0000933259-99-00003310QSB PLAYSTAR WYOMING HOLDING CORP 1999052419990524171945171901171901 0 0000933259-99-000033 10QSB 2 19990331 19990524 PLAYSTAR WYOMING HOLDING CORP 0001060205 7990 522098787 WY 1231 10QSB 34 000-24929 99633481 60 NEVIS STREET 2ND FL ST JOHNS ANTIGUA WI 2685620073 60 NEVIS STREET 2ND FLOOR ST JOHNS ANTIQUA WI 10QSB 1 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB (Mark One) (X) Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 ( ) For the quarterly period ended March 31, 1998 ( ) Transition report under Section 13 or 15(d) of the Exchange Act For the transition period from _____________ to _________ Commission File Number: 0-22443 PlayStar Wyoming Holding Corp. (Exact Name of Small Business Issuer as Specified in Its Charter) Antigua 52-209-8787 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) The Dollar Building, Top Floor, Nevis Street, St. John's, Antigua, West Indies (Address of Principal Executive Offices) (268) 562-0075 (Issuer's Telephone Number, Including Area Code) N/A (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X APPLICABLE ONLY TO CORPORATE ISSUERS As of March 31, 1999, the Registrant had outstanding 35,372,644 shares of its Common Stock, par value $0.0001 per share. Traditional Small Business Disclosure Format (check one):Yes x No __________ INDEX Part I. Financial Information Page Item 1. Financial Statements... Consolidated Balance Sheets as of March 31, 1999 and June 30,1998... 3 Interim Consolidated Statements of Operations for the nine months ended March 31,1998 and 1999 and for the period from inception (October 3, 1996) to March 31,1999... 5 Interim Consolidated Statements of Shareholders' Equity the period from inception (October 3, 1996) to June 30,1998 and for the nine months ended March 31,1999... 6 Interim Consolidated Statements of Cash Flows for the nine months ended March 31,1998 and 1999 and for the period from inception (October 3, 1996) to March 31, 1999... 11 Notes to Consolidated Financial Statements... 13 Item 2. Management's Discussion and Analysis or Plan of Operation... 17 Part II. OTHER INFORMATION... 24 Item 1. Financial Statements PLAYSTAR WYOMING HOLDING CORP. (FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES (A Development Stage Company) Consolidated Balance Sheets ASSETS March 31, June 30, 1999 1998 (Unaudited) (Audited) Current assets: Cash and cash equivalents $ 596,377 $ 182,219 Subscriptions receivable 1,350 21,350 Prepaid expenses and other current assets 91,616 150,922 ------- ------- Total current assets 689,343 354,491 Property and equipment, net 270,109 242,410 Deferred offering costs - 6,795 Security deposits 97,442 75,000 Investment in 40% owned affiliate - Cyberstation Computers & Support Inc. 339,800 - Investment in 50% owned affiliate - NetEngine Corporation 1,196,414 - License 1,794,620 - ---------- - $ 4,387,728 678,696 ========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable - affiliate - Dreamplay Research Corp. $ 53,702 - Accrued expenses and other current liabilities 147,141 264,374 -------- ------- Total current liabilities 147,141 318,076 Shareholders' equity Preferred stock, $.0001 par value: Authorized - 1,000,000 shares; none issued or outstanding at March 31, 1999 and June 30, 1998 - - Common stock, $.0001 par value: Authorized - 50,000,000 shares Issued and outstanding - 35,372,644 shares at March 31, 1999 and 19,661,274 shares at June 30, 1998 3,537 1,966 Additional paid-in capital 8,799,574 3,448,895 Deficit accumulated in the development stage (4,562,524) (3,090,241) ----------- ----------- Total shareholders' equity $ 4,240,587 $ 360,620 ----------- ----------- 4,387,728 678,696 ========== ========= PLAYSTAR WYOMING HOLDING CORP. (FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES (A Development Stage Company) Consolidated Statements of Operations (Unaudited) Period from October 3, 1996 Three Three Nine Nine (Inception) Months Months Months Months Ended Ended Ended Ended to March 31, March 31, March 31, March 31, March 31, 1999 1998 1999 1998 1999 ---- ---- ---- ---- ---- (Restated) (Restated) (Restated) (Note 7) (Note 7) (Note 7) $ $ $ $ 133,071 $ 133,071 51,926 - - 7,420 1,105 34,377 1,628 45,448 ------ ------ ------- ------ ------ 59,346 1,105 167,448 1,628 178,519 221,485 121,484 1,030,619 350,820 2,814,569 - - - (171,489) (171,489) 38,894 181,224 227,742 206,890 870,806 - - 140,450 - 822,950 48,868 4,681 135,835 12,718 262,242 16,967 - 34,279 - 34,279 21,784 - 21,784 - 21,784 16,356 9,676 49,022 20,913 82,446 - - - - 3,456 -- -- -- -- ----- Total expenses 364,354 317,065 1,639,731 419,852 4,741,043 -------- -------- ---------- -------- --------- (305,008) (315,960) (1,472,283) (418,224) (4,562,524) ========== =========== =========== ========== ========== $ $ $ $ (.01) (.02) (.05) (.02) ========== =========== =========== ========== 29,732,644 18,271,107 27,250,680 16,880,607 ========== =========== =========== ========== CAP 11,464 24,770 16,892,071 24,770
