Sungold International (SGIHF) 20-F 2004 FY Annual report (foreign)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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 ENDEDAUGUST 31, 2004

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 NUMBERNo. 000-30006

SUNGOLD INTERNATIONAL HOLDINGS CORP.
(Exact name of Registrant as specified in its charter)

N/A
(Translation of Registrant's name into English)

Canada
(Jurisdiction of incorporation or organization)

500 Park Place, 666 Burrard Street
Vancouver, British Columbia V6C 3P6
(Address of principal executive offices)

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Title of each Class	Name of each exchange on which registered
None	N/A

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Common Shares
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Not Applicable
(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.COMMON SHARES: 103,364,740

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 to follow.

Item 17 x Item 18 ¨

GENERAL

In this Annual Report on Form 20-F, all references to the “Corporation” or “Sungold” refer to Sungold International Holdings Corp. and its subsidiaries.

The Corporation uses the Canadian dollar as its reporting currency. All references in this document to “dollars” or “$” are expressed in Canadian dollars, unless otherwise indicated.

NOTE REGARDING FORWARD LOOKING STATEMENTS

This document contains statements that constitute “forward-looking statements”. Forward looking statements include the words “believes”, “anticipates”, “intends”, “expects”, “estimates”, “projects” and words of similar import, as well as all projections of future results. Such forward-looking statements involved known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements of the Corporation expressed or implied by such forward-looking statements. Such risks are discussed in Item 3D “Risk Factors.” The statements contained in Item 4B “Business Overview” and Item 5 “Operating and Financial Review and Prospects” are inherently subject to a variety of risks and uncertainties that could cause actual results, performance or achievements to differ significantly. You should carefully review the cautionary statements and risk factors contained herein and in other documents that the Corporation files from time to time with the Securities and Exchange Commission.

TABLE OF CONTENTS

PartI		Page No.
Item 1.	Identity of Directors, Senior Management and Advisers	1
Item 2.	Offer Statistics and Expected Timetable	1
Item 3.	Key Information	1
Item 4.	Information on the Company	8
Item 5.	Operating and Financial Review and Prospects	19
Item 6.	Directors, Senior Management and Employees	27
Item 7.	Major Shareholders and Related Party Transactions	33
Item 8.	Financial Information	34
Item 9.	The Offer and Listing	35
Item 10.	Additional Information	36
Item 11.	Quantitative and Qualitative Disclosure About Market Risk	54
Item 12.	Description of Securities Other Than Equity Securities	54
Part II
Item 13.	Defaults, Dividends Arrearages and Delinquencies	55
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	55
Item 15.	Controls and Procedures	55
Item 16.	[Reserved]	55
Item 16A.	Audit Committee Financial Expert	55
Item 16B.	Code of Ethics	56
Item 16C.	Principal Accountant Fees and Services	56
Item 16D.	Exemptions from the Listing Standards for Audit Committees	56
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	56

-i-

Part III
Item 17.	Financial Statements	57
Item 18.	Financial Statements	57
Item 19.	Exhibits	57

-ii-

ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not Applicable.

ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3.     KEY INFORMATION

A.     SELECTED FINANCIAL DATA

The following table presents selected consolidated financial data of the Corporation for the fiscal years 2000, 2001, 2002, 2003 and 2004. You should read this information in conjunction with the financial statements included elsewhere in this annual report. The Corporation’s financial statements have been audited by Loewen, Stronach & Co., Chartered Accountants, the Corporation’s independent accountants. The financial statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles (“Canadian GAAP”). Note 10 to the Corporation’s financial statements provides a description of the principal differences between Canadian GAAP and United States Generally Accepted Accounting Principles (“US GAAP”), as they relate to the Corporation, and a reconciliation to US GAAP of the Corporation’s net income and stockholders’ equity.

All information provided in the Summary of Financial Information below is in Canadian dollars and has been compiled according to Canadian GAAP and reconciled with U.S. GAAP at Note 10 to the Financial Statements.

	2004	2003	2002	2001	2000
	(Cdn$)	(Cdn$)	(Cdn$)	(Cdn$)	(Cdn$)
OPERATING DATA:
Revenue(1)	-	1,317	19,457	12,430	6
General And
Administrative Expenses(1)	1,211,718	2,601,855	2,463,280	1,735,936	1,314,129
Net (Loss) from
Continuing Operations
- Canadian GAAP	(1,211,718)	(4,617,958)	(2,602,640)	(2,184,080)	(1,314,123)
- US GAAP	(1,274,878)	(2,601,415)	(2,472,205)	(2,051,962)	(1,956,433)
Net (Loss) Per Share(2)
- Canadian GAAP	(0.01)	(0.07)	(0.06)	(0.07)	(0.06)
- US GAAP	(0.01)	(0.04)	(0.05)	(0.06)	(0.08)

- 1 -

	2004	2003	2002	2001	2000
	(Cdn$)	(Cdn$)	(Cdn$)	(Cdn$)	(Cdn$)
Working Capital (Deficiency)	34,395	(157,799)	64,291	18,214	(39,093)
Total Assets
- Canadian GAAP	1,592,034	1,418,406	3,708,525	3,739,902	3,500,905
- US GAAP	766,880	656,364	940,209	845,677	462,464
Total Liabilities	210,030	209,881	351,687	168,434	136,688
Shareholders Equity
- Canadian GAAP	1,382,004	1,208,525	3,356,838	3,571,468	3,364,217
- US GAAP	556,850	446,483	588,522	677,243	325,776
Long-Term Obligations	0	17,253	36,676	52,724	-
Capital Stock(2)	103,364,740	79,871,209	50,121,209	34,454,543	22,175,743
Dividends Declared Per Share	-	-	-	-	-

(1)	Foreign exchange gain (losses) have been reclassified to form part of the general and administrative expenses from revenue.
(2)	As adjusted to reflect a 21 for 20 stock split effected on September 8, 2003.

CURRENCY AND EXCHANGE RATES

We prepare our financial statements in Canadian dollars. In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian dollars. The following tables set forth, for the periods and dates indicated, information concerning the exchange rates between U.S. dollars and Canadian dollars based on the noon rates of exchange as reported by the Bank of Canada, expressed in U.S. dollars per Canadian dollar. No representation is made that the Canadian dollar amounts, on the one hand, or the U.S. dollar amounts, on the other hand, referred to in this Annual Report could be or could have been converted in U.S. dollars or Canadian dollars, as the case may be, at any particular rate or at all.

Year Ended	Average(1)	High	Low	Period End
	(US$)	(US$)	(US$)	(US$)
August 31, 2000	0.6808	0.6973	0.6631	0.6793
August 31, 2001	0.6539	0.6787	0.6334	0.6461
August 31, 2002	0.6358	0.6618	0.6199	0.6415
August 31, 2003	0.6790	0.7495	0.6273	0.7220
August 31, 2004	0.7522	0.7879	0.7159	0.7595

Month	Average(2)	High	Low	Period End
	(US$)	(US$)	(US$)	(US$)
August 2004	0.7609	0.7714	0.7504	0.7595
September 2004	0.7782	0.7912	0.7652	0.7912
October 2004	0.7886	0.8199	0.7859	0.8192
November 2004	0.8321	0.8493	0.8150	0.8401
December 2004	0.8257	0.8433	0.8080	0.8308

- 2 -

Month	Average(2)	High	Low	Period End
	(US$)	(US$)	(US$)	(US$)
January 2005	0.8196	0.8342	0.8051	0.8078
February 2005	0.8044	0.8130	0.7958	0.8059

Notes:

(1)	The average of the noon buying rates on the last business day of each month during the period.
(2)	The average of the lowest and the highest noon buying rates during the month.

The noon rate of exchange on March 9, 2005 as reported by the United States Federal Reserve Bank of New York for the conversion of Canadian dollars into United States dollars was $1.20 ($1.00 = US$0.83) .

B.     CAPITALIZATION AND INDEBTEDNESS

Not Applicable.

C.     REASONS FOR THE OFFER AND USE OF PROCEEDS

Not Applicable.

D.     RISK FACTORS

The securities of the Corporation are highly speculative. In evaluating the Corporation, it is important to consider that the Corporation is in the preliminary stage of its operations as a developer of emerging pari-mutuel wagering entertainment facilities. A prospective investor or other person reviewing the Corporation should not consider an investment unless the investor is capable of sustaining an economic loss of the entire investment. Certain risks are associated with the Corporation’s business including the following:

Limited History of Operations

The Corporation has a limited history of operations. The Corporation does not expect to receive any revenues from operations until the required approvals are received and the projects begin operations in a commercially profitable manner. There can be no assurance that any approvals will be obtained for the proposed projects, that the Corporation will obtain the required financing or that the Corporation or its strategic partners will be able to manage the Corporation’s proposed projects in commercially profitable manner.

Investors should be aware of the delays, expenses and difficulties encountered in an enterprise in this critical stage, many of which may be beyond the Corporation’s or its affiliates’ control, including, but not limited to, the regulatory environment in which the Corporation expects to operate, problems related to regulatory compliance costs and delay, marketing difficulties and costs that may exceed current estimates. There can be no assurance that the Corporation or its affiliates will be able to implement their business strategies, successfully develop any of the planned development projects or complete their projects according to specifications in a timely manner or on a profitable basis.

Investors cannot expect to receive a dividend on their investment in the foreseeable future, if at all. The Corporation will require additional financing to carry out its business plan and, if financing is unavailable for any reason, the Corporation may be unable to carry out its business plan.

Governmental Regulations; Uncertainty of Obtaining Licenses

Racetrack establishment operations are subject to extensive federal, provincial and local regulations. Federal, provincial, state and the applicable local authorities will require various licenses, permits and

- 3 -

approvals to be held by the Corporation and its management company. The local and federal authorities may, among other things, revoke a business license, or the license of any individual or registered entity. The Corporation has not obtained any government licenses, permits and approvals necessary for the operation of the proposed pari-mutuel wagering activities. Business licenses and related approvals are generally deemed to be privileges under the law and no assurances can be given that any licenses, permits or approvals that may be required will be given or that existing ones will not be revoked. In particular, the Corporation’s Horsepower® World Pool racing system operations for Vancouver Thoroughbred Park will require various approvals from the applicable authorities, provincial and city government, and this approval process can be time consuming and costly with no assurance of success. Moreover, all of the Corporation’s projects are subject to risks from political and economic uncertainty, which are beyond the control of the Corporation. The application processes for securing business licenses are extremely complex and time consuming.

The laws, rules and regulations governing the Corporation’s proposed projects are subject to change and variation prior to the Corporation and its joint venture partners obtaining the required licenses. To a certain extent, the licensing process is a political process and the Corporation and its joint venture partners may face delays in obtaining licenses due to political changes or competing political interests.

Need for Additional Financing to Fund Current Commitments

The Corporation anticipates it will need to raise approximately US$1,500,000 to meet its operating budget for the fiscal year ending August 31, 2005. The Corporation has not completed the financing to meet its operating budget through August 31, 2005. The Corporation requires further financings to continue its operations. If additional financing is not available at all or on acceptable terms, the Corporation may have to substantially reduce or cease its operations.

The development of the Corporation’s business will depend upon increased cash flow from operations and the Corporation’s ability to obtain financing through private placement financing, public financing or other means. The Corporation currently has no significant revenues from operations and is experiencing negative cash flow, accordingly, the only other sources of funds presently available to the Corporation is through the sale of equity and debt capital. While the Corporation has successfully raised such capital in the past there can be no assurance that it will be able to do so in the future. If the Corporation cannot obtain sufficient capital to fund its planned expenditures, its planned operations may be significantly delayed or abandoned. Any such delay or abandonment could result in cost increases and adversely affect the Corporation’s future results and which could result in a material adverse effect on an investment in the Corporation’s securities.

Need for Additional Financing to Fund Major Potential Projects

If the Corporation cannot obtain sufficient capital to fund its projects, some or all of its planned projects may be significantly delayed or abandoned. Any such delay or abandonment could result in cost increases and adversely affect the Corporation’s future results of operations.

Dependence on Key Personnel

The Corporation’s success is highly dependent upon the performance of its key personnel and continued service of certain independent contractors. The Corporation currently has hired and contracted the services of professional providers for government consulting, environmental, construction, real estate, engineering, architectural and planning service and has consulting contracts with its key personnel. The Corporation does not maintain key-man life insurance. The loss of the services of senior management and/or key personnel could have a material and adverse effect on the Corporation, its business and results of operations.

- 4 -

Horse Racing Industry Risks

The Corporation’s projects are speculative by their nature and involve a high degree of risk. The thoroughbred horse racing industry is subject to a number of factors beyond the Corporation’s control including changes in economic conditions, industry competition, management risks, changes in racing products, variability in operating costs, changes in government and changes in regulatory authorities’ rules and regulations, the occurrence of which could materially adversely affect the Corporation’s business operations.

Real Property Ownership Risks

If real property is acquired, certain significant expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and related charges, must be made throughout the period of ownership of real property regardless of whether the property is producing any income. If the Corporation or its affiliates are unable to meet mortgage payments on any property, loss could be sustained as a result of the mortgagee’s exercise of its rights of foreclosure or sale. Real property investments are relatively illiquid. Such illiquidity will tend to limit the Corporation’s ability to vary its portfolio promptly in response to changing economic or investment conditions.

Construction Risk

Historically, most sectors of the construction industry have been cyclical and have been significantly affected by changes in general and local economic conditions, levels of consumer confidence, employment and income, housing demand, interest rates and the availability of financing. The Corporation’s participation in its planned projects, if any, will be subject to construction risks such as availability and cost of financing, materials and labour; environmental risks; changes in government regulation and increases in government fees. In addition, the availability of land for development and permitted uses may be constrained by government regulation. Development activities are also subject to the risks of inability to obtain, or delays in obtaining, all necessary zoning, land-use, building and other required government permits and authorizations.

Delays in Completion of Construction Projects

The Corporation anticipates that it will derive growth in revenues from its Horsepower® World Pool racetrack program. The Corporation is subject to a number of risks relating to delays in obtaining a long term lease for the racetrack and grandstands at Hastings Park in Vancouver, British Columbia, and delays to its plans to renovate the Hastings Park facility in conjunction with the construction of a one mile thoroughbred training centre in Richmond and completing construction facilities housing such projects. Such risks include the unavailability of materials and labour, the abilities of the sub-contractors to complete work competently and on schedule, the surface and subsurface conditions of the land underlying the project, weather, economic and other ordinary risks of construction or other occurrences that may hinder or delay the successful completion of a particular project and the revenues from operating the Vancouver racetrack. Many of these factors are beyond the control of the Corporation.

In addition, where the Corporation undertakes the obligation to construct a facility to house a racetrack project, the Corporation must contract with professionals, subcontractors and suppliers of materials based on a schedule and critical path analysis plan. If construction of a project does not proceed in accordance with the anticipated schedule, the Corporation will, in most instances, experience increased administrative, financing and other costs associated with the project. The failure to complete a particular project on schedule or at the anticipated price may reduce or eliminate profits, or result in a loss.

