $ (.07)
=============== ============== ===========
Weighted average number of shares 36,622,644 29,344,921 17,415,461
=============== ============== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity (Deficit)
<TABLE>
<CAPTION>
Total
Ordinary Shares Additional Shareholders'
-------------------------- Paid-in Accumulated Equity
Shares Amount Capital Deficit (Deficit)
------------ ------ ------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1997 15,812,500 $ 1,581 $ 1,980,104 $ (1,926,732) $ 54,953
Issuance of ordinary shares 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 ordinary shares 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 ordinary shares 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 ordinary shares 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 ordinary shares to
consultants as compensation
for development costs - - 51,530 - 51,530
------------ --------- ------------- -------------- -------------
Totals carried forward 18,321,774 $ 1,832 $ 2,935,559 $ (1,926,732) $ 1,010,659
------------ --------- ------------- -------------- -------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Total
Ordinary Shares Additional Shareholders'
-------------------------- Paid-in Accumulated Equity
Shares Amount Capital Deficit (Deficit)
------------ ------ ------------- ------------------ -------------
<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 ordinary shares in
January 1998, in connection
with exercise of stock options
at $.05 per share 30,000 3 1,497 - 1,500
Issuance of ordinary shares in
February 1998, in connection
with exercise of stock options
at $.05 per share 27,000 2 1,348 - 1,350
Issuance of ordinary shares in May
1998, at $.50 per share, less costs
of $15,936 437,000 44 202,520 - 202,564
Issuance of ordinary shares in May
1998, at $.40 per share, less
costs of $14,441 445,500 45 163,714 - 163,759
Issuance of ordinary shares 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 ordinary shares 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>
See accompanying notes.
F-5
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Total
Ordinary Shares Additional Shareholders'
-------------------------- Paid-in Accumulated Equity
Shares Amount Capital Deficit (Deficit)
------------ ------ ------------- ------------------ -------------
<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 ordinary shares in July
1998, at $.50 per share, less costs
of $750 30,000 3 14,247 - 14,250
Issuance of ordinary shares in August
1998, at $.40 per share, less costs
of $100 5,000 1 1,899 - 1,900
Issuance of ordinary shares in August
and September 1998, at $.2580645
per share, less costs of $144,077 7,967,000 797 1,911,126 - 1,911,923
Issuance of ordinary shares in September
1998, as a fee in connection
with the August and September
1998 issuance of ordinary shares
(fair value $.39 per share,
$362,454) 929,370 93 (93) - -
Options granted in December 1998
for the purchase of 150,000
ordinary shares for services
provided through June 30, 1999 - - 42,807 - 42,807
Issuance of ordinary shares in February
1999 in connection with exercise of
stock options at $.05 per share 170,000 17 8,483 - 8,500
Issuance of ordinary shares in March
1999 in connection with purchase
of a software license and related
fees at fair value ($.453125 per
share) 6,500,000 650 2,944,663 - 2,945,313
------------ --------- ------------- -------------- -------------
Totals carried forward 35,262,644 $ 3,527 $ 8,372,027 $ (3,090,241) $ 5,285,313
------------ --------- ------------- -------------- -------------
</TABLE>
See accompanying notes.
F-6
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity (Deficit) (Concluded)
<TABLE>
<CAPTION>
Total
Ordinary Shares Additional Shareholders'
-------------------------- Paid-in Accumulated Equity
Shares Amount Capital Deficit (Deficit)
------------ ------ ------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
Totals brought forward 35,262,644 $ 3,527 $ 8,372,027 $ (3,090,241) $ 5,285,313
Issuance of ordinary shares in March
1999 in connection with exercise
of stock options at $.05 per share 110,000 11 5,489 - 5,500
Options granted in March 1999 for
the purchase of 150,000 ordinary
shares for services provided through
June 30, 1999 - - 39,460 - 39,460
Issuance of ordinary shares in June
1999 with exercise of options at
$.05 per share 1,250,000 125 62,375 - 62,500
Current year amortization of cost
of options granted in prior
periods - - 242,148 - 242,148
Net loss, June 30, 1999 - - - (1,621,596) (1,621,596)
------------ --------- ------------- -------------- -------------
Balance at June 30, 1999 36,622,644 3,663 8,721,499 (4,711,837) 4,013,325
Net loss, June 30, 2000 - - - (4,017,847) (4,017,847)
------------ --------- ------------- -------------- -------------
Balance at June 30, 2000 36,622,644 $ 3,663 $ 8,721,499 $ (8,729,684) $ (4,522)
============ ========= ============= ============== =============
</TABLE>
See accompanying notes.