PLAYSTAR WYOMING HOLDING CORP. (FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES (A Development Stage Company) Consolidated Statements of Shareholders' Equity For the Period from October 3, 1996 (Inception) to June 30, 1998 and the Nine Months ended March 31, 1999 (Unaudited) Deficit Accumulated Additional in the Total Paid-in Development Shareholders' Common Equity Stock Amount Capital Stage Equity October 3, 1996 (inception) - $ $ $ $ - - - - Common stock issued in exchange for all of the issued and outstanding shares of Playstar Limited in October 1996 (at $.0001 per share) 12,000,000 1,200 - - 1,200 Options granted to employees and consultants for development costs and services - - 1,143,500 - 1,143,500 Issuance of common stock in October 1996 and January 1997 for development costs based on fair market value of services # # # performed 1,750,000 175 174,825 - 175,000 Issuance of common stock in November 1996 at $.40 per share in a private placement offering, less costs of # # $163,015 2,062,500 206 661,779 - 661,985 Net loss, June 30, 1997 (restated) - - - (1,926,732)(1,926,732) -- -- -- ---------------------- Balance at June 30, 1997 (restated) # (carried 15,812,500 1,581 1,980,104 (1,926,732)54,953 ----------------- ---------- ----------------- forward)
PLAYSTAR WYOMING HOLDING CORP. (FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES (A Development Stage Company) Consolidated Statements of Shareholders' Equity (continued) For the Period from October 3, 1996 (Inception) to June 30, 1998 and the Nine Months ended March 31, 1999 Deficit Accumulated Additional in Total the Shareholders' Common Paid-in Development Stock Equity Shares Amount Capital Stage Balance at June 30, 1997 (restated) # (brough forward) 15,812,500 $1,581 $1,980,104 $(1,926,732) $54,953 Issuance of common stock in November 1997 in connect- ion with a private placement offering at $.40 per share, less related costs of $50,000 1,250,000 125 449,875 - 450,000 Issuance of common stock in December 1997, in a private placement offering at $.50 per share, less related costs of $36,211 724,274 72 325,854 - 325,926 Issuance of common stock in January 1998, in a private placement offering at $.50 per share, less related costs # # of $14,250 285,000 29 128,221 - 128,250 Issuance of common stock in January 1998, as a fee in connection with the November 1997 private placement offering (fair market value $.85 per share $212,500) 250,000 25 (25) - - Options granted during December 1997 through April 1998 for the purchase of 315,000 common shares to consultants as compensation for development costs, less unearned portion - - 51,530 - 51,530 -- -- ------- -- ------ ($173,596) Totals carried $ $ ---- - --- -- forward 18,321,774 $2,935,559 (1,926,732)$1,832 1,010,659 -------------------------------- ------- ---------
PLAYSTAR WYOMING HOLDING CORP. (FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES (A Development Stage Company) Consolidated Statements of Shareholders' Equity (continued) For the Period from October 3, 1996 (Inception) to June 30, 1998 and the Nine Months ended March 31, 1999 Deficit Accumulated Additional in Total the Shareholders' Common Paid-in Development Stock Equity Shares Amount Capital Stage Totals brought $ $ forward 18,321,774 $ 2,935,559 (1,926,732)$ 1,832 1,010,659 # # Issuance of common stock in January 1998, in connection with exercise of stock options at $.05 per share 30,000 3 1,497 - 1,500 Issuance of common stock in February 1998, in connection with exercise of stock options at $.05 per share 27,000 2 1,348 - 1,350 Issuance of common stock in May 1998, at $.50 per share, less costs of $15,936 437,000 44 202,520 - 202,564 Issuance of common stock in May 1998, at $.40 per share, less costs of $14,441 445,500 45 163,714 - 163,759 Issuance of common stock in May 1998, in connection with exercise of stock options, at $.05 per share # # # 400,000 40 19,960 - 20,000 Current year amortization of cost of options granted in prior periods - - 45,617 - 45,617 Options granted in October 1998 to consultants for the purchase of of 300,000 shares of common stock for services provided through June 30, 1998 - - 78,680 - 78,680 Net loss, June 30, 1998 - - - (1,163,509)(1,163,509) -- -- -- ---------------------- Balance at June 30, 1998 (carried $ $ ---- - --- -- forward) 19,661,274 $ 3,448,895 (3,090,241)$ -------------------------------- ------------ 1,966 360,620