- 5 -

Government Construction Regulations and Environmental Matters

The Corporation’s participation in its planned projects may be subject to a variety of statutes and rules regulating certain environmental and developmental matters, as well as building design and site design. In particular, the Corporation may be required to obtain the approval of numerous governmental authorities regulating such matters as permitted land uses, levels of density and the installation of utility services such as electricity, water and waste disposal. In addition, development fees, some of which may be substantial, are typically imposed by municipal authorities to defray the cost of providing certain governmental services and public improvements. The amount of such charges cannot always reliably be predicted and may arise after lands are acquired. The Corporation may also be required to obtain numerous government approvals and permits before it can commence construction of projects and obtaining such approvals and permits can require substantial expense, time and risk. The Corporation’s participation in its planned projects may be subject to additional costs or delays or may be precluded entirely from building its projects because of “no growth” or “slow growth” initiatives, building permit allocation ordinances, building moratoriums or similar government regulations that could be imposed in the future due to unforeseen health, safety, welfare or environmental concerns. Environmental regulations can also have an adverse impact on the availability and price of certain raw materials such as lumber.

Low-Priced Stocks are Subject to Greater Disclosure Requirements

The Securities and Exchange Commission adopted rules (“Penny Stock Rules”) that regulate broker-dealer practices in connection with transactions in penny stocks. The Common Shares of the Corporation fall within the Commission’s definition of a penny stock. The closing price of the Corporation’s shares on March 8, 2005 was US$0.08. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current prices and volume information with respect to transactions in such securities is provided by the exchange or system). The Penny Stock Rules require a broker-dealer, prior to effecting a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission that provides information about penny stocks and the nature and level or risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the Penny Stock Rules require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker-dealer must receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that is subject to the Penny Stock Rules, shareholders may find it more difficult to sell their shares.

There Is A Limited Market For the Corporation’s Common Stock. If A Market For The Corporation’s Common Stock Is Developed, Then The Stock Price May Be Volatile

The Corporation’s common stock is traded on the OTC Bulletin Board. However, there is a limited market for the Corporation’s common stock and there is no assurance that investors will be able to sell their shares in the public market. The Corporation anticipates that the market price of its common stock will be subject to wide fluctuations in response to several factors, such as:

1.	actual or anticipated variations in the Corporation’s results of operations;
2.	the Corporation’s ability or inability to generate new revenues;

- 6 -

3.	increased competition; and
4.	conditions and trends in the horse racing industry.

Further, companies traded on the OTC Bulletin Board have traditionally experienced extreme price and volume fluctuations. Accordingly, the Corporation’s stock price may be adversely impacted by factors that are unrelated or disproportionate to its operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of the Corporation’s common stock.

The Corporation’s Audited Financial Statements Contain a Note about the Corporation’s Ability to Continue as a Going Concern

The Corporation’s financial statements have been prepared on the basis of accounting principles applicable to a going concern. As of August 31, 2004 the Corporation had an accumulated deficit of $18,629,484, which if prepared under U.S. GAAP would have been an accumulated deficit of US$24,179,064. The Corporation continues to incur operating losses, including losses of $1,211,718 during the fiscal year ended August 31, 2004 ($4,617,958 in 2003, and $2,602,640 in 2002). The Corporation’s ability to continue as a going concern and the recoverability of the amounts shown for predevelopment costs is primarily dependant on the ability of the Corporation to operate the Horsepower World Pool profitably in the future. The Corporation plans to meet anticipated financing needs in connection with its obligations by the exercise of stock options, share purchase warrants and through private placements, public offerings or joint venture participation by others. Failure to continue as a going concern would require a restatement of assets and liabilities on a liquidation basis, which would differ materially from the going concern basis on which the Corporation’s financial statements were prepared. Under U.S. GAAP, the auditor’s report on the consolidated financial statements contains an explanatory paragraph when the financial statements are affected by conditions and events that cast substantial doubt on a company’s ability to continue as a going concern such as those described in Note 1 to the financial statements.

Foreign Incorporation

The Corporation is incorporated under the laws of Canada and a majority of the Corporation’s directors and officers are residents of Canada. Consequently, it may be difficult for United States investors to effect service of process within the United States upon the Corporation or upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under the United States Securities Exchange Act of 1934, as amended. A judgment of a U.S. court predicated solely upon such civil liabilities may not be enforceable in Canada by a Canadian court if the U.S. court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter. There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or the Corporation predicated solely upon such civil liabilities.

- 7 -

ITEM 4.     INFORMATION ON THE COMPANY

A.     HISTORY AND DEVELOPMENT OF THE COMPANY

Name and Incorporation History

The Corporation was incorporated on April 7, 1986 pursuant to theCompany Act (British Columbia) under the name “307198 B.C. Ltd.” and commenced trading on the Vancouver Stock Exchange (now the TSX Venture Exchange) (the “Exchange”) on May 3, 1988. The Corporation’s shares were voluntarily de-listed from the Exchange effective at the close of trading December 11, 1997.

On May 14, 1999, the common shares of the Corporation were approved for quotation by the National Association of Securities Dealers on the OTC Bulletin Board.

The Corporation changed its name from “307198 B.C. Ltd.” to “Fircrest Resources Ltd.” on July 9, 1986. On October 30, 1991, the Corporation consolidated its authorized capital from 100,000,000 common shares without par value to 20,000,000 common shares without par value and the name of the Corporation was changed from “Fircrest Resources Ltd.” to “NTC Capital Corporation”.

On March 1, 1994, the Corporation changed its name from “NTC Capital Corporation” to “Sungold Gaming Inc.”, to reflect the nature of its business.

On May 26, 1997, the Corporation increased its authorized capital from 20,000,000 to 60,000,000 common shares, and changed its name from “Sungold Gaming Inc.” to “Sungold Gaming International Ltd.”, to reflect the nature and location of its business. Subsequently, the authorized share capital was decreased to 58,875,000 due to cancellation of escrow shares in accordance with Section 232 of theCompany Act (British Columbia). On March 20, 2000, the Corporation changed its name from “Sungold Gaming International Ltd.” to “Sungold Entertainment Corp.”. Management of the Corporation believed that the name more accurately reflected the future direction and business of the Corporation.

At the Corporation’s Annual General Meeting held on February 22, 2002, the shareholders approved an increase in the Corporation’s authorized capital to 100,000,000 common shares to ensure that there are sufficient shares reserved for future issuance. The shareholders also approved the creation of 100,000,000 Class “A” Preference Shares, and the creation of 100,000,000 Class “B” Preference Shares, to permit future preferred share financings.

On December 12, 2003, the Corporation changed its name to “Sungold International Holdings Corp.” and was continued under theCanada Business Corporations Act, thereby changing from a provincial to a Canadian federally incorporated company, at which time the authorized capital was changed to an unlimited number of common shares.

Offices

The Corporation’s head office is located at 500 Park Place, 666 Burrard Street, Vancouver, British Columbia, Canada V6C 3P6 (Tel: 604-669-9580). The Corporation’s registered office is located at Suite 1880, Royal Centre, 1055 West Georgia Street, Box 11122, Vancouver, British Columbia, Canada V6E 3P3 (Tel: 604-687-5792).

History and Development of the Corporation

The Corporation is a development stage company focused on the development of property for horse racing, internet payment systems, and pari-mutuel, virtual, horseracing entertainment software.From 1988

- 8 -

to 1993, the Corporation was engaged in the mineral exploration business. Beginning in 1993, the Corporation decided to refocus its principal business and concentrate its resources on developing property for horse racing and entertainment.

Following the decision of management to change the nature of the Corporation’s business operations, the Corporation entered into an agreement in 1994 with the Gun Lake Indian Band in the State of Michigan, to develop and manage a full service casino and gaming operation (the “Gun Lake Agreement”). In 1999, the Gun Lake Band breached the agreement with the Corporation. As a result, the Corporation filed a lawsuit in the Michigan courts against the Gun Lake Band claiming damages for breach of contract. In 2002, the Michigan Court of Appeals court dismissed the appeal on the basis of the Gun Lake Band’s claim of sovereign immunity. In 2003, the Michigan Supreme Court denied the Corporation an application to appeal the Michigan Court of Appeals court decision and in 2003 the Corporation decided not to appeal the decision to the United States Supreme Court.

Management changes which were effective May 1, 1998 and June 1, 1998 took place in order to enhance the Corporation’s management expertise in the Corporation’s principal business undertaking of developing property for horse racing and entertainment in major population centres. Management changes which were effective in August and September, 1999, in February, 2000, October, 2001, December, 2001 and January 2002 have also taken place in order to enhance the Corporation’s management expertise in the Corporation’s businesses of developing wagering systems at racetracks, online payment processing, entertainment in major population centres and broadcasting the Horsepower® system.

The Corporation entered into a letter of intent dated December 8, 1997, which was subsequently amended and extended, with TAC International Investments LLC (“TAC”), a private investment company, regarding Richmond Thoroughbred Training Centre. Pursuant to the TAC letter of intent, if the Corporation receives authorization to develop the complex from the City of Richmond and the Province of British Columbia prior to October 1, 2005, TAC agrees to purchase six million common treasury shares of the Corporation at US $4.00 per share by way of private placement.

In September, 1999, the Corporation, through its wholly owned subsidiary, Horsepower Broadcasting Network Inc., the Corporation acquired computer hardware for developing software and leased a hosting facility that enables Horsepower^TM to operate the $US based World wagering pool at licensed racetracks and licensed teletheatres worldwide. The Corporation engaged another of its wholly owned subsidiaries Horsepower Broadcasting Network (HBN) International Ltd. (“HBN”) to test run their US$ wagering program through the internet.

In February, 2001, the Corporation through its subsidiaries, operated the Horsepower® World Pool pari-mutuel wagering system. In March 2003 the Corporation made a strategic decision to offer the Horsepower® pari-mutuel wagering system and the Horsepower World Pool, exclusively through licensed, land based racetracks and licensed off track betting centres and to grant long term licenses to operate the Horsepower pari-mutuel wagering system exclusively to authorized racetrack affiliates (“A.R.A.'S”) worldwide.

In May, 2001, the Corporation acquired the right, title and interest to the internet payment system technology of SafeSpending® from SafeSpending Services Inc. The SafeSpending® internet payment system is intended to become a prepaid spending system that uses a unique and personalized PIN number which can be used to make anonymous purchases online from merchants and individuals. The acquisition agreement includes all copyrights, trademarks, source codes and SafeSpending’s intellectual property. Under the terms of agreement the Corporation agreed to pay a 7.5% royalty upon the Corporation or its licensed subsidiary receiving $1,000,000 in net revenue from operation, sale or license of the technology.

- 9 -

Recent Corporate Developments

Since August 31, 2003 Sungold has experienced the following significant developments:

1.	The Corporation’s wholly owned subsidiary Horsepower Broadcasting Network (HBN) International Ltd. (“HBN”) entered into five year non-exclusive and non-transferable license agreements for the use of HBN’s Horsepower™ pari-mutuel wagering based virtual horse racing game and certain maintenance and support services in relation to the operation and installation of the Horsepower™ system, with the following licensees the (“Licensees”):
	(a)	Pompano Park Racing, the license agreement was entered into in March, 2004.
	(b)	Manitoba Jockey Club Inc, the license agreement was entered into in April, 2004.
	(c)	Truro Raceway, the license agreement was entered into in May, 2004.
	(d)	Invereness Raceway, the license agreement was entered into in August, 2004.
	(e)	Fredericton Exhibition Limited, the license agreement was entered into in September, 2004.
	(f)	Buffalo Trotting Association, the license agreement was entered into in November, 2004.
	(g)	Flagler Greyhound Track, the license agreement was entered into in November, 2004.
	In consideration of the grant of license each Licensee agreed to pay 86% of the net revenue received by the Licensee from customers playing the Horsepower™ game. Each of the license agreements is subject to termination in the event that: (i) the Licensee fails to make any required payments under the agreement, (ii) the Licensee breaches any of its covenants or commits a breach of its obligations under the agreement that are not cured within 20 days written notice to the Licensee.
2.	During the year the Corporation signed a $275,825 software development agreement with a consulting company for its Horsepower™ program. The owner of the consulting company is Jeff Grant, the Chief Technical Officer of HBN. See “Item 7. Major Shareholder And Related Party Transactions”.
3.	In July 2004, the Corporation obtained an option to purchase 126 acres of land southwest of No. 8 Road and Westminster Highway in Richmond, BC, Canada for the purpose of developing a horse training complex, subject to approval of all zoning and regulatory authorities. The agreement gave the Corporation the option to purchase the Westminster Property for $10,500,000 until January 2, 2005. The option expired on January 2, 2005. The Corporation continues to be interested in pursuing this project and may seek to acquire a new option on the Westminster Property or other suitable property. See “Item 4. Information On The Company - Business Overview”.
4.	In July 2004, the Corporation renegotiated to extend the agreement with TAC International Investments LLC (“TAC”) which is interested in both the Vancouver one-mile racecourse and the Corporation’s Richmond Equine Training Center project. The agreement sets out the intention of both parties that upon the Corporation receiving the appropriate permission from the Cities of Vancouver and of Richmond, British Columbia and from the Province of British Columbia to develop the project, the interested party would purchase 6 million common treasury shares of Sungold at a price of US$4.00 per share. The agreement was extended to October 1, 2005. In the event that the Corporation does not complete the financing with TAC, the Corporation will require additional financing in order to proceed with its Vancouver Thoroughbred Park (“VTP”) proposal. As at August 31, 2004, the Corporation expended $12,919 in direct costs on the VTP project. See “Item 4. Information On The Company - Business Overview”.

- 10 -

5.	In the past twelve months the Corporation undertook various initiatives to streamline its operations, activities and strategies to reduce its costs. The primary focus of these activities in 2004 was to reposition Sungold from a financial perspective. The Corporation was able to reduce its operating expenses from $2,601,855 in fiscal 2003 to $1,211,718 in 2004.
6.	As part of the Corporation’s decision to streamline and restructuring its operations the Corporation dissolved its wholly owned inactive subsidiary Horsepower Broadcasting Network Inc., in January, 2005.
7.	As part of the Corporation’s corporate restructuring during the past twelve months, the Corporation appointed Larry Simpson as Chief Executive Officer and President of Horsepower Broadcasting Network (HBN) International Ltd. and Roy Woodbridge has been appointed to the Corporation’s board following the Corporation’s 2005 annual meeting of shareholders. See “Item 6. Directors, Senior Management and Employees”.

For fiscal 2005 management is considering, as part of the Corporation’s business plan, making further fundamental changes to Sungold’s business strategies including, but not limited to, focusing on the Corporation’s Horsepower® World Pool Wagering System, selling assets or subsidiaries, pursuing a revised business focus, further reducing the Corporation’s level of business activity, discontinuing certain of the Corporation’s current projects or making other significant changes.

The Corporation’s principal capital expenditures currently in progress consist of:

• The Horsepower® based racing system, source codes, patent, trademarks and worldwide licence;

• The rights, title and all intellectual property rights to the Safespending® anonymous internet payment system;

• Certain computer hardware and software for scaleable operation of multiuser wagering systems; and

• Investment in research and development related to pari-mutuel wagering systems and online payment processing systems.

The Corporation intends to continue to finance its operations through the issuance of equity and debt financing and through revenues from Horsepower® World Pool system.