F-7
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------------------------
2000 1999 1998
------------- -------------- -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (4,017,847) $ (1,621,596) $ (1,163,509)
Adjustments to reconcile net loss to net cash used
in operating activities:
Write-off of software license 2,996,495 - -
Write-off of investment in unconsolidated affiliate 324,800 - -
Settlement of liability to Cyberstation St. Kitts
Limited (12,500) - -
Depreciation and amortization 77,554 65,521 33,424
Equity in loss of unconsolidated affiliate - 15,000 -
Development costs paid through the issuance of
ordinary shares and granting of stock options - 242,148 175,827
Redeemable ordinary shares due to employees
as compensation 109,400 - -
Options granted for consulting costs - 82,267 -
Change in assets and liabilities:
Prepaid expenses and other current assets 47,167 90,777 (149,062)
Accounts payable - affiliate (13,342) (27,860) 53,702
Accrued expenses (96,870) (36,175) 208,329
------------- -------------- -------------
Net cash used in operating activities (585,143) (1,189,918) (841,289)
------------- -------------- -------------
Cash flows from investing activities:
Proceeds from (payments of) security deposits 15,662 (26,300) (75,000)
Purchase of property and equipment (35,852) (78,429) (275,834)
Equity investment in unconsolidated affiliate - (339,800) -
Cash paid for software license - (51,182) -
------------- -------------- -------------
Net cash used in investing activities (20,190) (495,711) (350,834)
------------- -------------- -------------
Cash flows from financing activities:
Stock subscriptions receivable - 21,350 -
Net proceeds from issuance of ordinary shares - 2,004,573 1,271,999
Net proceeds from redeemable ordinary shares 270,000 - -
Deferred offering costs - 6,795 (6,795)
------------- -------------- -------------
Net cash provided by financing activities 270,000 2,032,718 1,265,204
------------- -------------- -------------
Net increase (decrease) in cash (335,333) 347,089 73,081
Cash, beginning of year 529,308 182,219 109,138
------------- -------------- -------------
Cash, end of year $ 193,975 $ 529,308 $ 182,219
============= ============== =============
Supplemental Schedule of Non-Cash Investing and Financing Activities
Ordinary shares issued in connection with raising of
capital $ - $ 362,454 $ 212,500
============= ============== =============
Receivable from shareholders in connection with
exercise of stock options $ - $ - $ 21,350
============= ============== =============
Ordinary shares issued for a software license $ - $ 2,945,313 $ -
============= ============== =============
</TABLE>
See accompanying notes.
F-8
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - The Company
The consolidated financial statements include the accounts of
PlayStar Wyoming Holding Corp. ("Playstar") and its wholly-owned subsidiaries,
PlayStar Limited (a Jersey, Channel Islands corporation), Players Limited (an
Antigua corporation) ("Players") and Playstar Casino Limited ("Playstar Casino")
(an Antigua corporation) (collectively the "Company"). All intercompany accounts
and transactions have been eliminated in consolidation.
The Company, through its subsidiaries, operates an on-line gaming
service operating interactive, software-based games of chance, accessible
world-wide through the Internet. The Company also intends to license its
software and enter into strategic relationships with gaming and sports book
companies. The Company had been in the development stage since its inception on
October 3, 1996 through June 30, 1999.
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
became an Antigua corporation. 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. The financial statements give effect for the conversion of one
common share to one ordinary share for all periods presented.
On March 12, 2000, the Company suspended its gaming operations in
order to make software modifications and upgrades. On July 11, 2000, the Company
signed a letter of intent (see Note 15) with a software company to have them
develop a new Shockwave software casino module in place of upgrading the old
Java based software the Company had been using. The Company expects the new
software to be implemented and fully operational sometime in December 2000.
F-9
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles in the United States.
Use of Estimates
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes gaming revenue in accordance with industry
practice. Casino revenue is the net win from gaming activities and is net of
accruals for progressive jackpots. Promotional allowances are classified as
expenses on the accompanying consolidated statements of operations. The cost of
such promotional allowances for the years ended June 30, 2000 and 1999 was
nominal.