------ ------- PLAYSTAR WYOMING HOLDING CORP. (FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES (A Development Stage Company) Consolidated Statements of Shareholders' Equity (continued) For the Period from October 3, 1996 (Inception) to June 30, 1998 and the Nine Months ended March 31, 1999 Deficit Accumulated Additional in Total the Shareholders' Common Paid-in Development Stock Equity Shares Amount Capital Stage Balance at June 30, 1998 (brought $ $ forward) 19,661,274 $ 3,448,895 (3,090,241)$ 1,966 360,620 Issuance of common stock in July 1998 in a private placement offering at $.50 per share, less related costs of $ 750 30,000 3 14,247 - 14,250 Issuance of common stock in August 1998 in a private placement offering at $.40 per share, less related costs of $ 100 5,000 1 1,899- - 1,900 Issuance of common stock in August and September 1998, in a private placement offering at $.2580645 per share, less related costs of $144,077 7,967,000 796 1,911-127 - 1,911,923 Issuance of common stock in September 1998, as fees in connection with private placement offerings in May, July, August and September 1998 (fair market value $.39 per share $362,454) 929,370 93 (93) - - - Options granted in December 1998 to a consultant for the purchase of 150,000 shares of common stock stock for services provided through December 31,1998 - - 42,807 - 42,807 -- -- ------- -- ------ Totals carried forward 28,592,644 2,859 5,418,882 (3,090,241)2,331,500 ----------------- ---------- --------------------
PLAYSTAR WYOMING HOLDING CORP. (FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES (A Development Stage Company) Consolidated Statements of Shareholders' Equity (concluded) For the Period from October 3, 1996 (Inception) to June 30, 1998 and the Nine Months ended March 31, 1999 Deficit Accumulated Additional in Total the Shareholders' Common Paid-in Development Stock Equity Shares Amount Capital Stage Totals brought $ $ forward 28,592,644 $ 5,418,882 (3,090,241)$ 2,859 2,331,500 Issuance of common stock in February 1999, in connection with exercise of stock options at $.05 per share 280,000 28 13,972 - 14,000 Options granted in March 1999 to a consultant for the purchase of 150,000 shares of common stock stock for services provided through March 31,1999 - - 39,460 - 39,460 Issuance of common stock in March 1999 in connection with the acquisition of 50% owned affiliate NetEngine Corporation, License and related fees at fair market value - $.453125 per share 6,500,000 650 2,944,662 - 2,945,312 Amortization of cost of options granted in prior periods - - 382,5-8 - 382,598 Net loss, March 31, 1999 - - - (1,472,283)(1,472,283) -- -- -- ---------------------- Balance at March 31, $ $ 1999 35,372,644 $ 8,799,574 (4,562,524)$ 3,537 4,240,587 ===== ===== ===== ===== =====
PLAYSTAR WYOMING HOLDING CORP. (FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES (A Development Stage Company) Consolidated Statements of Cash Flows (Unaudited) Period from October 3, 1996 Nine Nine (Inception) Months Months Ended Ended to March 31, March 31, March 31, 1999 1998 1999 (Restated) (Restated) (Note 7) (Note 7) Cash flows from operating activities: Net $ $ $ loss (1,472,283) (418,224) (4,562,524) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 49,022 20,913 82,446 Development costs and professional fees paid through the issuance of common stock and granting of stock options 324,415 52,716 1,136,242 Options granted as employee compensation 140,450 - 822,950 Change in assets and liabilities: Prepaid expenses and other current assets 59,306 (196,082) (91,616) Accounts payable - affiliate - Dreamplay Research Corp. (53,702) 47,324 - Accrued expenses (117,233) (17,219) 147,141 --------- -------- ------- Net cash used in operating activities (1,070,025) (510,572) (2,465,361) ----------- --------- ----------- Cash flows from investing activities: Payment of security deposits (22,442) (75,000) (97,442) Purchase of property and equipment (76,721) (243,667) (352,555) Investment in 40% owned affiliate - Cyberstation Computers & Support Inc. (339,800) - (339,800) Costs related to acquisition of License (45,722) - (45,722) -------- -- -------- Cash used in investing activities (484,685) (318,667) (835,519) --------- --------- --------- Totals carried forward $ $ $ ----- ------ -- (1,554,710) (829,239) (3,300,880) ----------- --------- ----------- PLAYSTAR WYOMING HOLDING CORP. (FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES (A Development Stage Company) Consolidated Statements of Cash Flows (Concluded) Period from October 3, 1996 Nine Nine (Inception) Months Months Ended Ended to March 31, March 31, March 31, 1999 1998 1999 (Restated) (Restated) (Note 7) (Note 7) Totals brought forward $ $ $ (1,554,710) (829,239) (3,300,880) Cash flows from financing activities: Net proceeds from issuance of common shares 1,928,073 904,176 3,861,757 Decrease in deferred offering costs. 