During the three year period ended August 31, 2004, the Corporation financed its operations by selling 64,916,666 in equity securities either for cash or in settlement of debt. In the same three year period, the Corporation spent $284,684 in acquisition of capital assets, $107,166 in direct costs and $3,720,816 in indirect overhead and administrative costs, for a total of $4,112,666 spent on development expenditures related to its entertainment projects, including approximately $284,684 in capital assets, $107,166 in direct costs for a total of approximately $391,850 on its current projects to August 31, 2004. See “Business Overview” below.

- 11 -

B.     BUSINESS OVERVIEW

The Corporation and its wholly owned subsidiaries, SafeSpending Inc., a company incorporated under the laws of Arizona, Horsepower Broadcasting Network (HBN) International Ltd., a company incorporated under the laws of Canada, and Racing Unified Network (R.U.N.) Inc. a company incorporated under the laws of Canada, are in the business of developing and operating entertainment facilities and online virtual horse racing and prepayment systems.

The Corporation’s present business operations consist of the following projects to develop entertainment, racing and pari-mutuel wagering operations:

1.     HORSEPOWER BROADCASTING NETWORK (HBN) INTERNATIONAL LTD.

The Corporation controls the international rights, title and interest in the Horsepower® World Pool, random, virtual horserace and pari-mutuel based wagering system. The Horsepower® World Pool Wagering System (“Horsepower®”) operates through licensed, racetrack operators by Horsepower Broadcasting International (HBN) Ltd., a subsidiary company 100% owned and controlled by the Corporation. Horsepower® is a computer generated horse racing jackpot system, which is viewed in real time worldwide. Players can win small prizes or multimillion-dollar jackpots from a $1 base wager.

The Corporation believes that due to the state of the overall worldwide lottery market including the many racetrack facilities worldwide, there are many opportunities for the Corporation to offer Horsepower® as a pari-mutuel wager worldwide. The market for Horsepower® includes racetracks and off track betting facilities worldwide that potentially can offer the Horsepower World Pool as a pari-mutuel wager.

The Corporation owns the exclusive perpetual right and license to market its Horsepower® proprietary system, commercial sponsorships, advertising and other promotional materials in connection with the use of the technology. This includes the rights to all intellectual property including copyrights, patents and trademarks.

During the most recently completed fiscal year, the Corporation assisted its wholly owned subsidiary HBN to develop the Horsepower® system for worldwide racetrack introduction. HBN has added a Chinese wagering format for racetrack applications of the Horsepower® system.

Horsepower® Systems Management and Horsepower® Security are internally managed by HBN. An advertising/affiliate marketing program has been established to develop Horsepower® and create awareness of the Corporation as a public corporation.

Legal protection is an ongoing priority for the Corporation. All developments in Horsepower® are protected by a patent, trademark and copyright program. Registered trademarks are in place for Sungold®, Horsepower®, Quick 6® and Safespending®.

Industry Recognition

In November 2001, the Corporation and HBN were awarded the International Internet Gaming Innovator Award at the Fifth Annual Symposium on Internet Gaming held in Dublin, Ireland. Horsepower® was also featured on the front page of Thoroughbred Times Magazine (America’s premier weekly Thoroughbred magazine) on September 23, 2001.

- 12 -

1.     VANCOUVER THOROUGHBRED PARK

In 2001, the Corporation presented a proposal to renovate the Hastings Thoroughbred Park horse racing facility (the “Vancouver Thoroughbred Park” or “VTP”) located in Vancouver, British Columbia, in conjunction with the construction of a one mile thoroughbred training centre in Richmond, British Columbia, Canada. The Corporation continues to negotiate the proposal with the owners of the VTP and has developed a team with development, financing and operations expertise as well as architects that intend to work to revive the racecourse. The proposal is open to a possible joint venture with a new emphasis on the core live racing product.

The Corporation has entered into a letter of intent with TAC which may provide the Corporation with US$24,000,000 in financing for racecourse development in British Columbia. The letter of intent between the Corporation and TAC grants TAC an option to purchase six million shares of the Corporation’s common stock for $4 US per share until October 1, 2005. In the event that the Corporation does not complete the financing with TAC, the Corporation will require additional financing in order to proceed with its VTP proposal. As at August 31, 2004, the Corporation expended $12,919 in direct costs on the VTP project.

Vancouver Thoroughbred Park Racing Days, Licenses

The approval to operate the Vancouver Thoroughbred Park and policies related to pari-mutuel wagering activities are regulated by the Province of British Columbia. The Corporation must submit an application for business licenses required to operate the Vancouver Thoroughbred Park. The Corporation must also submit an application to the B.C. Government for authorization to conduct horse racing and to receive race dates for the racing seasons and apply to the B.C. Gaming Commission for approval to operate Horsepower® electronic horse racing at the Vancouver Thoroughbred Park. The operator of the Vancouver Thoroughbred Park must receive the approval of the Solicitor General before the required permits, licenses and race days will be issued for VTP.

The Corporation anticipates that TAC, pursuant to the TAC Letter of Intent, will subscribe to the purchase of six million shares of the Corporation’s common stock. See “Richmond Equine Training Centre.” The proceeds are expected to be used for the racetrack development.

TAC’s agreement to purchase the six million common shares of the Corporation expires on October 1, 2005, unless extended by the parties. There can be no assurance that the City of Vancouver or the Province of British Columbia will provide the approval needed to operate the Vancouver Thoroughbred Park before October 1, 2005, if at all, or that TAC will purchase the Corporation’s treasury shares in the private placement as agreed. If such private placement is completed, there can be no assurance that the funds will be sufficient to complete the Vancouver Thoroughbred Park. If the Corporation is unable to obtain the required approval or financing required to complete the project, the Corporation may abandon its plans to operate the Vancouver Thoroughbred Park.

Summary of Governmental Regulation of the Vancouver Thoroughbred Park

The process for obtaining regulatory approval for the Vancouver Thoroughbred Park is complex and time consuming. In the future, the federal, and provincial legislature may pass legislation that may place additional regulatory requirements on the Corporation’s plans to develop or operate the Vancouver Thoroughbred Park.

- 13 -

2.     RICHMOND EQUINE TRAINING CENTRE “RETC”

In July 2004, the Corporation obtained an option to purchase 126 acres of land southwest of No. 8 Road and Westminster Highway in Richmond, BC, Canada (the “Westminster Property”) for the purpose of developing a horse training complex, subject to approval of all zoning and regulatory authorities (the Richmond Equine Training Center”). The agreement gave the Corporation the option to purchase the Westminster Property for $10,500,000 until January 2, 2005. The option expired on January 2, 2005. The Corporation continues to be interested in pursuing this project and may seek to acquire a new option on the Westminster Property or other suitable property.

In July 2004, the Corporation renegotiated to extend the agreement with a TAC International Investments LLC (“TAC”) which is interested in both the Vancouver one-mile racecourse and the Corporation’s Richmond Equine Training Center project. The agreement sets out the intention of both parties that upon the Corporation receiving the appropriate permission from the Cities of Vancouver and of Richmond, British Columbia and from the Province of British Columbia to develop the project, the interested party would purchase 6 million common treasury shares of Sungold at a price of US$4.00 per share. The agreement was extended to October 1, 2005.

Status of Richmond Equine Training Centre

The Corporation has undertaken extensive activities related to the development and obtaining regulatory approval for its Richmond Equine Training Centre. Below is an outline of the activities undertaken by the Corporation and the status of Richmond Equine Training Centre as of the date of this annual report.

• The Corporation engaged Hunter Interests of Maryland and Racing Resource Group of Colorado to prepare a study of the British Columbia thoroughbred industry and the economic feasibility for Richmond Equine Training Centre.

• The Corporation engaged Lea and Associates to produce a traffic study for Richmond Equine Training Centre. Lea and Associates subsequently met with the Ministry of Transportation and Highways and confirmed that the Richmond Equine Training Centre traffic plan to access Highway 91 directly by Nelson Road is consistent with the strategic plans of B.C. Transportation and Highway.

• The Corporation engaged Ewing, Cole, Cherry and Brott as the master planner and executive architect/consulting architect for the Richmond Equine Training Centre. Ewing, Cole, Cherry and Brott has provided the Corporation consulting services related to site selection and market analysis, prepared preliminary designs for the Richmond Equine Training Centre complex and entered into initial discussions with officials at Richmond Planning and Urban Development.

• B.C. Soil Scientists Eveco Consultants prepared an agricultural assessment and application strategy for the Gilmore Property for the Corporation. The agricultural assessment indicates that the intended use of the Richmond Property is consistent with the agricultural capability of the surrounding areas and is projected to realize benefits for both local and regional agricultural development.

• The Corporation engaged Marktrend Research to conduct a survey of Richmond residents and a second survey of Greater Vancouver residents to assess public opinion of the Richmond Equine Training Centre proposed project. The Marktrend results indicate that 70% of those in Richmond with an opinion supported the proposal and planned site of Richmond Equine Training Centre.

- 14 -

• The Corporation has engaged P.C.L. Constructors to act as the general contractor for Richmond Equine Training Centre. P.C.L. is Canada’s leading building contractor and has successfully constructed major arenas, equine centres and racetracks.

• The Corporation has retained Eikos Planning Inc. to provide consulting services with the City of Vancouver and all provincial agencies affected by the Richmond Equine Training Centre development proposal.

The regulatory approval process is complex, time consuming and expensive. There can be no assurance that the Corporation will obtain the required financing, appropriate authorization, approval and permits to develop Richmond Equine Training Centre in a timely manner or that the Corporation will successfully develop and construct Richmond Equine Training Centre. TAC’s agreement to purchase the six million common shares of the Corporation to partially fund Richmond Equine Training Centre expires on October 1, 2005, unless extended by the parties. There can be no assurance that the Province of British Columbia will provide the approval needed to complete development of Richmond Equine Training Centre before October 1, 2005, if at all. If such private placement is completed, there can be no assurance that the Corporation will secure additional funds required to complete Richmond Equine Training Centre. Except for the TAC Letter of Intent, the Corporation has no other agreements related to the financing for the Richmond Equine Training Centre. If the Corporation is unable to obtain the required approval or financing required to complete the project, the Corporation may abandon its plans to complete the Richmond Equine Park Training Center.

3.     SAFESPENDING® PROJECT

In May 2001, the Corporation acquired the entire world wide right, title and interest to the internet payment system technology of Safespending Services Inc. (“SafeSpending®”). The Safespending® internet payment system is a prepaid anonymous cash spending system that uses a unique and personalized PIN number which can be used to make purchases online from merchants and individuals.

The acquisition agreement with SafeSpending® includes all copyrights, trademarks, source codes and SafeSpending’s® intellectual property. Under the terms of the agreement the Corporation has agreed to pay a 7.5 percent royalty of net revenue relating to the technology upon the Corporation or its subsidiary Horsepower Broadcasting Network Inc. receiving $1,000,000 in net revenue from operation, sales or license of the technology. The Corporation has been negotiating for a joint venture partner to distribute SafeSpending® through retailers (land based) on a worldwide basis. A patent is pending for the anonymous cash payment system in 105 countries.

The Corporation is in the preliminary stages of obtaining the regulatory and other approvals required to develop each of the Sungold® Projects. All of the Corporation’s projects are in the development stage and currently produce no revenues. The Corporation’s projects are in the pari-mutuel wagering/entertainment industry and are subject to significant regulatory requirements.

There can be no assurance that the Corporation will successfully develop all of the Projects currently under development or that such projects, if developed, will generate any revenues or profits from operations.

The Corporation anticipates it will need to raise approximately US$1,500,000 during the fiscal year ending August 31, 2005 to meet its minimum projected expenditures for such period. See “Description of Business - Plan of Operation.” There can be no assurance that the Corporation will successfully obtain such financing on acceptable terms.

- 15 -

Principal Markets

The Corporation’s principal markets include North America, Asia and Europe for the installation of the Horsepower® racing system at licensed racetracks.

Seasonality of the Corporation’s Business

The Corporation’s business is not seasonal nor does the Corporation require raw materials to conduct its business.

Marketing Channels

The Corporation’s marketing channels are primarily licensed world racetracks as well as the Internet and traditional multimedia.

PLAN OF OPERATION

The Corporation’s plan of operation is based on information provided in the reports of its consultants and the decisions of management. Set out below is a summary of the Corporation’s Plan of Operation and operating budget (in US Dollars) for each of the Corporation’s projects and for administration and marketing for the fiscal year ending August 31, 2005.

Richmond Thoroughbred Training Centre

The Corporation does not anticipate that the construction of the Richmond Thoroughbred Training Centre facilities will begin until after October, 2005, subject to the Corporation’s ability to: (i) rezone the Gilmore Land and the Fraser River Land, (ii) obtain regulatory approval for the project, and (iii) obtain additional financing for the project. Other factors which may affect the construction of the project are the projected cost of the project, economic conditions and other conditions that may affect regulatory approval of the Richmond Thoroughbred Training Centre. See “Risk Factors.” The Corporation believes that a majority of its activities on the Richmond Thoroughbred Training Centre during the remainder of the fiscal year ending August 31, 2005 will be related to pre-development activities and obtaining regulatory approval for the project. There can be no assurance that the Corporation will receive regulatory approval for the Richmond Thoroughbred Training Centre.

Set forth below is the Corporation’s anticipated operating budget for the Richmond Thoroughbred Training Centre for the fiscal year ending August 31, 2005.

Richmond Thoroughbred Training Centre

Option Payments	US$4,000
Legal	US$2,000
Total:	US $6,000

Horsepower™ Project

During the fiscal year ending August 31, 2005, the Corporation anticipates that its plan of operation related to the Horsepower™ pari-mutuel wagering system will consist of, among other things, (i) preparing the Horsepower™ system for introduction at selected international racetracks; (ii) development

- 16 -

of an advertising/sponsorship network focusing on mutual promotion to develop the Horsepower™ system and create awareness of the Corporation.

Set forth below is the Corporation’s anticipated operating budget for the Horsepower™ pari-mutuel wagering system for the fiscal year ending August 31, 2005.

Horsepower™ System

Operating Expenses	US$
Legal	$ 20,000
Software Development	150,000
Hardware Systems	50,000
System Management	100,000
Advertising/Marketing	125,000
Total Horsepower™ System:	US$445,000

Vancouver Thoroughbred Park

The Corporation’s operating budget for the financial year ending August 31, 2005 with respect to the Vancouver Thoroughbred Park is as follows:

Consulting Fees	US$15,000
Total Thoroughbred Park	US$15,000

- 17 -

Set forth below are the Corporation’s estimated operating budgets for administrative and marketing expenses for the fiscal year ending August 31, 2005:

Administration Expenses	US($)
Office/Telephone/Supplies	$10,000
Insurance	$10,000
Office Rent Services	$50,000
Legal/Audit/Trust Corporation	$150,000
Management Fees	$50,000
Consulting Fees	$300,000
Travel/Entertainment	$100,000
Contingency	$164,000
Total Administration Expenses	$834,000
Marketing Expenses	$200,000
TOTAL OPERATING BUDGET:	US$1,500,000

The Corporation’s total operating budget for the fiscal year ending August 31, 2005 is estimated to be approximately US$1,500,000. There can be no assurance that the Corporation’s actual expenditures for the fiscal year ending August 31, 2005 will not exceed the Corporation’s estimated operating budgets. Actual expenditures will depend on a number of factors, some of which are beyond the control of the Corporation, including, among other things, timing of regulatory approval of its projects, the availability of financing on acceptable terms, reliability of the assumptions of management in estimating cost and timing, certain economic and political factors, the time expended by consultants and professionals and fees associated with applications related to the Corporation’s projects. If the actual expenditures for such costs exceed the estimated costs or if events occur that require additional expenditures, the Corporation will be required to raise additional financing or to defer certain expenditures to meet other obligations. The failure to meet certain expenditures may cause the Corporation to default on material obligations and such default may have a material adverse effect on the Corporation’s business and results of operations.