Advertising and Promotion Costs
Advertising and promotion costs are charged to operations during
the period in which they are incurred. For the years ended June 30, 1999 and
2000, advertising expenses were approximately $15,000 and $92,000, respectively.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is
computed by the straight-line method over seven years for furniture and five
years for equipment and automobiles. Leasehold improvements are amortized over
the lesser of their estimated useful life or the remaining term of the lease
when acquired. Additions and betterments are capitalized, and repairs and
maintenance are charged to operations in the period incurred.
Reclassifications
Certain reclassifications have been made to the 1999 and 1998
financial statements to conform to the 2000 presentation.
F-10
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 2 - Summary of Significant Accounting Policies (Continued)
Long-Lived Assets
In accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," ("SFAS No. 121"), long-lived assets used in
operations are evaluated for possible impairment by reviewing undiscounted
expected future cash flows. The carrying value of a long-lived asset is
considered impaired if the sum of the undiscounted expected future cash flows is
less than the carrying amount of that asset. In that event, a loss is recognized
based on the amount by which the carrying value exceeds the undiscounted
expected future cash flows of the long-lived assets. Based on management's
estimate of future cash flows, losses due to impairment of long-lived assets are
not material in any period presented.
Fair Value of Financial Instruments
The Company applies the provisions of Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments" ("SFAS No. 107"). SFAS No. 107 requires all entities to disclose
the fair value of financial instruments, both assets and liabilities recognized
and not recognized on the balance sheet, for which it is practicable to estimate
fair value. SFAS No. 107 defines fair value of a financial instrument as the
amount at which the instrument could be exchanged in a current transaction
between willing parties. At June 30, 2000 and 1999, management believes the fair
value of all financial instruments approximated carrying value.
Foreign Currency Translation
The accounts of Playstar Casino are translated using a fixed
exchange rate for assets, liabilities and results of operations. The local
currency for Playstar Casino is the functional currency. Assets, liabilities and
revenue and expenses of Playstar Casino are all translated at the current
conversion rate as the Antigua currency is, in effect, "linked" to the U.S.
dollar and the exchange rate does not fluctuate.
Preopening Costs
The Company has adopted Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities", which requires entities to expense start-up
costs and organization costs as incurred and is effective for all fiscal years
beginning after December 15, 1998. The adoption of the statement did not have a
material effect on the Company's financial position.
F-11
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 2 - Summary of Significant Accounting Policies (Continued)
Software Costs
The Company has adopted Statement of Position 98-1, "Accounting for
the Cost of Software Developed for Internal Use", which requires that all
qualifying software costs developed for internal use incurred in the application
and development stage be capitalized and is effective for all fiscal years
beginning after December 15, 1998.
Computation of Net Loss per Ordinary Share
The Company follows 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 ordinary shares
outstanding for the period. Diluted net income (loss) per share is computed by
dividing net income (loss) by the weighted average number of ordinary shares
outstanding for the period, adjusted for the dilutive effect of ordinary share
equivalents, consisting of dilutive options and warrants, using the treasury
stock method.
For all periods presented, 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 2,768,000 at June 30, 2000, could have a dilutive effect on future
earnings per share calculations in those periods.
Stock-Based Compensation
The Company follows SFAS No. 123, "Accounting for Stock-Based
Compensation". The provisions of SFAS No. 123 allow companies to either expense
the estimated fair value of stock options or to continue to follow the intrinsic
value method set forth in APB Opinion 25, "Accounting for Stock Issued to
Employees" ("APB 25") but disclose the pro forma effects on net income (loss)
had the fair value of the options been expensed. The Company has elected to
continue to apply APB 25 in accounting for its stock option incentive plans (see
Note 8).
F-12
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 3 - Related Party Transactions
Dreamplay
From inception until December 1998, the Company retained the
services of Dreamplay Research Corp. ("Dreamplay"), a Canadian corporation that
was wholly-owned by a significant shareholder of the Company, who was the
Company's president through September 1998 and a director through March 1998.
Dreamplay developed the Company's software and internet site (used through March
12, 2000), provided consulting services and purchased hardware and vendor
supplied software applications. The relationship was terminated in December 1998
and all options granted for future development became fully vested (see Note 8).