6,795 - - Received on exercise of stock options 34,000 - 35,500 ------- -- ------ Net cash provided by financing activities 1,968,868 904,176 3,897,257 ---------- -------- --------- Net increase in cash and cash equivalents 414,158 74,937 596,377 Cash and cash equivalents, beginning of period 182,219 109,138 - -------- -------- - Cash and cash equivalents, end of $ $ period 596,377 184,075 $ 596,377 =========== ========== =========== Supplemental Schedule of Non-Cash Investing and Financing Activities Common stock issued in connection with raising of $ $ capital 362,454 212,500 $ 574,954 =========== ========== =========== Common stock issued in connection with the acquisition of 50% owned affiliate - NetEngine Corporation and License $ $ 2,945,312 $ 2,945,312 - =========== ========== =========== Receivable from shareholders in connection with exercise of stock options $ $ $ - 2,850 1,350 =========== ========== =========== PLAYSTAR WYOMING HOLDING CORP. (FORMERLY PLAYSTAR CORPORATION) AND SUBSIDIARIES (A Development Stage Company) Notes to Consolidated Financial Statements (Unaudited) Note 1. Basis of Presentation The financial statements included herein are unaudited and have been prepared in accordance with generally accepted accounting principals for financial reporting and Securities and Exchange Commission regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management the financial statements reflect all adjustments (of a normal and recurring nature) which are necessary to present fairly the financial position, results of operations and cash flows for the interim periods. These financial statements should be read in conjunction with the Annual Report of PlayStar Wyoming Holding Corp. on Form 10-K for the year ended June 30, 1998. The results for the nine months ended March 31,1999 are not necessarily indicative of the results that may be expected for the year ending June 30, 1999. Note 2. Nature of Business and Basis of Consolidation The consolidated financial statements include the accounts of PlayStar Wyoming Holding Corporation ("PlayStar Wyoming")(formerly PlayStar Corporation) and its wholly owned subsidiaries PlayStar Limited, a Jersey Island corporation, Players Ltd, an Antigua corporation and Antigua Casino and Sports Book Limited, an Antigua corporation (collectively "the Company"). All intercompany accounts and transactions have been eliminated in consolidation. The Company has been in the development stage since its incorporation on October 3, 1996. Through its subsidiaries the Company, designs, develops and operates, an on-line gaming service operating interactive, software-based games of chance, accessible world-wide through the Internet. Effective September 4, 1998, pursuant to a Merger Agreement, and an Application for Certificate of Transfer, Playstar Corporation was merged with and into Playstar Wyoming Holding Corp., a newly formed Wyoming corporation that became the surviving entity (the "Merger"). Subsequently, pursuant to a Wyoming statutory continuation procedure, Playstar Wyoming became an Antigua corporation ("Playstar Antigua"). In accordance with the terms of the merger, each outstanding share of Playstar Corporation's common stock was automatically converted into one outstanding share of Playstar Wyoming common stock and subsequently, in connection with the statutory continuation procedure referred to above, automatically converted into one ordinary share, par value $.0001 of Playstar Antigua. Since the effective time of the reorganization, PlayStar Wyoming has continued to conduct the business previously carried on by PlayStar Delaware. Except for PlayStar Wyoming's new domicile, the activities of PlayStar Wyoming are identical to that of PlayStar Delaware prior to the effective time of the reorganization. Accordingly, references in the discussion of the business of PlayStar Wyoming include the operations of PlayStar Wyoming and PlayStar Delaware. On March 25, 1999, the Company acquired, 40% of the common stock of Cyberstation Computers & Support, Inc. for Cdn.$ 500,000 ($339,800). In addition to this transaction, Players Ltd., entered into a license agreement with Cyberstation Limited, a St.Kitts corporation ("Cyberstation"). Players was granted an exclusive irrevocable perpetual royalty-free license to Cyberstation`s software and intellectual property, presently owned or hereafter to be acquired or developed, for use in certain designated countries and geographic territories. In consideration for the grant of the license, the Company issued to Cyberstation 5,000,000 of its common stock. In addition, the Company issued 1,500,000 of its common stock to third parties as fees in connection with this transaction. Players also received, as part of the transaction the following: 1. 50% ownership in the common stock of NetEngine Corporation, a St.Kitts corporation)("NetEngine"). 2.An option to purchase for $100, at the termination of the management services agreement (described below), the software programs, including related source codes, developed by Cyberstation for use in marketing, administration, and/or game playing activities related to casino style gaming on the Internet. 