C.     ORGANIZATIONAL STRUCTURE

The Corporation has three wholly owned subsidiaries: (i) SafeSpending Inc. (formerly Sungold Entertainment USA Inc.), a company incorporated under the laws of Arizona; (ii) Horsepower Broadcasting Network (HBN) International Ltd., a company incorporated under the laws of Canada; and (iii) Racing Unified Network (R.U.N.) Inc. a company incorporated on June 26, 2003, under the laws of Canada.

The Corporation dissolved its wholly owned subsidiary Horsepower Broadcasting Network Inc. in January, 2005.

D.     PROPERTY PLANTS AND EQUIPMENT

The Corporation’s corporate headquarters are located in Vancouver, British Columbia. The Corporation leases corporate office space at an annual rent of approximately $21,000, which includes rent, secretarial

- 18 -

services, two offices and the shared use of boardrooms. The Corporation has 27 months remaining on its current office lease. Management believes these offices are adequate for its needs and that the rates are comparable with market rates.

ITEM 5.     OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following should be read in conjunction with the Corporation’s financial statements, forming a part of this document, including note 10 to the annual financial statements which provides a reconciliation between US GAAP and Canadian GAAP.

Critical Accounting Policies

The Corporation’s financial statements are prepared in conformity with Canadian generally accepted accounting principles, which require management to make estimates and assumptions which can affect the reported balances. In determining estimates of net recoverable amounts and net realizable values, or whether there has been a permanent impairment in value, for, pre-paid and deposits, pre-development costs and equipment, patent rights and other assets, the Corporation relies on assumptions regarding applicable industry performance and prospects, as well as general business and economic conditions that prevail and are expected to prevail. Assumptions underlying asset valuations are limited by the availability of reliable comparable data and the uncertainty of predictions concerning future events.

By nature, asset valuations are subjective and do not necessarily result in precise determinations. Should the underlying assumptions change, the estimated net recoverable amounts and net realizable values may change by a material amount. The Corporation’s significant accounting policies are set forth in Note 2 to its consolidated financial statements, which should be read in conjunction with management’s discussion of the Corporation’s critical accounting policies and estimates set forth below.

Commitments and Contingencies

The Corporation’s activities are subject to various governmental laws and regulations relating to horse racing, virtual horse racing, copyrights, trademarks and patents. These regulations are continually changing. The Corporation believes its activities comply in all material respects with all applicable laws and regulations.

Translation of Foreign Currencies

Accounts recorded in foreign currency have been converted to Canadian dollars as follows:

• Current assets and current liabilities at exchange rates at the end of the year;

• Other assets at historical rates; and

• Revenues and expenses at the average rate of exchange for the month incurred.

• Gains and losses resulting from the fluctuation of foreign exchange rates are included in the determination of income.

Pre-development costs

The Corporation is in the development stage and capitalizes all costs related to its pre-development projects in accordance with Accounting Guideline No. 11, “Enterprises in the Development Stage”, issued by the Canadian Institute of Chartered Accountants. These costs will be amortized on the basis of revenue

- 19 -

generated in relation to the project following commencement of operations. When management decides a project is to be abandoned, costs of the abandoned project are written off to operations. As the date of this annual report, there were no projects which commenced operations.

The costs deferred at any time do not necessarily reflect present or future values. The ultimate recovery of such amounts depends on the Corporation successfully developing and commencing the project.

Overview

To date, the Corporation has not earned significant revenues and is considered to be in a development stage. The recoverability of pre-development costs is primarily dependent on the ability of the Corporation to put its pre-development projects into economically viable products in the future.

The Corporation has funded its business operations, working capital and business development by the issuance of share capital under private placements and by the exercise of accompanying warrants and stock options in the aggregate amount of $15,717,808 for cash and $1,967,758 for debt settlement since inception.

As of August 31, 2004, the Corporation had $185,657 cash, $58,768 in prepaid expenses and $200,334 in accounts payable. As at August 31, 2003, the Corporation had $47,928 cash on hand, $4,154 in prepaid expenses and $175,238 in accounts payable.

The Corporation's net losses for the fiscal years ended 2004 and 2003 were $1,211,718 and $4,617,958 respectively.

- 20 -

A.     OPERATING RESULTS

The following is a summary of selected financial data for the Corporation for its last three completed financial years.

			Year ended
	August 31,		August 31,		August 31,
	2004		2003		2002
Revenue(1)	$Nil		$1,317		$19,457
Net Income (Loss)	($1,211,718	)	($4,617,958	)	($2,602,097	)
Earnings (Loss) Per Share	($0.0131	)	($0.0680	)	($0.0560	)
Net Income (Loss) US GAAP	($1,274,878	)	($2,601,415	)	($2,472,205	)
EPS (Loss) US GAAP	($0.0138	)	($0.0383	)	($0.0533	)
Dividends Per Share	$Nil		$Nil		$Nil
Dividends Per Share (US GAAP)	$Nil		$Nil		$Nil
Weighted Average Number of Shares(2)	92,239,057		67,894,398		46,403,429
Working Capital	$34,395		($157,799	)	$64,291
Pre-development costs	$825,154		$762,042		$2,768,316
Long Term Debt	$Nil		$17,253		$36,676
Long Term Debt (US GAAP)	$Nil		$17,253		$36,676
Shareholder’s Equity	$1,382,004		$1,208,525		$3,356,838
Total Assets	$1,592,034		$1,418,406		$3,708,525
Total Assets (US GAAP)	$766,880		$656,364		$940,209

Notes

(1)	Foreign exchange gain (losses) have been reclassified to form part of the general and administrative expenses from revenue.
(2)	As adjusted to reflect a 21 for 20 stock split effected on September 8, 2003.

Year Ended August 31, 2004 Compared to August 31, 2003

Revenues. The Corporation had no revenue from operation during fiscal 2004 compared to $1,317 during the same period in 2003 and a foreign exchange gain of $48 compared to a loss of $10,269 for 2003.

Operating Expenses.Operating expenses for fiscal 2004 decreased to $1,211,718 compared to $2,601,855 for fiscal 2003, primarily due the Corporation being in a period of retrenchment and restructuring administration and management which resulted in reduced management and consulting fees.

Financing Expenditures.During the year ended August 31, 2004, the Corporation issued 19,500,000 private placement units to settle $1,385,197 of debts. Proceeds from the exercise of share purchase warrants, incentive share purchase options and private placements totaled $Nil in fiscal 2004 compared to $1,835,162 in fiscal 2003.

Pre-development Expenditures. Overall the pre-development expenditures and investments capitalized under Canadian GAAP for the year ended August 31, 2004 were increased by $63,112, as compared to a decrease of $2,006,274 in 2003, which includes the impairment write-off of $2,017,420 in 2003. The Vancouver Thoroughbred Park/Richmond Equine Training Centre project pre-development expenditures for fiscal 2004 were $12,919 and the Safespending® project pre-development expenditures for fiscal year 2004 were $30,073. The Horsepower® software development project pre-development expenses for fiscal 2004 were $20,120.

- 21 -

Professional and consulting expenditures for fiscal 2004 were $488,500 compared to expenses of $547,829 in fiscal 2003. Investor relations fees decreased to $35,192 in fiscal 2004 from $214,843 in fiscal 2003. Office expenses decreased to $59,673 in fiscal 2004 from $164,044 in fiscal 2003.

Management Fees.In fiscal years 2004 and 2003, the Corporation had agreements with two consultants providing full time administration and management services and agreements with ten other consultants providing services such as internet consulting, marketing and corporate development. Management fees for the two agreements respecting management services during the year ended August 31, 2004 were $58,353 compared to $286,603 in 2003. Fees for internet services in fiscal 2004 were $23,831 compared to $184,249 in 2003.

Net Loss.The Corporation had a net loss of $1,211,718 for fiscal 2004 which was largely due to the Corporation being in a period of retrenchment and restructuring administration and management, compared to net loss of $4,617,958 for fiscal 2003 which was primarily due to a one time impairment write down of $2,017,420 primarily related to the Gun Lake project. The $0.01 loss per share for fiscal 2004 compares to $0.07 loss per share for fiscal 2003 and reflects the Corporation's net loss in the 2003 and 2004 fiscal years under Canadian GAAP.

As the Corporation's only revenue-producing technology Horsepower® pari-mutuel wagering system is in the early startup stage, income from operation is not material at this point. However, the Corporation anticipates that the system will continue to develop more revenues as the HBN World Pool Racetrack Program becomes operational.

The Corporation’s “The Horsepower World Pool Jackpot Program” has attracted new Authorized Racetrack Affiliates (A.R.A.’s) under five year exclusive agreements with the following Racetracks; Pompano Park in Florida, Assiniboia Downs in Manitoba, Fredericton Raceway in New Brunswick, Buffalo Raceway in New York, Flagler Greyhound Track in Miami, Florida, and both Truro Raceway and Inverness in Nova Scotia. In 2004, interest has developed in the Horsepower A.R.A. opportunity in dozens of jurisdictions within North America and the Caribbean. In 2005, the Corporation plans to sign up new A.R.A.’s within North America, the Caribbean and overseas.

Year Ended August 31, 2003 Compared to August 31, 2002

The Corporation had $1,317 revenue from operation during fiscal 2003 compared to $19,547 during the same period in 2002 and $10,269 in foreign exchange loss for fiscal year 2003 compared to $4,526 loss for 2002. The Corporation had a net loss of $4,619,275 for fiscal 2003 compared to net loss of $2,602,640 for fiscal 2002. Net losses from operations were composed entirely of operating expenses, including a write down of pre-development costs and investments of $2,017,420.

In November 2002, the option to purchase 227 acres in Richmond, British Columbia, Canada for the purpose of developing a horse training complex expired, and the Corporation did not obtain a new option to purchase 100 acres on the same property. Consequently, the Corporation wrote-off all deferred expenditures that were related directly to the option property in 2003.

During the year ending August 31, 2003, the Corporation issued 11,750,000 private placement units to settle $582,561of debts. Proceeds from the exercise of share purchase warrants, incentive share purchase options and private placements totalled $1,835,162 in fiscal 2003 compared to $2,388,010 in fiscal 2002.

Overall the pre-development expenditures and investments capitalized under Canadian GAAP for the year ended August 31, 2003 were decreased by $2,006,274, as compared to a decrease of $125,909 in 2002, which represents the addition of $11,146 representing consulting and legal fees of $1,680 on the Vancouver Thoroughbred Park/Richmond Equine Training Centre project and $9,466 on the

- 22 -

Safespending® project, less the impairment write-off of $2,017,420. The Vancouver Thoroughbred Park/Richmond Equine Training Centre project pre-development expenditures for fiscal 2002 were $19,821 in 2002 and the Safespending® project pre-development expenditures for fiscal year 2002 were $13,087. The Horsepower® software development project pre-development expenses for fiscal 2003 and 2002 were nil. In 2003, the Corporation discontinued the Gun Lake project and provided an impairment write-off of all related pre-development costs of $1,769,717. In November 2002, the Corporation’s option to purchase a 227 acre property in Richmond expired and was not renewed. The Corporation wrote-off pre-development costs of $247,703 relating to the option on the Richmond property in 2003.

Professional and consulting expenditures for fiscal 2003 were $547,829 compared to expenses of $242,565 in fiscal 2002. Investor relations fees increased to $214,843 in fiscal 2003 from $169,935 in fiscal 2002. Office expenses increased to $164,044 in fiscal 2003 from $60,936 in fiscal 2002.

In fiscal years 2003 and 2002, the Corporation had agreements with two consultants providing full time administration and management services and agreements with ten other consultants providing services such as internet consulting, marketing and corporate development. Management fees for the two agreements respecting management services during the year ended August 31, 2003 were $286,603 compared to $246,000 in 2002. Consulting fees for internet services in fiscal 2003 were $184,249 compared to $410,144 in 2002.

The $0.07 loss per share for fiscal 2003 compares to $0.06 loss per share for fiscal 2002 and reflects the Corporation's net loss in the 2003 fiscal year.

As the Corporation's only revenue-producing technology Horsepower® system is in the early startup stage, income from operation is not material at this point. However, the Corporation anticipates that the system will continue to develop more revenues as the player base develops.

B.     LIQUIDITY AND CAPITAL RESOURCES

As at August 31, 2004, the Corporation had the following cash:

Cdn Account	$92,958
US Account (expressed in CDN$)	$92,699
TOTAL:	$185,657

The Corporation has a planned operating budget of US$1,500,000 for the fiscal year ended August 31, 2005. The Corporation currently does not have sufficient funds to fund its operations through the fiscal year ended August 31, 2005, and will be required to raise additional funds from, operations or through equity or debt financing. The Corporation anticipates it will raise funds to meet its planned operating budget through private placements of equity and debt financing.

There can be no assurance that the Corporation's actual expenditures for the fiscal year ending August 31, 2005 will not exceed the Corporation's estimated operating budget. If the actual expenditures for such cost exceed the estimated costs or if events occur that require additional expenditures, the Corporation will be required to raise additional financing or to defer expenditures to meet other obligations. The failure to meet certain expenditures may cause the Corporation to default on material obligations and such default may have a material adverse effect on the Corporation's business and results of operations. If the Corporation is unable to obtain additional financing on acceptable terms, the Corporation will be unable to meet its obligations and the Corporation may be forced to abandon its interest in some of its projects and write off its investment.

- 23 -

The following is a summary of the Corporation’s financing activities during the fiscal years ending August 31, 2004, 2003 and 2002:

1.	During the year ended August 31, 2004, the Corporation issued 19,500,000 common shares pursuant to private placements to settle $1,385,197 of debts owed by the Corporation. The exercise of share purchase warrants, and the exercise of incentive share purchase options for cash was $Nil. Also, on September 8, 2003 the Corporation issued 3,993,531 common shares pursuant to 21 for 20 stock split.
2.	During the year ended August 31, 2003, the Corporation issued 29,750,000 common shares pursuant to private placements, the exercise of share purchase warrants, and the exercise of incentive share purchase options for proceeds of $1,835,162 cash and to settle $582,561 of debts owed by the Corporation.
3.	During the year ended August 31, 2002, the Corporation issued 15,666,666 common shares pursuant to private placements, the exercise of incentive share purchase options and the exercise of share purchase warrants for proceeds of $2,388,010.