The following table summarizes transactions between the Company and Dreamplay
for the years ended June 30, 2000, 1999 and 1998:
<TABLE>
<CAPTION>
2000 1999 1998
------------ ------------ ---------
<S> <C> <C> <C>
Charges for development costs and support
and maintenance $ - $ 244,136 $ 387,409
Charges for purchases of computer equipment
and software - 56,662 256,778
Due to Dreamplay for insurance costs paid on
Playstar's behalf - - 6,004
Credit against research and development costs - - (171,489)
------------ ------------ ------------
Total $ - $ 300,798 $ 478,702
============ ============ ============
Amounts paid to Dreamplay $ - $ 354,500 $ 425,000
============ ============ ============
</TABLE>
Cyberstation
On March 25, 1999, the Company acquired 40% of the common stock of
Cyberstation Computers & Support, Inc. ("Cyberstation") for Canadian $500,000
($339,800).
The Company entered into a management services agreement with
Cyberstation St. Kitts Limited with an original expiration date of June 30,
2002. Cyberstation was to receive a base management fee of Canadian $160,000
(approximately $109,000 at June 30, 1999) per annum and a payment equal to 15%
of the pre-tax profits of Players and 10% of the pre-tax profits of Playstar, in
excess of certain thresholds as defined in the management agreement of Playstar.
For the year ended June 30, 1999, the Company paid Cyberstation St. Kitts
Limited approximately $25,000 in management fees and $42,000 for support and
maintenance service rendered prior to March 25, 1999 (see Note 4). At June 30,
1999, approximately $26,000 was accrued for management fees and costs incurred
by Cyberstation on the Company's behalf.
F-13
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 3 - Related Party Transactions (Continued)
Cyberstation (Continued)
During 2000, the Company entered into settlement talks with
Cyberstation and Cyberstation St. Kitts Limited after disputes emerged in
October 1999 between the parties over the management services agreement. In
March 2000, the Company discontinued its relationship with Cyberstation and the
parties reached a settlement in September 2000 (see Note 12). The Company paid
Cyberstation St. Kitts approximately $13,500 of the $26,000 owed at June 30,
1999. The remaining $12,500 was waived as part of the settlement in September
2000 (see Note 12).
Note 4 - Software License
On March 25, 1999, the Company purchased from Cyberstation an
irrevocable, perpetual and royalty-free software license for exclusive use in
designated countries and geographic areas which would provide credit card
processing services. The Company issued 5,000,000 ordinary shares to
Cyberstation and 1,500,000 ordinary shares to certain shareholders of the
Company as fees in connection with this transaction.
The Company also received, as part of the transaction, the
following:
1. 50% ownership in the common stock of NetEngine St. Kitts
Limited, an inactive corporation ("NetEngine").
2. An option to purchase for $100, at the termination of the
management services agreement, 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 inactive corporation after December 1999) for
$100. Dreamplay served as the Company's software developer until
December 29, 1998.
In addition, the Company granted Cyberstation three options to
acquire an aggregate of 5,000,000 ordinary shares at exercise prices ranging
from $.25 to $1.00 per share. During the year ended June 30, 2000, these options
were cancelled as a result of the litigation settlement (see Note 12).
F-14
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 4 - Software License (Continued)
The entire purchase price of the above transaction had been
allocated to the software license. The following is a summary of the cost of the
software license:
<TABLE>
<S> <C>
5,000,000 shares issued to Cyberstation
at fair market value of $.453125 $ 2,265,625
1,500,000 shares as finders fees issued
to certain shareholders of the Company
at fair market value of $.453125 679,688
Other related costs 51,182
--------------
$ 2,996,495
==============
</TABLE>
During the year ended June 30, 2000, the Company terminated this
software license as the result of a litigation settlement (see Note 12). The
licensed software was never placed into service.
Note 5 - Property and Equipment
At June 30, property and equipment consists of:
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Computer equipment and software $ 334,756 $ 321,208
Furniture and fixtures 19,848 19,105
Leasehold improvements 21,561 -
Automobiles 13,950 13,950
------------ ------------
390,115 354,263
Less: Accumulated depreciation and
amortization 176,499 98,945
------------ ------------
$ 213,616 $ 255,318
============ ============
</TABLE>
Note 6 - Equity Investment in Unconsolidated Affiliate
The Company's loss on its 40% investment in Cyberstation (see Note
3) for the year ended June 30, 1999 was $15,000. During the year ended June 30,
2000, the Company, as part of a litigation settlement, surrendered all of its
shares of Cyberstation (see Note 12).