3.An option to purchase 100% of the common stock of Dreamplay Research Corp., an Ontario, Canada corporation for $100. Dreamplay served as the Company's software developer until December 29, 1998. The Company also entered into a management agreement with Cyberstation, whereby Cyberstation provides management services to the Company's operating subsidiaries, which terminates on June 30, 2002. Cyberstation will receive a base management fee of Cdn.$ 160,000 (US $105,000) per annum and a payment equal to 15% of the pre-tax profits of Players; and 10% of the pre-tax profits, in excess of certain thresholds as defined in the management agreement, of the Company. In addition, the Company has granted Cyberstation three options to acquire an aggregate of 5,000,000 common stock of PlayStar as follows: Exercise No. of Shares Price ------------- -------- 1,000,000 $ .25 2,000,000 .50 2,000,000 1.00 --------- 5,000,000 These options vest over a three-year period, and only then if the pre-tax profits of PlayStar, as defined, exceed certain amounts described in the management agreement. Note 3. New Accounting Pronouncements In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," which is effective for fiscal years beginning after December 15, 1997. This Statement establishes standards for reporting and display of comprehensive income and its components in financial statements. The Statement is effective for PlayStar's financial statements commencing the year ending June 30, 1999. The adoption of this Statement will not have a material effect on PlayStar's financial statements. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which is effective for fiscal years beginning after December 15, 1997. This Statement establishes standards for the manner in which a public business enterprise reports certain information about operating segments and discloses enterprise-wide information about its products and services, activities in different geographic areas, and its reliance on major customers. The Statement is effective for PlayStar's financial statements commencing the year ending June 30, 1999. The adoption of this Statement will not have a material effect on PlayStar's financial statements. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for fiscal years beginning after June 15, 1999. This statement establishes standards that require that all derivative instruments be recorded on the balance sheet at their fair value. This statement is effective for PlayStar's financial statements commencing the year ending June 30, 2000. The adoption of this statement will not have a material effect on PlayStar's financial statements. Note 4. Investment in 50% owned affiliate - NetEngine Corporation and License Shares issued at fair market value $.453125 Cyberstation Limited 5,000,000 shares $2,265,625 Fees 1,500,000 shares 679,687 Related costs 45,722 ---------- $2,991,034 Note 5. Computation of Net Loss per Common Share The Company adopted SFAS No. 128, "Earnings per Share". This statement requires that the Company report basic and diluted earnings (loss) per share for all periods reported. Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period, adjusted for the dilutive effect of common stock equivalents, consisting of dilutive common stock options and warrants using the treasury stock method. For all periods presented, common stock options and warrants are not included in the computation as they would be anti-dilutive. In the event that the Company was to report net income in future periods, these options and warrants aggregating 10,668,000 at March 31, 1999 could have a dilutive effect on future earnings per share calculations in those periods. Note 6. Possible Legislation in the United States Congress On July 23, 1998, the Senate passed an appropriations bill containing an amendment by Senator John Kyl of Arizona, which would prohibit gaming on the Internet in the United States. The proposed prohibition was not enacted into law in 1998, but it or a similar bill may be reintroduced shortly. Several similar bills were also introduced in the House of Representatives in the summer of 1998, and House Internet gaming legislation may be reintroduced this year as well. If legislation prohibiting gaming on the Internet is enacted into law, that legislation could have a significant effect on the Company's online gaming operations. If a law prohibiting Internet gaming passes, the Company's gaming subsidiaries (Limited and Casino) might be forced to cease all marketing and promotional activities in the United States to ensure that no solicitation of United States citizens occurs. If such legislation prohibits United States citizens from gaming on the Internet, the Company may be expected to lose a significant portion of its online gaming customers. Note 7. Restatement of 1997 Financial Information The financial statements as of June 30, 1997 and for the period October 3, 1996 (inception) to June 30, 1997 have been restated to comply with the requirements of APB No. 25 and SFAS 123. The effect