While the Corporation has been successful in raising the necessary funds in the past, there can be no assurance it can continue to do so. If such funds cannot be secured, the Corporation may be forced to curtail some of its development efforts to a level for which funding can be secured through new investment or joint venturing. If the Corporation cannot raise or arrange to obtain the cash requirements necessary to meet its minimum obligations for the Richmond Equine Training Centre, the Vancouver Thoroughbred Park and the SafeSpending® Project, some of its projects may be forfeited. The Corporation believes its minimum financial obligations during the fiscal year ending August 31, 2005 will be approximately US$1,500,000. The Corporation anticipates it will finance the Richmond Equine Training Centre by issuing six million common shares to TAC for US$4.00 per share pursuant to a letter of intent. The Corporation has TAC's commitment to purchase six million shares of the Corporation under the TAC letter of intent for US$24 million. The Corporation has not obtained any firm commitment to finance the Richmond Equine Training Centre. There can be no assurance that such financing will be obtained on acceptable terms. In 2004, the Corporation financed the Horsepower® World Pool system with equity financing. The Corporation anticipates it will finance the Horsepower® World Pool system and the SafeSpending® Project primarily through revenues from the Horsepower® World Pool system.

The Corporation does not currently have adequate funds available to finance its operations through August 31, 2005. The Corporation intends finance its operations through additional equity financings of its shares.

The Corporation's liquidity depends largely on the established financing capabilities of its principals and on its ability to access the capital markets or to enter into joint venture agreements. Although the Corporation has no plans to acquire additional projects or to explore new opportunities in fiscal 2005, the Corporation may enter into arrangements to do so if management determines that such projects are economically viable and in the best interest of the Corporation's shareholders. Such acquisition may affect the Corporation's ability to access the capital markets or to enlist new joint venture partners. The Corporation does not know of any other trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, the Corporation's liquidity either materially increasing or decreasing at present or in the foreseeable future.

The Corporation relies on private placements, investment by related parties and revenues from the licensing Horsepower Racetrack World Pool system for the working capital necessary for its operations. It is anticipated that financings will continue to be achieved through these means as well as through potential joint ventures. The Corporation has received expressions of interest from both private and public

- 24 -

investors. There can be no guarantee that the expressions of interest will be sufficient to fund the Corporation's projects.

As at August 31, 2004, the Corporation has no obligations under its capital lease. The Corporation repaid its the obligation under capital leases for two computer hardware leases in February 2004. The Corporation does not have any material commitments for capital expenditures.

C.     RESEARCH AND DEVELOPMENT

The Corporation has not expended any funds over the last three years on "Research and Development" as that term is defined in the CICA Handbook. The Corporation has, however, expended the following amounts directly in connection with software development of the Horsepower® World Pool system over the past three years:

	Pre-development costs	Computer	Computer
Year	- Consulting and legal	Hardware	Software
2002	-	$3,112	$4,579
2003	-	-	$181,084
2004	$20,120	-	$69,580
TOTAL	$20,120	$3,112	$255,243

The Corporation continues to be in the development stage of its operations. Consequently a significant amount of the Corporation's expenditures have been related to software development. The Corporation's plans for its software research and development expenditures for fiscal 2005 will represent a decreasing percentage of the Corporation's budget as advertising and marketing Horsepower® system are expected to begin generating revenues for the Corporation.

D.     TREND INFORMATION

The Corporation does not have sufficient history of operations, because it has been in the development stage until the last fiscal year, to be able to ascertain any trends in production, sales or costs. The Corporation is unaware of any trends, uncertainties, demands, commitments or events that are likely to have a material effect on its net sales or revenues, income from operations, profitability, liquidity or capital resources or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition except that the Corporation plans to exploit the trend towards online delivery of wagering systems and focus primarily on the trend towards racetrack friendly alternative wagering which the Corporation believes is in the initial stages of a major international expansion.

E.     OFF-BALANCE SHEET ARRANGEMENTS

As at the date of this annual report the Corporation does not have any off-balance sheet arrangements.

- 25 -

F.     TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

As of the date of the balance sheet for the Corporation’s last fiscal year end contained in this Form 20-F, the Corporation’s known contractual obligations identified in the following table are:

	Payments Due by Period
Contractual Obligations	Total	Less than	1- 3 years	3 -5 years	More than
		1 year			5 years
Long-Term Debt Obligations	-	-	-	-	-
Capital (Finance) Lease Obligations(1)	-	-	-	-	-
Operating Lease Obligations(2)	46,800	20,550	26,250	-	-
Purchase Obligations	-	-	-	-	-
Other Long-Term Liabilities reflected	-	-	-	-	-
on the Corporation’s Balance Sheet
under Canadian GAAP
Total	46,800	20,550	26,250	-	-

(1)	As of February 27, 2004 the Corporation repaid the outstanding balance of its two existing capital leases.
(2)	Operating lease obligations represent leases on the Corporation’s current offices to November, 2006.

G.     SAFE HARBOR

The safe harbor provided in Section 27A of theSecurities Act and Section 21E of theExchange Act applies to forward-looking information provided pursuant to Item 5.E and F above.

- 26 -

ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.     DIRECTORS AND SENIOR MANAGEMENT

All of the directors of the Corporation are elected annually by the shareholders and hold office until the next annual general meeting of shareholders or until their successors are duly elected and qualified, unless they sooner resign or cease to be directors in accordance with the Corporation’s bylaws. The Corporation’s last annual general meeting was held on March 4, 2005. The Corporation’s executive officers are appointed by and serve at the pleasure of the Board of Directors.

As of March 9, 2005, the following persons are directors and/or executive officers of the Corporation:

		Number of Common
Name	Position with the Corporation	Shares Owned
Art Cowie(1) (2) (3)	Director and President	1,356,900
Donald R. Harris	Director and Chairman	6,562,851
Roy Woodbridge(1)	Director	332,350
Dennis Hedtke(1) (2)	Director and Corporate Secretary	2,027,182

(1)	Member of the Corporation’s Audit Committee.
(2)	Member of the Corporation’s Executive Committee.
(2)	Includes 274,500 shares held in the name of Mr. Cowie’s spouse and 50,000 shares held by Eikos Planning Inc., a company controlled by Mr. Cowie.

Members of the Corporation’s board of directors are elected by the holders of the Corporation’s shares to represent the interests of all shareholders. The board of directors meets periodically to review significant developments affecting the Corporation and to act on matters requiring board approval. Although the board of directors delegates many matters to others, it reserves certain powers and functions to itself. The only standing committees of the Board of Directors of the Corporation is an audit committee and an executive committee. See “Board Practices” below.

None of the Corporation’s directors or executive officers are parties to any arrangement or understanding with any other person pursuant to which said individual was elected as a director or officer or member of senior management of the Corporation.

No director or executive officer of the Corporation has any family relationship with any other officer or director of the Corporation.

The following is a brief summary of biographical information on each of the officers and directors listed above:

ART COWIE, has served as President and director of the Corporation since January, 2003. Mr. Cowie has been a career community planner as well as a distinguished landscape architect, government affairs consultant and has an extensive public service record including member of the BC Legislature, Alderman for the City of Vancouver, Director of the Pacific National Exhibition, Chairman of Vancouver Board of Parks and Recreation, member of B.C. and Canadian Institutes of Planning, past President of the BC Society of Landscape Architects and a Fellow of the Canadian Society of Landscape Architects. Art is the designer for the Corporation’s proposed Hastings Park one-mile racecourse retrofit

DONALD R. HARRIS, has served as a director of the Corporation since January, 1998 and Chairman of the Board since December, 1999. Mr. Harris is the President and CEO of TAC International Investment LLC, a private investment company, and the Chairman of the Board and CEO of Town’s Edge Properties,

- 27 -

Inc., a developer of multiple residential and commercial properties, for over 31 years. Town’s Edge is the managing entity for 12 real estate investment general and limited partnerships worth in excess of US $65 million.

DENNIS HEDTKE, is presently the Corporate Secretary of the Corporation and has been a director of the Corporation since May, 2003. Mr. Hedtke is President and owner of Hedtke, Inc. a Manufacturer’s Representative firm offering engineered products to the mobile off-highway original equipment manufacturing market in 10 states. Mr. Hedtke is also founder and CEO of Specialty Fittings, Inc. a manufacturer of non-standard hydraulic fittings and Partner/Owner and CEO of Filtration Products Corporation, a manufacturing company with worldwide sales and distribution of hydraulic filters and accessories.

ROY WOODBRIDGE, has been a Director of the Corporation since March 4, 2005. He is President of Woodbridge & Associates, a consulting firm that works with Canadian companies, governments and international organizations to access international business opportunities and address policy issues related to the environment. He is a broadly-based executive with senior public and private sector management experience. As President of the Canadian Advanced Technology Association and as a Director of the Mining Association of Canada he has been a national industry spokesperson.

No director and/or executive officer of the Corporation has been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he or she is a director and/or executive officer, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he or she is an officer or director from engaging in or continuing any conduct, practice, or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.

B.     COMPENSATION

The Corporation does not compensate its directors for their services as directors. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors. The Board of Directors makes separate remuneration to any director undertaking services on behalf of the Corporation other than services ordinarily required of a director. Other than indicated below, no director received any compensation for his or her services as a director, including any committee participation or special assignments.

The Corporation grants stock options to directors, executive officers and employees. See “Options to Purchase Securities from the Corporation or Subsidiary”.

- 28 -

The following table sets forth details of the compensation paid during the Corporation’s fiscal year ended August 31, 2004, to directors and executive officers:

Directors and Officers	Salary/Bonus	Other Compensation
Kim N. Hart(1)	Nil	$276,842(2)
Anne Kennedy(4)	Nil	$58,353(2)
Art Cowie	Nil	$34,684(3)
Donald Harris	Nil	Nil
Dennis Hedtke	Nil	Nil
Walter Wolff	Nil	Nil
Larry R. Simpson	Nil	$30,000(2)
Troy Griffin	Nil	$4,860
Jeff Grant	Nil	$46,000

Notes

(1)	Mr. Hart was formerly President, Chief Executive Officer and a director of the Corporation’s subsidiary – Horsepower Broadcasting Network (HBN) International Ltd.
(2)	Paid in consideration of consulting services provided to the Corporation. See “Item 6.C. Board Practices”.
(3)	Paid as consulting fees to Eikos Planning Inc., a company controlled by Mr. Cowie.
(4)	Anne Kennedy resigned as a director of Sungold in April, 2004.

The aggregate amount of compensation paid by the Corporation during the fiscal year ended August 31, 2004 to all officers and directors as a group was $450,739.

No amounts have been set aside or accrued by the Corporation during the year ended August 31, 2004 to provide pension retirements or similar benefits for directors or executive officers of the Corporation pursuant to any plan provided for or contributed to by the Corporation.

OPTIONS TO PURCHASE SECURITIES FROM THE CORPORATION OR SUBSIDIARY

Stock Options to purchase shares from the Corporation are granted to directors and employees of the Corporation on the terms and conditions acceptable to the applicable securities regulatory authorities. The Corporation has no formal written stock option plan. No stock option granted under the stock option program is transferable by the optionee other than by will or the laws of descent and distribution, and each stock option is exercisable during the lifetime of the optionee only by such optionee. The exercise price of all stock options granted under the stock option program is based on the market price of the Corporation’s securities at the time of the grant of the incentive stock option and the maximum term of each stock option may not exceed five years.

- 29 -

The names and titles of the directors, executive officers and consultants of the Corporation to whom outstanding stock options have been granted and the number of shares subject to such stock options are set forth below as at August 31, 2004. The exercise price of the stock options is stated in U.S. dollars.

Name of Optionees	Options	Exercise Price (US)	Expiration Date	Total Outstanding Options at August 31, 2004
Officers and Directors:
Kim N. Hart	1,050,000	$0.06	February 28, 2006
	79,900	$0.085	March 05, 2006
	550,764	$0.08	January 04, 2007
	400,000	$0.0725	January 24, 2007	2,080,664
Donald R. Harris	300,000	$0.08	August 10, 2006
	108,000	$0.08	January 04, 2007	408,000
Walter Wolff	100,000	$0.15	February 16, 2006
	36,000	$0.08	January 04, 2007	136,000
Art Cowie	136,000	$0.11	January 15, 2007
	64,000	$0.05	May 27, 2008	200,000
Larry R. Simpson	200,000	$0.15	October 11, 2007	200,000
Dennis Hedtke	150,000	$0.05	May 28, 2008	150,000
Consultants:
Jeff Grant	100,000	$0.09	December 20, 2006
	36,000	$0.08	January 04, 2007	136,000
Robert Zeilke	300,000	$0.15	October 16, 2007	300,000
			Total	3,610,664

C.          BOARD PRACTICES

Directors, Officers and Term of Office

Directors may be appointed at any time in accordance with the Articles and Bylaws of the Corporation and then re-elected annually by the shareholders of the Corporation. Directors may resign at any time and their term of office expires annually at each Annual General Meeting of the shareholders of the Corporation.

Executive officers are appointed from time to time by the Board of Directors. The Board, in its discretion, may remove any officer of the Corporation, otherwise each officer shall hold office until his or her successor is appointed or until his earlier resignation.

Agreements with Senior Management

                  Effective May 1, 1998 as amended January 2, 2003, October 1, 2003 and January 2, 2004, the Corporation entered into a consulting agreement with Mr. Kim Hart, a former director of the Corporation’s wholly owned subsidiary HBN. The consulting agreement provided for the payment of consulting fee at a rate of $100 USD per hour for an initial three year term. Pursuant to the terms of the consulting agreement, Mr. Hart was responsible for the supervision, direction, control, promotion and

- 30 -

operation of the Corporation. Mr. Hart had the obligation and duty to perform all those duties which are generally performed by a Chief Executive Officer and President in corporations of similar size to the Corporation, and all acts which are reasonably necessary for the efficient and proper operation and development of the Corporation including all matters related to the general administration of the Corporation. Effective January 3, 2005 the Corporation and Hart Ventures, a business controlled by Mr. Hart, entered into a business services agreement pursuant to which Hart Ventures agreed to provide certain independent business services including office administration and accounting services to the Corporation at a fee of $120USD per hour. The agreement was for a term of three years.

Mr. Hart was also required to provide management services to the Corporation, including negotiations with other persons, firms, corporations or financial institutions in connection with the arranging and securing of financing for the Corporation, including financings through underwritings, best efforts offerings or such other offerings as may be allowed through the facilities of the NASD and financings through limited partnership offerings or by conventional bank financing methods, the terms of such financing to be subject to the approval of the Board of Directors. Hart was to be paid consulting bonuses from time to time, as determined by the Board of Directors. The consulting agreement was to be terminated by the Corporation at any time with cause and at any time on payment of twelve month’s compensation without cause. Mr. Hart was entitled to terminate the consulting agreement on 90 day’s notice to the Corporation.

Pursuant to an agreement dated May 1, 2000, as amended January 2, 2004, Mr. Hart also agreed to provide management services to the Corporation’s wholly owned subsidiary, HBN for a management fee at a rate of $100 USD per hour for an initial three year term. Mr. Hart was the President and a director of HBN. During the Corporation’s most recently completed financial year a total of $276,842 has been paid or is payable by the Corporation and its subsidiaries to Mr. Hart for such services.