F-15
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 6 - Equity Investment in Unconsolidated Affiliate (Continued)
In 1999, the investment in Cyberstation was accounted for by the
equity method. The following is a summary of condensed unaudited financial
information related to Cyberstation at May 31, 1999 and for the year then ended:
<TABLE>
<S> <C>
Current assets $ 247,000
Other assets 6,000
-------------
Total assets $ 253,000
=============
Current liabilities $ 143,000
Shareholders' equity 110,000
-------------
Total liabilities and shareholders' equity $ 253,000
=============
Net revenue $ 138,000
=============
Gross profit $ 4,000
=============
Net loss $ (222,000)
=============
</TABLE>
Note 7 - Accrued Expenses
At June 30, accrued expenses consist of the following:
<TABLE>
<CAPTION>
2000 1999
------------- ---------------
<S> <C> <C>
Accrued professional fees $ 92,141 $ 144,675
Accrued payroll - 12,400
Accrued advertising - 32,500
Customer deposits 12,318 11,985
Other accrued expenses 26,870 26,639
------------- --------------
$ 131,329 $ 228,199
============= ==============
</TABLE>
Note 8 - Shareholders' Equity
Ordinary Shares
In November 1997, the Company completed an offering of 1,250,000
ordinary shares 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, an additional 250,000 shares were issued
to finders as compensation for their assistance in connection with the sale of
the 1,250,000 shares.
F-16
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 8 - Shareholders' Equity (Continued)
Ordinary Shares (Continued)
In November 1997, the Company commenced an offering of ordinary
shares under Regulation S promulgated under the Securities Act. In December
1997, the Company sold 724,274 ordinary shares 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 an
additional 285,000 ordinary shares 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 January, February and May 1998, the Company issued 457,000
ordinary shares upon the exercise of options with a $.05 exercise price
resulting in approximately $23,000 of proceeds.
In May 1998, the Company sold 437,000 ordinary shares at $0.50 per
share and 445,500 ordinary shares 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 ordinary shares at prices ranging from
$.2580645 to $.50 per share, realizing total net proceeds of approximately
$1,928,000. Additionally, the Company granted 929,370 shares as issuance costs
and 6,500,000 of warrants to purchase ordinary shares of the Company. 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 expired in May 2000.
In February, March and June 1999, the Company issued 1,530,000
ordinary shares upon the exercise of options with a $.05 exercise price,
resulting in approximately $77,000 of proceeds.
In March 1999, the Company issued 6,500,000 ordinary shares for the
purchase of a software license and related fees. The fair value of these shares
on the date of grant was $.453125 per share or $2,945,313.
F-17
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 8 - Shareholders' Equity (Continued)
Stock Options and Warrants
On October 9, 1996, the Company adopted a stock option plan
authorizing the granting of options to purchase up to 10,000,000 ordinary
shares. The stock option plan permits the granting of options to officers,
employees and consultants of the Company and its subsidiaries. Generally, the
terms of the options are to be set by the Company's board of directors.
The Company has elected to adopt the disclosure-only provision of
SFAS No. 123 and will continue to apply APB No. 25 to account for stock options.
Had compensation expense been determined as provided in SFAS No. 123, the pro
forma effect would have been:
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------
2000 1999 1998
--------------- --------------- ----------------
<S> <C> <C> <C>
Net loss - as reported $ (4,017,847) $ (1,621,596) $ (1,163,509)
Net loss - pro forma (4,017,847) (1,762,046) (1,183,752)
Loss per share - as reported (.11) (.06) (.07)
Loss per share - pro forma (.11) (.06) (.07)
</TABLE>
The fair value of each option and warrant granted is estimated on
the date of grant using the Black-Scholes option pricing model with the
following assumptions:
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------
2000 1999 1998
--------------- --------------- ----------------
<S> <C> <C> <C>
Expected dividend yield N/A 0% 0%
Expected volatility N/A 148% 142%
Risk-free interest rate N/A 4% 6%
Expected lives in years N/A 1-2 5
</TABLE>
N/A - Not Applicable, no options or warrants were granted during
the year ended June 30, 2000.