of the correction with respect to the recording of stock options granted to employees and consultants during the period has been to increase development costs charged to operations by $461,000, and to increase employee compensation charged to operations by $682,500. In total, the effect of the restatement has been to charge operations $1,143,500 ($.08 per share). Note 8. Subsequent Events On April 8, 1999 Stuart Brazier joined the Company as its new President, Chairman of the Board and Chief Executive Officer. At that time, Mr. Brazier was the beneficial owner of the remaining 50% of NetEngine not owned by the Company. He had underway negotiations involving millions of processing dollars and it was agreed that the Company would acquire his interest in NetEngine for 2,000,000 shares of its common stock (1,000,000, of which, would be not issued until January 8, 2000); and grant him an option to acquire an additional 500,000 shares of common stock at $1.25 until March 31, 2001. During May the Company agreed to acquire from Hanver Trust Company a 90% interest in VirtualCard PLC, a Nevis public liability company for 2,000,000 shares of its common stock plus an additional 100,000 shares in fees. Item 2. Management's Discussion and Analysis or Plan of Operation The information contained in this report on Form 10-QSB contains "forward looking statements" within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. Actual results may materially differ from those projected in the forward looking statements as a result of certain risks and uncertainties set forth in this report. Although we believe that the assumptions made and expectations reflected in the forward looking statements are reasonable, actual results may differ materially from those suggested by the forward looking statements for various reasons. PlayStar/PlayStar Wyoming PlayStar is a holding company which, through its subsidiaries, PlayStar Limited, Antigua Casino and NetEngine, operates, promotes and commercializes e-commerce transactions and an on-line gaming service, that offers interactive, software-based games of chance. Antigua Casino conducts PlayStar's Internet gaming business, and PlayStar Limited licenses gaming technology to Antigua Casino's Internet gaming business. For the period from inception on October 3, 1996 until March 31, 1999, the cumulative earned interest and casino revenue of PlayStar was $178,519 and its accumulated deficit was $4,562,524. NetEngine will conduct the e-commerce activities of the Company. During 1996 and 1997, PlayStar raised an aggregate of $825,000 in cash through three private placements. In November and December 1997, and January 1998, PlayStar raised an additional $1,004,637 through two additional private placements. In May, July and August 1998, PlayStar raised an additional $2,469,700 through additional private placements. These financings have been sufficient to satisfy PlayStar's cash requirements. From these proceeds, the Company and its subsidiaries paid approximately $1,215,000 for products and services provided by Dreamplay and approximately $1,000,000 for legal, accounting, public relations and administrative services through March 31, 1999. At that date PlayStar had available approximately $550,000 in working capital. Of this amount, PlayStar intends to pay for the majority of its advertising, marketing and promotional efforts on a performance-related commission and/or profit sharing basis. Management believes that PlayStar will have sufficient funds to conduct its operations for at least through, at least, June 30, 1999. PlayStar Limited PlayStar Limited's efforts are centered on the purchase of on-line gaming and financial transaction processing software incorporated into the creation of an electronic casino operating over the Internet. Effective April 1, 1998, PlayStar Limited and Dreamplay Research Corp. entered into an agreement in which PlayStar Limited retained Dreamplay to provide PlayStar Limited's gaming software. Pursuant to the terms of this agreement, Dreamplay assigned to PlayStar Limited all right, title and interest in the software designed and developed for PlayStar Limited, under a previous agreement for services. PlayStar Limited licenses its gaming technology to Antigua Casino who then operates the electronic casino. Antigua Casino Antigua Casino's Articles of Incorporation enable it to operate an Internet-based casino. Using the technology developed by PlayStar Limited and licensed to it, Antigua Casino's casino service, at www.antigua.org, allows patrons to play interactive games in real time either in "free" mode or in "live" mode. In "live" mode, patrons wager with chips acquired using electronic money or "e-cash" that was purchased through credit cards, wire-transfers and money orders. Antigua Casino initially offers a selection of casino-style games, including, but not limited to blackjack, draw