Effective July 1, 1998, the Corporation entered into a consulting agreement, as amended April 11, 2002, January 2, 2003, October 1, 2003 and January 2, 2004, with Anne Kennedy, a director of the Corporation. The consulting agreement was for an initial term of two years and provided for the payment of $7,500 per month to Ms. Kennedy by the Corporation. The consulting agreement may be terminated by the Corporation at any time for cause, and at any time without cause by giving 30 days written notice to Ms. Kennedy and Ms. Kennedy may terminate the consulting agreement at any time by giving the Corporation 30 days’ written notice. During the Corporation’s last completed financial year a total of $58,353 has been paid or is payable by the Corporation to Ms. Kennedy for such services. Ms. Kennedy resigned as director of the Corporation in April, 2004 and her consulting agreement has been terminated.

Pursuant to a consulting agreement dated effective October 11, 2002, between the Corporation’s wholly owned subsidiary, HBN and Larry R. Simpson, Mr. Simpson provides marketing consulting services to HBN. Mr. Simpson is a director of the Corporation. During the Corporation’s last completed financial year a total of $30,000 has been paid or is payable by HBN to Mr. Simpson for such services.

During the year the Corporation signed a $275,825 software development agreement with a consulting company for its Horsepower™ program. As of August 31, 2004, the Corporation paid $69,580 as progress payments. The owner of the consulting company is Jeff Grant, the Chief Technical Officer of HBN.

Audit Committee

The members of the Corporation’s audit committee are Art Cowie, Dennis Hedtke and Roy Woodbridge. They may be appointed any time by the Corporation’s board of directors. The board, in its discretion may change the membership and fill vacancies in the audit committee, otherwise, audit committee members shall serve until his or her successor is appointed or until his or her earlier resignation.

- 31 -

The Corporation’s audit committee has the following primary duties, responsibilities and powers:

(a)	to serve as an independent and objective party to monitor the Corporation’s financial reporting process and internal control systems;
(b)	to review and appraise the audit activities of the Corporation’s independent auditors;
(c)	to provide open lines of communication among the independent auditors, financial and senior management, and the board of directors for financial reporting and control matters;
(d)	making recommendations to the Corporation’s board of directors regarding the selection, independence, evaluation, fees and, if necessary, the replacement of the independent auditors;
(e)	meeting with the Corporation’s auditors and senior management to review the scope of the proposed audit for the current year, and the audit procedures to be used;
(f)	reviewing the Corporation’s financial statements with the Corporation’s senior management and its independent auditors to ensure that:
	a.	senior management has reviewed the audited financial statements with the Audit Committee, including significant judgments affecting the financial statements;
	b.	the audit committee has received the assurance of both financial management and the Corporation’s independent auditors that its financial statements are fairly presented in conformity with generally accepted accounting principles (GAAP) in all material respects;
	c.	the Corporation’s senior management review the adequacy and effectiveness of the Corporation’s financial and accounting controls;
	d.	Making inquiries of the Corporation’s senior management and the Corporation’s independent auditors to identify significant business, political, financial and control risks and exposures and assess the steps management has taken to minimize such risk to the Corporation;
(g)	Ensuring that the disclosure of the process followed by the Corporation’s board of directors and its committees, in the oversight of the Corporation’s management of principal business risks, is complete and fairly presented; and
(h)	Review and confirmation of compliance with the Corporation’s policies on internal controls, conflicts of interests and other key compliance issues.

Executive Committee

The executive committee of the Corporation’s board of directors currently consists of Art Cowie and Dennis Hedtke. This committee is directed to have and exercise, during the intervals between the meetings of the Corporation’s board of directors, all the powers vested in the Board except the power to fill vacancies, the power to change the membership of, or fill vacancies in, the executive committee or any other committee of the Board.

- 32 -

D.          EMPLOYEES

As of March 9, 2005, the Corporation had no employees. The Corporation relies primarily on part-time staff, flex-time and consultants to minimize expenses.

ITEM 7.          MAJOR SHAREHOLDER AND RELATED PARTY TRANSACTIONS

A.                   MAJOR SHAREHOLDERS

The Corporation is currently a publicly-held corporation, with its shares held by residents of Canada, the United States and other countries. To the best of its knowledge, the Corporation is not controlled, directly or indirectly, by another corporation or any government or by any natural or legal persons and, as at March 9, 2005, no person or corporation or other entity owns, directly or indirectly, or controls more than 5% of the shares of the Corporation, the only class of securities with voting rights, except for the persons or groups listed below:

Identity of Persons or Group	Number of Shares Owned(1)	Percentage of Class
CDS & Co.(2)	58,523,685	51.76%
Cede & Co.(2)	10,219,922	9.04%
Estate of Kim N. Hart (deceased)(3) (4)	6,576,859	5.82%
Donald Harris(4)	2,455,340	2.17%
Total	77,775,806	68.79%

(1)	Based on 113,064,742 shares outstanding at March 9, 2005.
(2)	CDS & Co. and Cede & Co. are depository enterprises. It is the Corporation’s understanding that CDS & Co, and Cede & Co. hold the specified shares as shareholder of record in a nominal, fiduciary, trustee or similar capacity. Accordingly, the names of the beneficial owners are not available to the Corporation unless the shareholders voluntarily elect to contact the Corporation or request disclosure of his, her or its identity. The Corporation is unaware of the identities of the beneficial owners of these shares.
(3)	Mr. Hart resigned as President, Chief Executive Officer and director of the Corporation on May 27, 2003, and was the President and Chief Executive Officer of HBN until March, 2005.
(4)	Messrs. Hart and Harris are the only persons, corporations or other entities known by the Corporation to own directly or indirectly or control more than 5% of the shares of the Corporation.

There are no arrangements, known to the Corporation which may at a subsequent date result in a change in control of the Corporation.

The Corporation’s major shareholders do not have different voting rights from other shareholders of the Corporation.

Based on the records of Computershare Investor Services Inc., the Corporation’s registrar and transfer agent, at March 9, 2005, there were 372 holders of record of the Corporation’s shares with United States addresses who collectively held 40,990,950 shares or approximately 36.25% of the 113,064,742 issued and outstanding shares. As noted above, the Corporation is not in a position to confirm ownership by these parties.

B.                   RELATED PARTY TRANSACTIONS

Except for the ownership of the Corporation’s securities and the compensation described herein, advances to and by certain officers to or from the Corporation to cover expenses (all of which were reimbursed or

- 33 -

repaid without interest), below are all of the material transactions between the Corporation and its directors, executive officers, holders of ten percent or more of the Corporation’s outstanding shares, or any associate or affiliate of such person since the commencement of the last fiscal year, or in any proposed transaction which may materially affect the Corporation.

The Corporation has entered into consulting agreements with certain directors. See “Item 6. Directors, Senior Management and Employees.”

The Corporation does not provide benefits to any personnel or its consultants. None of the officers or directors of the Corporation are indebted to the Corporation or were indebted to the Corporation during the fiscal years ended August 31, 2004, 2003 and 2002. See “Indebtedness of Directors and Officers” below.

The Corporation has entered into the TAC International Investments LLC letter of intent dated December 8, 1997, as recently extended on July 30, 2004, with TAC International Investments LLC, a company controlled by Donald Harris, a director of the Corporation. Pursuant to the letter of intent, if the Corporation receives authorization to develop the Vancouver Thoroughbred Park prior to October 1, 2005, TAC will purchase six million common treasury shares of the Corporation at US$4.00 per share, by way of private placement.

During the year the Corporation signed a $275,825 software development agreement with a consulting company for its Horsepower™ program. As of August 31, 2004, the Corporation paid $69,580 as progress payments. The owner of the consulting company is also the Chief Technical Officer of the Corporation's subsidiary, Horsepower Broadcasting Network (HBN) International Ltd. See Note 6 of the audited consolidated financial statements of Sungold for the year ended August 31, 2004 attached to this report.

INDEBTEDNESS OF DIRECTORS AND OFFICERS

None of the directors, executive officers or senior officers of the Corporation or persons who were directors, executive officers or senior officers of the Corporation at any time during the Corporation’s last completed financial year, and non of the associates of such persons are or have been indebted to the Corporation or its subsidiaries at any time since the beginning of the Corporation’s last completed financial year. Furthermore, non or such person were indebted to a third party during such period where their indebtedness was the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Corporation or its subsidiaries.

ITEM 8.          FINANCIAL INFORMATION

CONSOLIDATED FINANCIAL STATEMENTS

The financial statements required as part of this Annual Report are filed under Item 17 of this Annual Report.

LITIGATION

To the best of its knowledge, the Corporation is not subject to any active or pending legal proceedings or claims against it or any of its properties that will have a material effect on the Corporation’s business or results of operations. However, from time to time, the Corporation may become subject to claims and litigation generally associated with any business venture.

- 34 -

DIVIDEND POLICY

Other than as described below, the Corporation has not and does not currently intend to pay any dividends on any of its shares. The Corporation intends to follow a policy of retained earnings to finance the growth of the business. Any future determination to pay dividends will be at the discretion of the Corporation’s board of directors on the basis of earnings, financial requirements and other relevant factors.

SIGNIFICANT CHANGES

Other than as described in this Annual Report, the Corporation does not have any significant changes to report since the date of the financial statements included with this Annual Report on Form 20-F.

ITEM 9.          THE OFFER AND LISTING

On March 29, 1999, the Corporation became a Reporting Issuer under the Securities Exchange Act of 1934 and on May 14, 1999, the Corporation began trading on the OTC Bulletin Board as “SGGNF.” Effective September 7, 2001, the Corporation’s shares were also listed and posted for trading on the Frankfurt and Berlin Stock Exchanges. On December 15, 2003, the Corporation changed its trading symbol on the OTC Bulletin Board to “SGIHF” in connection with the Corporation’s name change to “Sungold International Holdings Corp.”.

The following is a summary of trading of Sungold on the OTC Bulletin Board during the first, second, third and fourth quarters of fiscal 2000, 2001, 2002, 2003 and 2004:

OTC Bulletin Board	2000	High (US$)	Low (US$)	Volume
	1st Quarter	1.06	0.40	5,466,800
	2nd Quarter	1.00	0.31	2,480,900
	3rd Quarter	0.71	0.21	3,450,300
	4th Quarter	0.26	0.06	7,315,200
	2001	High (US$)	Low (US$)	Volume
	1st Quarter	0.25	0.047	12,114,300
	2ndQuarter	0.25	0.10	13,945,400
	3rd Quarter	0.18	0.08	6,721,600
	4th Quarter	0.17	0.08	8,380,100
	2002	High (US$)	Low (US$)	Volume
	1st Quarter	0.18	0.07	17,189,600
	2ndQuarter	0.23	0.06	11,947,300
	3rd Quarter	0.59	0.14	29,207,400
	4th Quarter	0.37	0.10	29,207,400

- 35 -

OTC Bulletin Board	2003	High (US$)	Low (US$)	Volume
	1st Quarter	0.20	0.07	15,671,400
	2ndQuarter	0.13	0.06	16,929,100
	3rd Quarter	0.13	0.03	27,202,400
	4th Quarter	0.13	0.03	33,562,100
	2004	High (US$)	Low (US$)	Volume
	1st Quarter	0.10	0.05	442,856
	2ndQuarter	0.11	0.08	230,382
	3rd Quarter	0.10	0.07	226,081
	4th Quarter	0.10	0.07	226,081

The following is a summary of trading, on a monthly basis, in the shares on the OTC Bulletin Board in the United States during the past six months:

Month & Year	High (US$)	Low (US$)	Volume
February 2005	0.08	0.04	188,952
January 2005	0.08	0.06	287,416
December 2004	0.10	0.07	266,234
November 2004	0.10	0.06	121,796
October 2004	0.12	0.06	482,628
September 2004	0.09	0.06	148,706
August 2004	0.11	0.07	303,095

The Corporation’s shares were approved for quotation by the National Association of Securities Dealers on the OTC Bulletin Board in the United States on May 14, 1999. The Corporation’s shares were listed and posted for trading on the Frankfurt and Berlin Stock Exchanges on September 7, 2001. Other than described above, the Corporation’s shares are not and have not been listed or quoted on any other exchange or quotation system.

ITEM 10.         ADDITIONAL INFORMATION

A.                     SHARE CAPITAL

The authorized capital of the Corporation consists of: (i) an unlimited number of common shares without nominal or par value; (ii) 100,000,000 Class A Preference Shares, without nominal or par value; and (iii) 100,000,000 Class B Preference Shares, without nominal or par value.

At March 9, 2005, there were 113,064,742 shares issued and outstanding and an additional 53,900,000 shares have been allotted and reserved for issuance pursuant to outstanding private placement warrants to purchase shares and 3,610,644 incentive stock options. As at August 31, 2004, there were 103,364,740 shares issued and outstanding and an additional 60,463,998 shares had been allotted and reserved for issuance pursuant to outstanding private placement warrants to purchase shares and incentive stock options.

- 36 -

There are no shares of the Corporation held by or on behalf of the Corporation itself or by subsidiaries of the Corporation. The Corporation’s board of directors has approved a share buy back program by its wholly owned subsidiary Horsepower Broadcasting Network (HBN) International Ltd. (“HBN”), whereby HBN may buy back up to 25% of the Corporation’s shares from HBN’s revenues.

- 37 -

SUMMARY OF SECURITIES TRANSACTIONS

Set forth below are the closed and pending transactions pursuant to which securities of the Corporation have been issued or sold over the Corporation’s last three fiscal years.