F-18
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 8 - Shareholders' Equity (Continued)
Stock Options and Warrants (Continued)
The table below summarizes the activity for the years ended June
30, 2000, 1999 and 1998:
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------------------------------------
2000 1999 1998
-------------------------- ------------------------- --------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 14,538,000 $ .65 4,268,000 $ .14 4,220,000 $ .05
Granted (including 6,500,000 of
warrants in 1999) - - 11,800,000 .76 865,000 .46
Exercised - - (1,530,000) .05 (457,000) .05
Cancelled (11,650,000) .77 - - (360,000) .05
Outstanding at the end of year 2,888,000 .20 14,538,000 .65 4,268,000 .14
Exercisable at the end of year 2,888,000 .20 14,538,000 .65 4,268,000 .14
Weighted average fair value
granted during the year - - - .16 - .45
Weighted average remaining
contractual rights (months) - 23 - 23 - 86
</TABLE>
Exercise prices for options and warrants outstanding as of June 30,
2000 ranged from $.05 to $.75.
F-19
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 8 - Shareholders' Equity (Continued)
Stock Options and Warrants (Continued)
Additional stock option and warrant information is presented below:
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------
2000 1999 1998
------------- ------------- --------------
<S> <C> <C> <C>
Options granted:
Employees and former employees
of the Company and Dreamplay - - 250,000
Consultants - 300,000 615,000
Affiliates - 5,000,000 -
Investors (warrants) - 6,500,000 -
------------- ------------- -------------
- 11,800,000 865,000
============= ============= =============
Options cancelled:
Employees and former employees
of the Company and Dreamplay - - 10,000
Consultants 150,000 - 350,000
Affiliates 5,000,000 - -
Investors 6,500,000 - -
------------- ------------- -------------
11,650,000 - 360,000
============= ============= =============
Options exercised:
Employees and former employees
of the Company and Dreamplay - 1,020,000 30,000
Consultants - 510,000 427,000
Affiliates - - -
Investors - - -
------------- ------------- -------------
- 1,530,000 457,000
============= ============= =============
Options outstanding:
Employees and former employees
of the Company and Dreamplay 2,238,000 2,238,000 3,258,000
Consultants 650,000 800,000 1,010,000
Affiliates - 5,000,000 -
Investors (warrants) - 6,500,000 -
------------- ------------- -------------
2,888,000 14,538,000 4,268,000
============= ============= =============
</TABLE>
F-20
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 8 - Shareholders' Equity (Continued)
Stock Options and Warrants (Continued)
In December 1998, the Company severed its relationship with
Dreamplay. Accordingly, all options previously granted to Dreamplay became fully
vested. This resulted in approximately $242,000 being charged to development
costs for the year ended June 30, 1999.
Note 9 - Redeemable Ordinary Shares
In April 2000, the Company received $300,000 for 3,000,000 ordinary
shares at a price of $.10 per share. These shares were issued subsequent to June
30, 2000. In connection with the above, the Company paid a shareholder of the
Company $30,000 as a finders fee.
In June 2000, the Company recorded $109,400 as compensation expense
for 1,000,000 ordinary shares (fair value $.1094 per share) due to two employees
of the Company for services rendered through June 30, 2000. These shares were
issued subsequent to June 30, 2000.
Note 10 - Income Taxes
The following table reconciles the provision for income taxes with
the federal statutory rate for the periods presented:
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------------------
2000 1999 1998
--------------- ------------- --------------
<S> <C> <C> <C>
Federal income tax benefit at
statutory rate $ (1,366,000) $ (551,000) $ (395,000)
Foreign loss not subject to
federal income taxes 1,366,000 369,000 -
Valuation allowance - 182,000 395,000
--------------- ------------- --------------
Provision for income taxes $ - $ - $ -
=============== ============= ==============
</TABLE>
Deferred tax liabilities and assets are determined based on the
difference between financial statement and tax bases of assets and liabilities
using enacted tax rates in effect for the year in which differences are expected
to reverse. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
F-21
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 10 - Income Taxes (Continued)
The components of deferred tax assets are as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------------------
2000 1999 1998
--------------- -------------- --------------
<S> <C> <C> <C>
Asset:
Net operating loss
carryforwards $ 1,232,000 $ 1,232,000 $ 1,050,000
Less: Deferred tax asset
valuation allowance (1,232,000) (1,232,000) (1,050,000)
--------------- -------------- --------------
$ - $ - $ -
=============== ============== ==============
</TABLE>
The Company's net operating loss carryforwards for United States
federal income tax reporting purposes of approximately $3,623,000 expire through
the year 2019. The valuation allowance increased by $182,000 during the year
ended June 30, 1999.
