2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT TO THE
1934 ACT REPORTING REQUIREMENTS
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2000 Commission
File No. 000-29477
PLAYANDWIN, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-039116
(State of organization) (I.R.S. Employer Identification No.)
7050 Weston Rd., Vaughn, Ontario, Canada L4L 8G7
(Address of principal executive offices)
Registrant's telephone number, including area code (905) 850-3940
Check whether the issuer (1) filed all reports required to
be file by Section 13 or 15(d) of the Exchange Act during
the past 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X
As of August 31, 2000, there were 7,802,857 shares of Class
A common stock outstanding and 3,486,260 shares of Class B
common stock outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Consolidated Balance Sheet as at August 31, 2000
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Current
Prepaid expenses and other current
assets $ 312,038
Due from related company -
----------
312,038
Investment 1,036
Furniture And Equipment, net 16,344
Intellectual Property 39,766
----------
$ 369,184
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Bank indebtedness $ 2,607
Accounts payable and accrued liabilities 152,665
Loans payable - stockholders 6,679
Convertible note payable 84,238
----------
246,189
----------
STOCKHOLDERS' EQUITY
Common Stock - $0.001 par
Class A - 50,000,000 shares authorized;
7,802,857and 3,486,260 shares issued and
outstanding 7,803
Class B - 3,486,260 shares authorized,
issued and outstanding 3,487
Additional paid-in capital 1,911,532
Accumulated foreign currency
translation adjustment (11,773)
Deficit accumulated during the
development stage (1,788,054)
-----------
Total Stockholders' Equity 122,995
-----------
Total Liabilities And Stockholders' Equity $ 369,184
===========
</TABLE>
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Total From
For The Three Months Ended For The Six Months Ended Inception To
August 31, August 31, August 31, August 31, August 31,
2000 1999 2000 1999 2000
Revenues $ - $ - $ - $ - $ -
General And Administrative 353,644 3,556 635,594 16,487 1,788,054
--------- --------- ---------- ---------- -----------
Loss From Operations Before Income
Taxes (353,644) (3,556) (635,594) (16,487) (1,788,054)
Provision For Income Taxes - - - - -
--------- --------- ---------- ---------- -----------
Net Loss (353,644) (3,556) (635,594) (16,487) (1,788,054)
Other Comprehensive Loss, net of
tax Foreign currency translation
adjustment (5,250) 2,074 (6,991) (2,285) (11,773)
---------- --------- ---------- ---------- ---------
Comprehensive Loss $(358,894) $ (1,482) $(642,585) $(18,772) $(1,799,827)
========== ========= ========== ========== ============
Loss Per Common Share - basic and
diluted $ (0.05) $ (0.01) $ (0.09) $ (0.01)
========= ========= ========= ==========
Weighted Average Number of Common
Share Outstanding - basic and
diluted 7,736,190 3,486,260 7,539,881 3,486,260
========= ========= ========= ==========
</TABLE>
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Total From
For The Three Months Ended For The Six Months Ended Inception To
Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31,
2000 1999 2000 1999 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(353,644) $(3,556) $(635,594) $(16,487) $(1,788,054)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 52,826 589 105,652 1,196 194,883
Write-off of due from related party - - - - 43,840
Write-off of intellectual property - - - - 86,620
Changes in assets and liabilities
Prepaid expenses and other current
assets 34,858 (2,819) 10,200 (1,196) (13,230)
Accounts payable and accrued expenses (13,725) 13,389 (63,370) 27,395 152,665
--------- --------- ---------- --------- -----------
Net Cash Provided By (Used In) Operating
activities (279,685) 7,603 (583,112) 10,908 (1,323,276)
CASH FLOWS FROM INVESTING ACTIVITY
Purchase of furniture and equipment - - (7,081) - (25,840)
Increase in intellectual property - - - - (126,386)
Increase in investment - - - - (1,036)
Advances to related party - - - - (43,840)
--------- --------- --------- --------- -----------
Net Cash Used In Investing Activity - - (7,081) - (197,102)
--------- --------- --------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in bank overdraft (7,190) (9,677) 2,607 (8,623) 2,607
Issuance of common stock for cash 329,109 - 609,734 - 1,438,627
Increase (decrease) in loans payable -
stockholders (24,712) - (24,712) - 6,679
Increase in convertible note payable - - - - 84,238
--------- --------- --------- --------- -----------
Net Cash Provided By (Used In) Financing
Activities 297,207 (9,677) 587,629 (8,623) 1,532,151
--------- --------- --------- --------- -----------
CHANGE IN FOREIGN CURRENCY TRANSLATION
ADJUSTMENT (5,250) 2,074 (6,991) (2,285) (11,773)