SHARE, OPTION AND WARRANT TRANSACTIONS

Shares Issued During Fiscal Year Ended August 31, 2002
		Price per	Total Gross
	Number of	Security	Consideration
Transaction	Securities Issued	(Cdn$)	(Cdn$)	Date Closed
Private Placement	150,000	$0.23/US$0.15	34,850	September 2001
Private Placement	230,000	$0.23/US$0.15	53,590	September 2001
Private Placement	400,000	$0.23/US$0.15	93,714	September 2001
Options Exercised	200,000	$0.17/US$0.11	34,621	October 2001
Options Exercised	200,000	$0.17/US$0.11	34,621	October 2001
Private Placement	220,000	$0.24/US$0.15	51,932	October 2001
Private Placement	420,000	$0.24/US$0.15	99,143	October 2001
Options Exercised	200,000	$0.16/US$0.10	31,546	November 2001
Options Exercised	100,000	$0.19/US$0.12	18,928	November 2001
Options Exercised	100,000	$0.19/US$0.12	19,003	November 2001
Private Placement	150,000	$0.09/US$0.06	14,189	December 2001
Private Placement	100,000	$0.09/US$0.06	9,465	December 2001
Private Placement	2,000,000	$0.09/US$0.06	189,300	December 2001
Private Placement	133,334	$0.09/US$0.06	12,620	December 2001
Private Placement	200,000	$0.09/US$0.06	18,930	December 2001
Private Placement	100,000	$0.09/US$0.06	9,465	December 2001
Private Placement	150,000	$0.10/US$0.06	14,403	January 2002
Private Placement	166,666	$0.10/US$0.06	16,003	January 2002
Private Placement	1,700,000	$0.10/US$0.06	163,231	January 2002
Options Exercised	400,000	$0.16/US$0.10	64,012	January 2002
Private Placement	1,000,000	$0.10/US$0.06	95,748	February 2002
Private Placement	300,000	$0.17/US$0.11	52,061	March 2002
Options Exercised	136,000	$0.13/US$0.08	17,188	March 2002
Private Placement	1,000,000	$0.27/US$0.17	268,312	April 2002
Warrants Exercised	1666,666	$0.09/US$0.06	15,813	April 2002
Private Placement	1,000,000	$0.26/US$0.165	260,915	April 2002
Options Exercised	36,000	$0.13/US$0.08	4,511	April 2002
Options Exercised	100,000	$0.23/US$0.15	23,495	April 2002
Options Exercised	36,000	$0.12/US$0.08	4,497	April 2002
Options Exercised	100,000	$0.23/US$0.15	23,419	April 2002
Warrants Exercised	200,000	$0.09/US$0.06	18,557	May 2002
Private Placement	400,000	$0.25/US$0.16	98,980	May 2002
Options Exercised	222,000	$0.12/US$0.08	27,210	May 2002
Private Placement	600,000	$0.23/US$0.15	136,764	May 2002
Warrants Exercised	150,000	$0.09/US$0.06	13,793	June 2002
Private placement	2,500,000	$0.12/US$0.075	289,856	July 2002
Private Placement	250,000	$0.12/US$0.08	31,026	July 2002
Private Placement	100,000	$0.14/US$0.09	13,885	August 2002
Total (Since Inception)	50,121,209		$16,156,646

- 38 -

Shares Issued During Fiscal Year Ended August 31, 2003
		Price per	Total Gross
	Number of	Security	Consideration
Transaction	Securities Issued	(Cdn$)	(Cdn$)	Date Closed
Private Placement	1,500,000	0.08	185,388	September 2002
Private Placement	1,500,000	0.08	188,316	October 2002
Private Placement	1,500,000	0.08	185,532	October 2002
Private Placement	1,000,000	0.07	115,672	November 2002
Private Placement	1,000,000	0.08	123,800	November 2002
Private Placement	700,000	0.06	64,995	November 2002
Private Placement	300,000	0.06	27,855	November 2002
Private Placement	1,000,000	0.06	92,265	January 2003
Private Placement	500,000	0.05	38,720	January 2003
Private Placement	2,000,000	0.10	308,200	January 2003
Private Placement	500,000	0.05	37,810	February 2003
Warrants Exercised	500,000	0.06	44,070	February 2003
Warrants Exercised	1,000,000	0.05	73,450	February 2003
Warrants Exercised	500,000	0.06	43,704	March 2003
Private Placement	1,200,000	0.05	88,554	March 2003
Private Placement	800,000	0.05	59,036	March 2003
Private Placement	1,000,000	0.05	71,725	April 2003
Private Placement	1,500,000	0.04	86,070	April 2003
Private Placement	2,250,000	0.04	124,605	May 2003
Private Placement	3,000,000	0.03	121,707	June 2003
Private Placement	700,000	0.03	28,398	June 2003
Private Placement	2,300,000	0.03	95,324	July 2003
Private Placement	721,000	0.03	30,878	July 2003
Private Placement	1,779,000	0.03	76,971	August 2003
Private Placement	1,000,000	0.07	104,678	August 2003
Total (Since Inception)	79,871,209		$18,574,369

Shares Issued During Fiscal Year Ended August 31, 2004
		Price per Security	Total Gross
	Number of	(Cdn$)	Consideration
Transaction	Securities Issued		(Cdn$)	Date Closed
21 for 20 stocks split	3,993,531	-	-
Private Placement	1,000,000	$0.08/US$0.060	81,792	September 2003
Private Placement	1,000,000	$0.08/US$0.060	79,308	September 2003
Private Placement	1,000,000	$0.08/US$0.060	79,308	October 2003
Private Placement	1,000,000	$0.08/US$0.060	78,756	October 2003
Private Placement	4,000,000	$0.05/US$0.040	212,920	February 2004
Private Placement	2,500,000	$0.06/US$0.045	151,306	February 2004
Private Placement	1,500,000	$0.07/US$0.0525	103,235	March 2004
Private Placement	3,000,000	$0.08/US$0.060	244,386	June 2004
Private Placement	4,500,000	$0.08/US$0.060	354,186	August 2004
Total (Since Inception)	103,364,740		$19,959,566

- 39 -

Options Outstanding as of August 31, 2004
Description		Number of Shares	Exercise Price (US$)	Expiration Date
Option		100,000	$0.15	February 16, 2006
Option		1,050,000	$0.06	February 28, 2006
Option		79,900	$0.08	March 5, 2006
Option		300,000	$0.12	August 10, 2006
Option		100,000	$0.09	December 20, 2006
Option		730,764	$0.08	January 4, 2007
Option		400,000	$0.07	January 24, 2007
Option		200,000	$0.15	October 11, 2007
Option		300,000	$0.15	October 16, 2007
Option		136,000	$0.11	January 23, 2008
Option	��	64,000	$0.05	May 27, 2008
Option		150,000	$0.05	May 28, 2008
Total:		3,610,644

Share Purchase Warrants Outstanding as of August 31, 2004
			Exercise Price
Description	Date of Grant	Number of Shares	(US$)	Expiry Date
Warrant(1)	Sep.7, 2001	1,000,000	$0.20	September 7, 2004
Warrant(1)	Oct.24, 2001	420,000	$0.15	October 24, 2004
Warrant(1)	Nov.4, 2001	1,000,000	$0.15	November 4, 2004
Warrant(1)	Dec.14, 2001	2,333,334	$0.06	December 14, 2004
Warrant(1)	Jan.7, 2002	1,700,000	$0.06	January 7, 2005
Warrant(1)	Jan.30, 2002	1,000,000	$0.06	January 30, 2005
Warrant(1)	Mar.1, 2002	300,000	$0.11	March 1, 2005
Warrant(7)	Mar.26, 2002	1,000,000	$0.17	March 26, 2005
Warrant(1)	Apr. 4, 2002	1,000,000	$0.16	April 4, 2005
Warrant(1)	May 7, 2002	400,000	$0.16	May 7, 2005
Warrant(1)	May 30, 2002	600,000	$0.15	May 30, 2005
Warrant(1)	Jul. 10, 2002	2,500,000	$0.07	July 10, 2005
Warrant(1)	Jul. 24, 2002	250,000	$0.08	July 24, 2005
Warrant(1)	Aug. 21, 2002	100,000	$0.09	August 21, 2005
Warrant(1)	Jul. 23, 2002	1,500,000	$0.08	July 23, 2005
Warrant(1)	Sep. 27, 2002	3,000,000	$0.08	September 27, 2005
Warrant(1)	Nov. 1, 2002	3,000,000	$0.07	November 1, 2005
Warrant(1)	Mar. 26, 2003	3,000,000	$0.05	March 26, 2006
Warrant(1)	Apr. 10, 2003	3,750,000	$0.04	April 10, 2006
Warrant(1)	May 16, 2003	3,000,000	$0.03	May 16, 2006
Warrant(1)	Jun. 11, 2003	3,000,000	$0.03	June 11, 2006
Warrant(1)	Jul. 7, 2003	2,500,000	$0.03	July 7, 2006
Warrant(1)	Aug. 21, 2003	1,000,000	$0.07	August 21, 2006
Warrant(1)	Sept. 5, 2003	2,000,000	$0.06	September 5, 2006
Warrant(1)	Oct. 31, 2003	2,000,000	$0.06	October 31, 2006
Warrant(1)	February 10, 2004	4,000,000	$0.04	February 10, 2007
Warrant(1)	February 18, 2004	2,500,000	$0.045	February 18, 2007
Warrant(1)	March 30, 2004	1,500,000	$0.0525	March 30, 2007
Warrant(1)	June 04, 2004	3,000,000	$0.06	June 04, 2007
Warrant(1)	August 20, 2004	4,500,000	$0.06	August 20, 2007
Total		56,853,334

(1) Each warrant is exercisable to acquire one common share.

- 40 -

Pending Transactions and Security Grants
	Relevant			Closing
Description	Agreement	Number of Shares	Price	Date/Expiry
Private Placement to TAC(1)	TAC Letter of Intent	6,000,000	US$4.00	Est. to 10/05(1)

(1)      Pursuant to the TAC letter of intent, TAC has agreed to enter into a private placement subscription agreement to purchase 6,000,000 shares from the Corporation at US$4.00, subject to receiving all regulatory authority to operate the Richmond Equine Training Centre and the Vancouver Thoroughbred Park on or before October 1, 2005. There can be no assurance that the Corporation will receive such regulatory approval in a timely manner, if at all.

CURRENCY TRANSLATION

The Corporation’s proposed operations will be carried out in United States and Canadian dollars. As a result, the Corporation will be faced with currency fluctuations. The Corporation does not currently engage in currency hedging, however, the Corporation will do so once operations have commenced.

B.                     MEMORANDUM AND ARTICLES OF ASSOCIATION

The Corporation was continued on December 12, 2003 under the provisions of theCanada Business Corporations Act (the "CBCA"). The Articles of Corporation place no restrictions upon the Corporation's objects and purposes.

Memorandum and Articles of Association

Pursuant to the Articles and the By-laws of Corporation and the requirements of the CBCA, the board of directors must consist of not fewer than three (3) and not more than eleven (11) directors. A majority of the number of directors appointed constitutes a quorum at any meeting of directors, provided, however, that no business may be transacted at a meeting of directors unless at least one-quarter of the directors present are resident Canadians. The duty of the directors is to manage or supervise the management of the business of the Corporation.

There is no provision in the By-laws that imposes a requirement in respect of a director's power to vote on a proposal, arrangement or contract in which the director is materially interested. The CBCA provides that a director must disclose to the Corporation, in writing or by requesting to have it entered in the minutes of meetings of directors or of meetings of committees of directors, the nature and extent of any interest that he or she has in a material contract or material transaction, whether made or proposed, with the Corporation, if the director: (a) is a party to the contract or transaction; (b) is a director, or an individual acting in a similar capacity of a party to the contract or transaction; or (c) has a material interest in a party to the contract or transaction.

The By-laws of the Corporation state that the directors may fix the remuneration of the directors and that the directors shall be paid such remuneration for their services as the board may from time to time determine. The directors are also entitled to be reimbursed for travel and other expenses properly incurred by them in attending meetings of the board or any committee of the board of directors. Nothing in the Bylaws precludes any director from serving the Corporation in any other capacity and receiving remuneration for such services.

The Articles and By-laws of the Corporation state that without limiting the borrowing powers of the Corporation as set forth in the CBCA, the board may from time to time on behalf of the Corporation without authorization of the shareholders: (a) borrow money upon the credit of the Corporation; (b) issue, reissue, sell or pledge debt obligations of the Corporation; (c) to the extent permitted by the CBCA, give a guarantee on behalf of the Corporation to secure performance of an obligation of any person; and (d)

- 41 -

mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation owned or subsequently acquired to secure any obligation of the Corporation.

The directors may, by resolution, make, amend or repeal any By-laws that regulate the business or affairs of the Corporation. Any resolution making, amending or repealing any By-laws of the Corporation must be submitted to the next following shareholders meeting for ratification by the shareholders who may by ordinary resolution confirm, reject or amend the By-law, amendment or repeal.

The powers of the directors set out in the Articles of the Corporation may be amended by special resolution. A special resolution is a resolution passed by a majority of not less than two-thirds (2/3) of the votes cast by shareholders of the Corporation who being entitled to do so, vote in person or by proxy at an annual or special meeting of shareholders of the Corporation. Under the CBCA, an ordinary resolution of shareholders requires approval by a majority of the votes cast at a meeting of shareholders, present in person or represented by proxy.

Election and Qualifications of Directors

The directors of the Corporation stand for election at the annual meeting of shareholders and there are no staggered terms. There is no cumulative voting for directors of the Corporation. There is no provision in the Articles or By-laws that imposes a requirement for retirement or non-retirement of directors.

There is no provision in the Corporation's Articles or By-laws that a director be required to hold a share in the capital of the Corporation as a qualification for his office, but he must be qualified to become or act as a director as required by the CBCA. The CBCA provides that no person is qualified to act as a director if that person is less than 18 years of age; is a person who has been found to be a person of unsound mind by a court in Canada; a person who is not an individual; or is a person who has the status of bankrupt.

The CBCA provides that a director of a Company may be removed if the shareholders by ordinary resolution at a special meeting vote to remove a director or directors from office.

Meetings

The CBCA provides that the Corporation must hold an annual meeting of its shareholders not later than 15 months after holding the last preceding annual meeting but no later than six months after the end of the Corporation's preceding financial year. The Corporation must give notice of any meeting to its shareholders entitled to receive notice not more than 60 days prior to and not less than 21 days before the date of meeting. The CBCA requires the directors of a company to provide with the notice of a general meeting a form of proxy for use by every member entitled to vote at such meeting as well as an information circular containing prescribed information regarding the matters to be dealt with and the conduct of the meeting.

Under the CBCA, the directors of the Corporation may call a meeting of shareholders and one or more shareholders holding not less than 5% of the issued voting shares of the Corporation may give notice to the directors requiring them to call and hold a meeting.

- 42 -

Limitations on Ownership of Securities

Except as described below under "Exchange Controls," there are no limitations on the right to own securities imposed by foreign law to the Corporation's knowledge or by the Articles of the Corporation.

Change in Control of Corporation

There are no provisions in the Corporation's Articles or By-laws that would have the effect of delaying, deferring, or preventing a change in control of the Corporation and that would operate only with respect to a merger, acquisition or corporate restructuring of the Corporation or its subsidiaries.

Rights to Own Securities

There are no limitations under the applicable laws of Canada, except as provided in theInvestment Canada Act (the “ICA”) as described below, or by the Corporation’s charter or other constituent documents on the rights of non-resident or foreigners to hold or vote common shares or other securities of the Corporation.

The ICA requires a non-Canadian making an investment to acquire control of a Canadian business, the gross assets of which exceed certain defined threshold levels, as set out below, to file an application for review with Investment Canada, an agency of the Canadian government created by the ICA.

The ICA will prohibit implementation, or if necessary, require divestiture of an investment deemed “reviewable” under the ICA by an investor that is not a “Canadian” as defined in the ICA (a “non-Canadian”), unless after review the Minister responsible for the ICA (“the Minister”) is satisfied that the “reviewable” investment is likely to be of net benefit to Canada. An investment in the Corporation’s common shares by a non-Canadian would be reviewable under the ICA if it was an investment to acquire control of the Corporation and the value of the Corporation’s assets was $5 million or more. A non-Canadian would be deemed to acquire control of the Corporation for the purposes of the ICA if the non-Canadian acquired a majority of the Corporation’s outstanding common shares (or less than a majority but controlled the Corporation in fact through the ownership of one-third or more of the Corporation’s outstanding common shares) unless it could be established that, on the acquisition, the Corporation was not controlled in fact by the acquirer through the ownership of such common shares. Certain transactions in relation to the Corporation’s common shares would be exempt from review under the ICA, including, among others, the following:

• acquisition of common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities;
  
  
• acquisition of control of the Corporation in connection with the realization of security granted for a loan or other financial assistance and not for any purpose related to the provisions of the ICA; and
  
  
• acquisition of control of the Corporation by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control of the Corporation, through the ownership of voting interests, remains unchanged.