Management of the Company believes that the reorganization
consummated in September 1998 will be, in part, a taxable transaction to the
Company in which a portion of the gain realized on the transaction for federal
income tax purposes will be potentially subject to United States federal income
taxes. However, based on the appraised fair market value of the assets of the
Company as of September 4, 1998, and the net operating loss carryforward to the
taxable year that will include the reorganization, the Company believes a
reasonable position can be taken that the United States federal income tax
imposed on it as a result of the consummation of the reorganization will not be
material. Nevertheless, there is a risk that it may be ultimately determined
that any gain realized by the Company from the consummation of the
reorganization would be taxable in full for United States federal income tax
purposes.
F-22
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 11 - Possible Legislation in the United States Congress
The Company's operations are subject to various state and federal
regulations. Because electronic commerce in general, and most of the Company's
products in particular, are so new, the application of many of these regulations
is uncertain and difficult to interpret. The agencies responsible for
interpreting and enforcing these regulations could amend those regulations or
issue new interpretations of existing regulations. It is also possible that new
legislation may be passed that imposes additional burdens. Any changes could
lead to increased operating costs and could also reduce the convenience and
functionality of the Company's products or services, possibly resulting in
reduced market access and acceptance. It is possible that new laws and
regulations may be enacted with respect to the Internet, covering issues like
user privacy, pricing, content, characteristics and quality of products and
services. The adoption of any of these laws or regulations may decrease the
growth of the Internet, which could in turn decrease the demand for the
Company's products or services and increase the cost of doing business or could
otherwise have a material adverse effect on the Company's business, financial
condition or operating results.
In particular, it is possible that the U.S. Congress will enact
federal legislation prohibiting gaming on the Internet. If enacted, such
legislation could have a significant effect on the Company's on-line gaming
operations. For example, if a federal law prohibiting Internet gaming passes,
the Company's gaming subsidiaries might be forced to cease all marketing and
promotional activities in the United States to ensure that no solicitation of
United States citizens occurs. Furthermore, such legislation could be
interpreted to give federal and state law enforcement officials the ability to
obtain injunctions preventing third parties operating in the United States from
providing products or services to the Company.
Note 12 - Litigation Settlement
In October 1999, the Company discontinued payments to Cyberstation
St. Kitts Limited after disagreements over cost sharing, management fees and
technical support surfaced. The Company also failed to file a registration
statement for the resale of the shares issued to Cyberstation for the software
license (see Note 4). In March 2000, the Company discontinued its relationship
with Cyberstation and Cyberstation St. Kitts Limited and entered in settlement
talks. In September 2000, the parties agreed to a settlement that cancelled all
contracts between the parties without any further cash payments, including
intercompany balances outstanding at that time. Cyberstation and Cyberstation
St. Kitts Limited agreed to return all of the Company's computer hardware in
their possession and the Company returned its shares in Cyberstation and gave up
its rights to the software license purchased from them. The 5,000,000 options
that were granted to Cyberstation on March 25, 1999 were cancelled.
F-23
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 12 - Litigation Settlement (Continued)
The following comprises the litigation settlement loss recorded by
the Company during the year ended June 30, 2000:
<TABLE>
<S> <C>
Software license returned to Cyberstation $ 2,996,495
Write-off of investment in Cyberstation 324,800
Settlement of liability to Cyberstation
St. Kitts Limited (12,500)
--------------
$ 3,308,795
==============
</TABLE>
Note 13 - Concentration of Credit Risk
The Company maintains cash at several banks. The majority of cash
is at an Antiguan bank and is not insured.
Note 14 - Commitments
Lease
The Company leases office space in Antigua which expires in 2004.
The following is a schedule of approximate future minimum lease
payments for the operating lease at June 30, 2000:
<TABLE>
<CAPTION>
Year Ending
June 30,
-------------
<S> <C>
2001 $ 60,000
2002 60,000
2003 65,000
2004 69,000
--------
$254,000
========
</TABLE>
Rent expense charged to operations for the years ended June 30,
2000, 1999 and 1998 was approximately $18,000, $43,000 and $14,000,
respectively.