poker, baccarat, roulette and three different slot machines. In December 1997, PlayStar Limited, on behalf of Antigua Casino, applied to the government of Antigua for an electronic casino gaming license. On January 28, 1998, the Antigua government granted approval for the issuance of the license to Antigua Casino. Antigua Casino began operations of this casino immediately following the consummation of the reorganization on September 14, 1998. Since the opening of its casino, Antigua Casino continued to operate in development mode under conditions of live play and real money wagering rather than only the free play of its earlier testing. This focus was carried forward into the first quarter of 1999 with ongoing analysis of the performance and the functionality of the casino. In addition, customer service systems and procedures were modified to reflect the reality of being live on line. Limited marketing activities resulted in a gradual build-up of the client and revenue base. With credit cards proving to be the means whereby almost 100% of this type of play is conducted, an important factor of operations is the ability to ensure adequate facilitation capability, not only from the standpoint of costs but also from the degree of fraud protection provided. This control enables chargebacks to be held to a minimum. Experience, during the last quarter of 1998, indicated the need for substantial improvement in this area. Accordingly, management instituted a search for an alternative solution to that then being carried out. With concern being expressed over possible changes in North American legislation, it was felt that such a solution would be required to be offshore. Analysis of the market indicated that this was an area ill served and suggested that a solution would provide the Company, not only with its internal needs, but also offer the considerable possibility of taking it into highly profitable areas of business activity outside the sphere of its casino operations. As 1998 concluded, management found in Cyberstation, not only the possibility of meeting these needs through the licensing of its ultra secure encryption technology and sophisticated data reporting capabilities, but also access to excellent sources of software design to further enhance the Company's Java based casino games. Management also believed that Cyberstation would provide the Company with the ability to introduce substantial savings in the cost infrastructure of its operations. Accordingly, with negotiations underway for these enhancements to its direction, the Company felt that its future would be best served by concluding its relationship with Dreamplay and this contract was terminated in late December 1998. For the March 1999 quarter, casino results were adversely affected by a number of large winners outside of a considered norm. However, we believe that long-term benefits are derived from favourable word of mouth publicity in meeting payments to such winners. While negotiations with Cyberstation were taking place during the quarter, Cyberstation personnel conducted a full examination of the gaming and back office software with a view towards its enhancement. The casino intends shortly to introduce a unique two-tiered affiliate business opportunity called QuickConnect. Under the program, webmasters, from anywhere on the Internet, are encouraged to host a direct link from their websites into our casino games. Webmasters who become program "Associates" use this casino gateway to feed players into our new cash management system, CashEngine. This product allows all players to be tracked back to the originating website, and provides the Associate with the ability to earn a 30% participating commission in the casino's net win. Associates become members of the Master Associate Program by signing up two new QuickConnect Associates, thereby earning an additional 20% override commission. With each QuickConnect application, Associates and Master Associates will be offered a CashEngine eCash account for easy tracking of commissions (see also possible use of a VirtualCard discussed below). During May we have introduced player incentive contests and have undertaken some direct e-mail programs, which have resulted in a significant increase in player activity. NETENGINE A significant amount commerce is now being conducted over the Internet. Most of this e-commerce is conducted using credit cards, as consumers reach a comfort level that allays security concerns. As merchants accept the Internet as a place for doing business, many will recognize that they have much to gain by going offshore because it is relatively easy for them to set up shop@anywhere.com. They are the first generation of merchants who can choose their business domicile. With the right corporate structure in place, they can select the jurisdiction under which their profits are settled and taxed. As traditional