--------- --------- --------- --------- -----------
NET CHANGE IN CASH AND CASH
EQUIVALENTS (12,272) - (9,555) - -
CASH AND CASH EQUIVALENTS, Beginning of
period 12,272 - 9,555 - -
--------- --------- --------- --------- -----------
CASH AND CASH EQUIVALENTS, End of period $ - $ - $ - $ - $ -
========== ========= ========= ========= ===========
</TABLE>
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Total From
For The Three Months Ended For The Six Months Ended Inception To
Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31,
2000 1999 2000 1999 2000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for
Interest $ 2,440 $ - $ 4,880 $ - $ 4,880
======= ======== ======= ======= ========
Income taxes $ - $ - $ - $ - $ -
======= ======== ======= ======= ========
</TABLE>
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulated Deficit
Foreign Accumulated
Common Stock Additional Currency During the Total
Class A Class B Paid-in Translation Development Stockholders'
Shares Amount Shares Amount Capital Adjustment Stage Equity
Balance at February 7,225,000 $7,225 3,486,260 $3,487 $1,302,376 $(4,782) $(1,145,469) $162,837
Shares issued for cash
03/00 at $1.75 per
share 177,857 178 - - 280,447 - - 280,625
Shares issued for cash
O6/00 at $1.00 per
share 400,000 400 - - 371,600 - - 372,000
Offering Costs - - - - (42,891) - - (42,891)
Foreign currency
translation adjustment - - - - - (6,991) - (6,991)
Net loss - - - - - - (642,585) (642,585)
--------- ------ --------- ------ ---------- --------- ------------ ----------
Balance at August 31,
2000 7,802,857 $7,803 3,486,260 $3,487 $1,911,532 $(11,773) $(1,788,054) $122,995
========= ====== ========= ====== ========== ========= ============ ==========
</TABLE>
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements have
been prepared by Playandwin, Inc. (the "Company") pursuant to the
rules and regulations of the Securities and Exchange Commission.
The information furnished herein reflects all adjustments
(consisting of normal recurring accruals and adjustments) which
are, in the opinion of management, necessary to fairly present
the operating results for the respective periods. Certain
information and footnote disclosures normally present in annual
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been omitted
pursuant to such rules and regulations. The results of the six
months ended August 31, 2000 are not necessarily indicative of
the results to be expected for the full year ending February 28,
2000.
NOTE 2 - EARNINGS PER SHARE
In 1997, the Financial Accounting Standard Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." SFAS No. 128 replaced the previously
reported primary and fully diluted earnings per share with basic
and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of
options, warrants, and convertible securities. Diluted earnings
per share is very similar to the previously reported fully
diluted earnings per share. Basic earnings per share is computed
using the weighted-average number of common shares outstanding
during the period. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive.
NOTE 3 - SALE OF SECURITIES
On June 15, 2000, the Company issued 400,000 shares of its common
stock for consideration of $372,000 cash pursuant to Rule 504 of
Regulation D to one investor.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
Management's Discussion and Analysis of Financial Condition
General
The following discussion and analysis should be read in
conjunction with the Company's consolidated financial statements
and related footnotes for the year ended February 29, 2000
included in its Annual Report on form 10 - KSB. The discussion of
results, causes and trends will necessarily continue in the
future.
Results Of Operations
Three Months Ended August 31, 2000
For the three months ended August 31, 2000 and the three months
ended August 31, 1999, the Company had no revenues.
The net loss for the three months ended August 31, 2000 was
353,644 compared to a net loss of $3,556 for the three months
ended August 31, 1999. These losses consisted primarily of
General and Administrative ("G & A") expenses of $300,818 and
$2,967 respectively and amortization expense of $52,826 and $589
respectively. The increase in G & A was primarily due to: i) a
$138,000 increase in professional fees and consulting fees
incurred for ongoing operational activities required by the
Company; ii) a $100,000 increase in product development costs and
iii) a $45,000 increase in management wages. The increase in
amortization expense of $52,000 over 1999 is primarily due to the
amortization of the value of the stock options that were granted
to four advisory board members.
Six Months Ended August 31, 2000
For the six months ended August 31, 2000 and the six months ended
August 31, 1999, the Company had no revenue.