F-24
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 14 - Commitments (Continued)
Consulting Agreement
On July 15, 2000, the Company entered into a three year agreement
with a gaming consultant. This contract may be cancelled by the Company after
one year if the Company's revenues are not at least $400,000. The contract
includes 1,000,000 ordinary shares to be issued for signing the contract and
provides for an additional 250,000 shares for every $250,000 in net revenue, as
defined in the agreement, earned by the Company over the contract period, up to
4,000,000 shares. In addition, the consultant will receive monthly compensation
payments beginning on August 15, 2000. The following is a schedule of annual
future compensation payments over the life of the contract:
<TABLE>
<CAPTION>
Year Ending
June 30,
-----------
<S> <C>
2001 $ 65,500
2002 120,500
2003 177,000
2004 15,000
--------
$378,000
========
</TABLE>
Note 15 - Subsequent Events
Convertible Notes Payable
In September 2000, the Company received $236,000 in exchange for
non-interest bearing notes convertible into ordinary shares (after the Company's
shareholders have authorized additional ordinary shares and modified the
articles of incorporation accordingly) at a conversion price of $.05 per share.
New Casino Module
In July 2000, the Company signed a letter of intent with Raymond
Gertner and Howard Mann, in trust (Capital IT) to obtain a fully implemented
Shockwave casino software module to be used and licensed by the Company. This
module, expected to be operational by the end of December 2000, will replace the
Java based casino software created by Dreamplay. The Company will pay Capital IT
Canadian $115,000 ($77,000), reimburse them for certain advertising expenses and
costs incurred in creating the module, and issue a total of 1,500,000 ordinary
shares (after the Company's shareholders have authorized additional ordinary
shares and modified the articles of incorporation accordingly) once the casino
has been implemented. The Company is currently in talks with Capital IT about
creating an internet sports wagering module.
F-25
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 15 - Subsequent Events (Continued)
New Casino Module (Continued)
Under the letter of intent, Capital IT is entitled to 15% of the
Company's net revenue win generated by those licenses arranged by Capital IT.
They will serve as the exclusive marketing agent of the Company through February
2002, provided the Company achieves certain net revenue thresholds defined in
the letter of intent. As long as they remain the Company's exclusive marketing
agent, the Company will pay Capital IT 50% of the license fees earned by the
Company. For eighteen months beginning on August 1, 2000, the Company will issue
Capital IT one ordinary share (after the Company's shareholders have authorized
additional ordinary shares and modified the articles of incorporation) for each
$3 of net revenue generated through sales of the licenses, up to 1,500,000
shares.
Sports Pool Agreement
In August 2000, the Company entered into an agreement with SMP
Data, Inc. ("SMP"), a company which will be providing the Company with a sports
pool software program for licensing purposes only. The Company will share all
future revenue from licensing this software equally with SMP. SMP has the option
through August 2001 of receiving ordinary shares of the Company (after the
Company's shareholders have authorized additional ordinary shares and modified
the articles of incorporation) for $.10 per share in lieu of cash for its share
of licensing revenue up to 2,000,000 shares.
Casino License
In October 2000, the Company signed a letter of intent with
Richmond Investments Limited for the Company to license and implement an on-line
casino and sports wagering website on behalf of MagiCorp. Inc. (a consultant of
Richmond Investments Limited) for $75,000. The Company will issue to MagiCorp.
Inc. five year warrants to purchase 625,000 ordinary shares of the Company at
$.12 per share (after the Company's shareholders have authorized additional
ordinary shares and modified the articles of incorporation accordingly). These
warrants will become available to MagiCorp. Inc. after it has made the first
$25,000 payment (due when final agreement is executed). MagiCorp. Inc. will pay
the Company additional fees for each game that is customized and for each
language the game offered.
Once the casino is operating for MagiCorp. Inc., the Company will
receive monthly support fees. The Company will incur the hosting, internet and
credit card processing charges and retain 20% of monthly net revenue up to
$500,000 and 15% on amounts thereafter.
F-26
<PAGE>
PLAYSTAR WYOMING HOLDING CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 15 - Subsequent Events (Continued)
Internet Sports Propositions Website
In November 2000, the Company signed a letter of intent with Select
Investments, doing business as ABC Offshore, Inc. ("ABC"), pursuant to which the
Company will provide and implement Internet sports proposition software and
license a casino package for $350,000, whereas ABC retains all propriety rights
to the sports proposition software created. The Company will receive 50% of the
revenue generated from licensing of the sports proposition software. The Company
shall receive 80% of the net win generated solely from the licensed casino
package, as defined in the letter of intent.
On November 21, 2000, the Company received $100,000 in exchange for
non-interest bearing notes convertible into ordinary shares (after the Company's
shareholders have authorized additional ordinary shares and modified the
articles of incorporation) at a conversion price of $.10 per share. These shares
include 2,000,000 detachable warrants to purchase ordinary shares of the Company
at $.15 for two years.
F-27