businesses expand online and become truly global, the Company believes that there will be a shift to multi-national thinking with merchants identifying the opportunity and benefits of processing e-commerce transactions in an offshore jurisdiction. Recognizing the huge potential of providing credit card processing services, NetEngine has licensed a number of "Software Engines" for this purpose. Card Engine Using 2,048 bit RSA keys that are rated military grade cryptography allows merchants to perform credit card processing in an ultra secure manner. The keys are used to sign the merchant and transaction hub certificates for cross verification purposes. In addition, the certificates provide control over access to reviewing online reports outlining the transactions. Transactions occur live and only take a few seconds of real time processing. As part of this function, access is made to an effective database set up to limit possible consumer and merchant fraud. The system submits each transaction to online monitoring and real time accounting from the standpoint of both the merchant and its Bank. These financial institutions in turn use the system to monitor their total merchant network. As developed outside the United States, without participation of US citizens, it allows the technology to be used world-wide without violating any cryptographic export restrictions. Cash Engine The product works in conjunction with CardEngine. While the merchant uses CardEngine to process and report credit card transactions, CashEngine provides customers and marketing partners with electronic cash. Using its licensed proprietary 2,048 bit encryption technology, it allows for a software product with a set of functions associated to a unique computer certificate. The creation of an eCash account allows customers and affiliates to purchase goods or services from member merchants or transfer funds to other eCash account holders. In this way, eCash develops into a product that becomes used across numerous websites as a form of tender. The eCash management system allows users to review transactions that have occurred within their accounts and the status of their eCash account balance. Without the creation of a unique certificate being allocated to each user, this would not be possible. The possession of an eCash account also allows the user access to our newly acquired product namely VirtualCard. VirtualCard This product serves as a secured credit card/debit card matched against funds within eCash account. Balances within the account govern useable limits. Upon request, and subject to an annual fee, the user may request a physical Master Card that can be used to purchase goods and services, not only on the Internet, but elsewhere. These transactions are administered using the Bank's existing technical infrastructure; with an interface provided by CashEngine to monitor available spending. Similar review and reporting capabilities as eCash are available, again governed by the existence of a unique certificate. Marketing Management believes that the most effective way to penetrate into new markets will be through a network of joint ventures. These joint ventures will make up what will be known as the "NetEngine Network." NetEngine and the joint venture partner will jointly own each company within the NetEngine Network. NetEngine will provide the CashEngine and CardEngine technologies while the joint venture partner will provide the local contacts and resources. NetEngine will work with the local partner to set up the NetEngine operation. The ideal partner is one with a good relationship with Acquiring Banks and other strategic entities such as Internet Service Providers. NetEngine will provide a turnkey solution including but not limited to: 1. The NetEngine name, logo and business plan; 2. The CardEngine and CashEngine Software Technologies; 3. Credit Card Processing Agreements for the local Acquiring Bank; 4. Merchant application forms and contracts; 5. Cardholder application forms and contracts; and 6. Customer Service and Sales training manuals; NetEngine recently announced its first such joint venture with MasterPay Limited, a Nevis company. Using Banks based in Guatemala City, management project that the Company will earn over $2 million in processing income by the end of 1999. The Company's investment in Cyberstation Computers and Support allows it to participate in revenues obtained in marketing similar products in territories not covered in the Cyberstation license. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PLAYSTAR WYOMING HOLDING CORP. By: /s/ William F.E. Tucker William F.E. Tucker President EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS JUN-30-1999 JAN-1-1998 MAR-31-1999 596,377 0 0 0 0 689,343 270,109 49,022 387,728 147,144 0 0 0 3,537 8,799,576 4,387,728 0 59,346 0 0 364,354 0 0 (1,472,283) 0 (1,472,283) 0 0 0 (1,472,283) (.01) (.01)