The net loss for the six months ended August 31, 2000 was
$635,594 compared with a net loss of $16,487 for the six months
ended August 31, 1999. These losses consisted primarily of
G & A expenses of $529,942 and $15,291 respectively and
amortization expense of $105,652 and $1,196 respectively. The
increase in G & A was primarily due to: i) a $282,125 increase
in professional fees and consultants hired to maintain the
Company's operations: ii) a $132,000 increase in product
development costs and iii) a $50,000 increase in management
wages. The increase in amortization expense of $106,000
over 1999 is primarily due to the amortization of the
value of the stock options that were granted to four advisory
board members.
Liquidity And Capital Resources
Historically, the Company has not incurred any revenues. The
current period operating cash flow deficit of approximately
$617,000 was funded primarily by $652,625 received from the
issuance of the Company's common stock.
The Company has certain cash requirements to initiate its
business plan. Management has estimated these requirements to be
as follows: i) begin the operations of the Racingo Land Based
operations estimated to be approximately $3,000,000 and ii)
general and administrative costs estimated to be approximately
$750,000. The Company must also arrange for insurance for
guaranteed jackpots. Management has been in discussions with an
insurance carrier and has an estimate cost of $50,000 per $1
million guaranteed.
The Company estimates that the above requirements will be
expended during the fiscal year 2001.The Company has entered into
a "best efforts basis" private placement of its equity securities
with an investment banking firm, Thomson Kernaghan, Inc.,
Toronto, Ontario, to raise the required funds under the
commitments. Thomson Kernaghan Inc. specializes in facilitating
growth capital for emerging companies. The Company is also
pursuing other opportunities within the gaming industry for
financing alternative for Racingo.
Subsequent Events
On September 20, 2000, the Company filed a Certificate of Change
pursuant to NRS 78.207 and 78.209 increasing the Company's
authorized common stock from 50,000,000 shares to 200,000,000
shares. This increase corresponds with the 4:1 forward split
adopted by the Board of Directors.
On September 25, 2000, the Company announced that it had entered
into a Letter of Intent with Penn National Gaming, Inc. to hub
Racingo in the U.S. Under the terms of the Letter of Intent, Penn
National will act as a wagering hub for all hosting and interface
services for Racingo in the United States in respect to Racingo
and Penn National will provide all of the necessary
infrastructure and support required for the operation of Racingo
throughout the U.S. Penn National will collect the total amount
wagered on Racingo by patrons less Racingo winner pay-outs and an
amount equal to 20% of the total wagered on Racingo by patrons.
The Company will continue to make Racingo available to racetracks
("Guest Tracks") throughout the U.S. by contracting with Guest
Tracks in order that they may participate in Racingo.
NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS
This statement includes projections of future results and
"forward-looking statements" as that term is defined in Section
27A of the Securities Act of 1933 as amended (the "Securities
Act"), and Section 21E of the Securities Exchange Act of 1934 as
amended (the "Exchange Act"). All statements that are included in
this Registration Statement, other than statements of historical
fact, are forward-looking statements. Although Management
believes that the expectations reflected in these forward-looking
statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors
that could cause actual results to differ materially from the
expectations are disclosed in this Statement, including, without
limitation, those expectations reflected in forward-looking
statements contained in this Statement.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Company has been threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities.
On June 15, 2000, the Company issued 400,000 shares of its common
stock for consideration of $372,000 cash to one investor, which
was exempt from registration pursuant to Rule 504 of Regulation
D.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
3.1a The exhibits, consisting of the Company's Articles of
Incorporation, are attached to the Company's Amended Form 10-
SB, filed on May 31, 2000. These exhibits are incorporated
by reference to that Form.
3.1b The Company's Certificate of Change Pursuant NRS 78.209 is
attached to this Form 10-QSB
3.2 The exhibits, consisting of the Company's Bylaws, are
attached to the Company's Amended Form 10-SB, filed on May
31, 2000. These exhibits are incorporated by reference to
that Form.
10 Letter of Intent with Penn National is attached to this Form
10-QSB
27 Financial Data Schedule
Reports on Form 8-K:
The Company filed a Form 8-K and an Amended Form 8-K on September
25, 2000 and October 16, 2000, respectively, regarding the
Company's forward split and the corresponding increase in the
authorized capital stock from 50,000,000 to 200,000,000 shares of
common stock.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Playandwin, Inc.
By:/s/ Stewart Garner
Stewart Garner,
President/Secretary/Treasurer
Date: October 24, 2000