As a result of the Canada-U.S. Free Trade Agreement, the ICA was amended in January 1989 to provide distinct threshold levels for Americans who acquire control of a Canadian business. The threshold levels for Americans, as described below, gradually rose between 1989 and 1992 to its present level.

The ICA was amended with the World Trade Organization Agreement to provide for special review thresholds for “WTO Investors” of countries belonging to the World Trade Organization, among others,

- 43 -

nationals and permanent residents (including “WTO Investor controlled entities” as defined in the ICA). Under the ICA, as amended, an investment in the Corporation’s common shares by WTO Investors would be reviewable only if it was an investment to acquire control of the Corporation and the value of the Corporation’s assets was equal to or greater than a specified amount which is published by the Minister after its determination for any particular year.

A Canadian business is defined in the ICA as a business carried on in Canada that has a place of business in Canada, an individual or individuals in Canada who are employed or self-employed in connection with the business, and assets in Canada used in carrying on the business.

An American, as defined in the ICA, includes: an individual who is an American national or a lawful permanent resident of the U.S.; a government or government agency of the U.S.; an American-controlled entity, corporation or limited partnership; and a corporation, limited partnership or trust of which two-thirds of its board of directors, general partners or trustees, as the case may be, are Canadians or Americans.

The following investments by a non-Canadian are subject to review by Investment Canada:

• all direct acquisitions of control of Canadian businesses with assets of $5 million or more;
  
  
• all indirect acquisitions of control of Canadian businesses with assets of $50 million or more if such assets represent less than 50% of the value of the assets of the entities, the control of which is being acquired; and
  
  
• all indirect acquisitions of control of Canadian businesses with assets of $5 million or more if such assets represent more than 50% of the value of the assets of the entities, the control of which is being acquired.

Review by Investment Canada is required when investments by Americans exceed $150 million for direct acquisitions of control. No review by Investment Canada is required for indirect acquisitions of control.

For purposes of the ICA:

• “direct acquisitions of control” means purchase of the voting interests of a corporation, partnership, joint venture or trust carrying on a Canadian business, or any purchase of all or substantially all of the assets used in carrying on a Canadian business; and
  
  
• “indirect acquisition of control means” a purchase of the voting interest of a corporation, partnership, joint venture or trust, whether a Canadian or foreign entity, which controls a corporation, partnership, joint venture or trust company on a Canadian business in Canada.

The acquisition of certain Canadian businesses is excluded from the higher thresholds set out for Americans. These excluded businesses are oil, gas, uranium, financial services (except insurance), transportation services and cultural services (i.e., the publication, distribution or sale of books, magazines, periodicals (other than printing or typesetting businesses), music in print or machine readable form, radio, television, cable and satellite services; the publication, distribution, sale or exhibition of film or video recordings or audio or video music recordings). Direct or indirect acquisitions of control of these excluded businesses are reviewable at the $5 million and $50 million thresholds.

A non-Canadian shall not implement an investment reviewable under the ICA unless the investment has been reviewed and the Minister responsible for Investment Canada is satisfied or is deemed to be satisfied

- 44 -

that the investment is likely to be a net benefit to Canada, the non-Canadian shall not implement the investment or, if the investment has been implemented, shall divest himself of control of the business that is the subject of the investment.

A non-Canadian or American making the following investments:

(a)	an investment to establish a new Canadian business; and
(b)	an investment to acquire control of a Canadian business

which investment is not subject to review under the ICA, must notify Investment Canada, within prescribed time limits, of such investments.

Ownership Threshold Requiring Public Disclosure

There are no provisions in the Corporation’s Articles or By-Laws or in the CBCA governing the threshold above which shareholder ownership must be disclosed. TheSecurities Act (British Columbia), which is applicable to the Corporation, requires that a shareholder disclose ownership of 10% or more of the shares (and any further increases of 2% or more) of a publicly traded company by issuing a news release and filing a report (both containing prescribed disclosure) with the Securities Commissions in those provinces. They also require that the Corporation disclose, in its proxy circular sent out for an Annual Meeting or Special Meeting, the names of holders known to the Corporation to beneficially own more than 10% of the Corporation’s issued and outstanding shares.

Most state corporation statutes do not contain provisions governing the threshold above which shareholder ownership must be disclosed. United States federal securities laws require a company to disclose, in its Annual Report or Form 20-F, holders who own more than 5% of a corporation’s issued and outstanding shares.

Changes in the Capital of the Corporation

There are no conditions imposed by the Corporation’s Articles or By-Laws which are more stringent than those required by the CBCA.

C.                     MATERIAL CONTRACTS

Except as otherwise disclosed in this annual report and our financial statements and notes included in this annual report, we have no other material contracts.

D.                     EXCHANGE CONTROLS

There are no governmental laws, decrees or regulations in Canada relating to restrictions on the import of capital affecting the remittance of interest, dividends or other payments to non-resident holders of the Corporation’s shares. Any such remittances to United States residents, however, are subject to a 5% to 15% withholding tax pursuant to Article X of the reciprocal tax treaty between Canada and the United States. See “Taxation”.

Except as provided in the Investment Canada Act (the “Investment Act”), there are no limitations under the laws of Canada, the Province of British Columbia or in the charter or any other constituent documents of the Corporation on the right of foreigners to hold and/or vote the shares of the Corporation.

The Investment Act requires a non-Canadian making an investment to acquire control of a Canadian

- 45 -

business, the gross assets of which exceed certain defined threshold levels, as set out below, to file an application for review with Investment Canada, an agency of the Canadian government created by the Investment Act.

As a result of the Canada-U.S. Free Trade Agreement, the Investment Act was amended in January 1989 to provide distinct threshold levels for Americans who acquire control of a Canadian business. The threshold levels for Americans, as described below, gradually rose between 1989 and 1992 to its present level.

A Canadian business is defined in the Investment Act as a business carried on in Canada that has a place of business in Canada, an individual or individuals in Canada who are employed or self-employed in connection with the business, and assets in Canada used in carrying on the business.

An American, as defined in the Investment Act, includes: an individual who is an American national or a lawful permanent resident of the U.S.; a government or government agency of the U.S.; an American-controlled entity, corporation or limited partnership; and a corporation, limited partnership or trust of which two-thirds of its board of directors, general partners or trustees, as the case may be, are Canadians or Americans.

The following investments by a non-Canadian are subject to review by Investment Canada:

(a)	all direct acquisitions of control of Canadian businesses with assets of $5,000,000 or more;
(b)	all indirect acquisitions of control of Canadian businesses with assets of $50,000,000 or more if such assets represent less than 50% of the value of the assets of the entities, the control of which is being acquired; and
(c)	all indirect acquisitions of control of Canadian businesses with assets of $5,000,000 or more if such assets represent more than 50% of the value of the assets of the entities, the control of which is being acquired.

Review by Investment Canada is required when investments by Americans exceed $150,000,000 for direct acquisitions of control. No review by Investment Canada is required for indirect acquisitions of control.

For purposes of the Investment Act, direct acquisitions of control means:

• a purchase of the voting interests of a corporation, partnership, joint venture or trust carrying on a Canadian business, or any purchase of all or substantially all of the assets used in carrying on a Canadian business; and
  
  
• indirect acquisition of control means:
  
  
• a purchase of the voting interest of a corporation, partnership, joint venture or trust, whether a Canadian or foreign entity, which controls a corporation, partnership, joint venture or trust company on a Canadian business in Canada.

The acquisition of certain Canadian businesses is excluded from the higher thresholds set out for Americans. These excluded businesses are oil, gas, uranium, financial services (except insurance), transportation services and cultural services (i.e., the publication, distribution or sale of books, magazines, periodicals (other than printing or typesetting businesses), music in print or machine readable form, radio, television, cable and satellite services; the publication, distribution, sale or exhibition of film or video

- 46 -

recordings or audio or video music recordings). Direct or indirect acquisitions of control of these excluded businesses are reviewable at the $5,000,000 and $50,000,000 thresholds.

A non-Canadian shall not implement an investment reviewable under the Investment Act unless the investment has been reviewed and the Minister responsible for Investment Canada is satisfied or is deemed to be satisfied that the investment is likely to be a net benefit to Canada, the non-Canadian shall not implement the investment or, if the investment has been implemented, shall divest himself of control of the business that is the subject of the investment.

A non-Canadian or American making the following investments:

(a)	an investment to establish a new Canadian business; and
(b)	an investment to acquire control of a Canadian business

which investment is not subject to review under the Investment Act, must notify Investment Canada, within prescribed time limits, of such investments.

E.                     TAXATION

Canadian Federal Income Tax Consequences

The following is a general summary of all material Canadian federal income tax considerations generally applicable to a holder of the Corporation’s common shares who is not a resident of Canada for the purposes of theIncome Tax Act (Canada) (the “Act”). The discussion does not address individual consequences to persons subject to special provisions of federal income tax law.

The summary is based on the current provisions of the Act and the regulations thereunder and the Corporation’s understanding of the current administrative practices published by, and press announcements released by Canada Customs and Revenue Agency and the Department of Finance. This summary takes into account proposals to amend the Act announced prior to the date hereof (although no assurances can be given that such changes will be enacted in the form presented or at all), but does not otherwise take into account or anticipate any other changes in law, whether by judicial, governmental or legislative action or decision nor does it take into account any provincial, territorial, local or foreign tax considerations. Accordingly, holders and prospective holders of the Corporation’s shares are urged to consult their own tax advisors about the federal, provincial, territorial, local and foreign tax consequences of purchasing, owning and disposing of such shares.

The Act provides in subsection 212(2) that dividends and other distributions which are deemed to be dividends and which are paid or credited or are deemed to be paid or credited by a Canadian resident Company to a non-resident of Canada shall be subject to non-resident withholding tax equal to 25 percent of the gross amount of the dividend or deemed dividend.

Subsections 2(3) and 115(1) of the Act provide that a non-resident person is subject to tax in Canada at the rates generally applicable to residents of Canada on any “taxable capital gain” arising on the disposition of the shares of a company which are listed on a prescribed stock exchange if such non-resident, together with persons with whom he does not deal at arm’s length, owned 25 percent or more of the issued shares of any class of the capital stock of the Corporation at any time in the five years immediately preceding the date of disposition of the shares. Subsections 2(3) and 115(1) also provide that a non-resident person is subject to tax in Canada on taxable capital gains arising on the disposition of shares that constitute capital property used in carrying on a business in Canada. The taxable portion of a capital gain is equal to one-half of the amount by which the proceeds of disposition of such shares, net of any reasonable costs associated with the disposition, exceeds the adjusted cost base to the holder of the shares.

- 47 -

Provisions in the Act relating to dividend and deemed dividend payments and gains realized by nonresidents of Canada who are residents of the United States are subject to the Canada-United States Income Tax Convention (1980), as amended (the “1980 Convention”).

Article X of the 1980 Convention provides that for 1997 and subsequent taxation years pursuant to the Third Protocol to the 1980 Convention the rate of Canadian non-resident withholding tax on dividends paid to a U.S. company that beneficially owns at least 10% of the voting stock of the Corporation shall not exceed 5% of the dividends. Otherwise, and except in the case of dividends received by a resident of the United States who carries on business in Canada through a Canadian permanent establishment and the shares in respect of which the dividends are paid are effectively connected with that permanent establishment, the rate of non-resident withholding shall not exceed 15 percent of the dividend. Where the dividends are received by a United States person carrying on business in Canada through a Canadian permanent establishment and the shares in respect of which the dividends are paid are effectively connected with that permanent establishment the dividends are generally subject to Canadian tax as business profits, generally without limitation under the 1980 Convention.

Article XIII of the 1980 Convention provides that gains realized by a United States resident on the disposition of shares of a Canadian company may not generally be taxed in Canada unless the value of those shares is derived principally from real property situated in Canada or the shares form part of the business property of a permanent establishment which the United States shareholder has or had in Canada within the 12 month period preceding the date of disposition. Canada also retains the right to tax gains on property owned at the time of departure from Canada if it is sold by a person who was resident in Canada for 120 months in any 20 consecutive years preceding the sale and who was a resident in Canada at any time in the 10 years preceding sale.

United States Federal Income Tax Consequences

The following is a general discussion of all material United States federal income tax consequences, under current law, generally applicable to a U.S. Holder (as hereinafter defined) of common shares of the Corporation. This discussion does not address individual consequences to persons subject to special provisions of federal income tax law, such as those described below as excluded from the definition of a U.S. Holder. In addition, this discussion does not cover any state, local or foreign tax consequences. (See “Canadian Federal Tax Consequences).

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, published Internal Revenue Service (“IRS”) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. This discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. This discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advise to any holder or prospective holder of common shares of the Corporation and no opinion or representation with respect to the United States federal income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares of the Corporation are urged to consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Corporation.

U.S. Holders

As used herein, a “U.S. Holder” means a holder of common shares of the Corporation who is a citizen or individual resident of the United States, a corporation or partnership created or organized in or under the

- 48 -

laws of the United States or of any political subdivision thereof or a trust whose income is taxable in the United States irrespective of source. This summary does not address the tax consequences to, and U.S. Holder does not include, persons subject to specific provisions of federal income tax law, such as tax-exempt organizations, qualified retirement plans, individual retirement accounts and other tax-deferred accounts, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals, persons or entities that have a “functional currency” other than the U.S. dollar, shareholders who hold common shares as part of a straddle, hedging or a conversion transaction, and shareholders who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services. This summary is limited to U.S. Holders who own common shares as capital assets. This summary does not address the consequences to a person or entity holding an interest in a shareholder or the consequences to a person of the ownership, exercise or disposition of any options, warrants or other rights to acquire common shares.

Distribution on Common Shares of the Corporation

U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Corporation are required to include in gross income for United States federal income tax purposes the gross amount of such distributions equal to the U.S. dollar value of such dividends on the date of receipt (based on the exchange rate on such date) to the extent that the Corporation has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s federal income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s federal taxable income by those who itemize deductions. (See more detailed discussion at “Foreign Tax Credit” below). To the extent that distributions exceed current or accumulated earnings and profits of the Corporation, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder which is a corporation.

In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss. However, an individual whose realized gain does not exceed $200 will not recognize that gain, to the extent that there are no expenses associated with the transaction that meet the requirement for deductibility as a trade or business expense (other than travel expenses in connection with a business trip) or as an expense for the production of income.

Dividends paid on the common shares of the Corporation will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from the Corporation (unless the Corporation qualifies as a “foreign personal holding company” or a “passive foreign investment company,” as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Corporation. The availability of this deduction is subject to several complex limitations which are beyond the scope of this discussion.

Under current temporary Treasury Regulations, dividends paid on the Corporation’s common shares, if any, generally will not be subject to information reporting and generally will not be subject to U.S. backup withholding tax. However, dividends paid, and the proceeds of a sale of the Corporation’s common shares, in the U.S. through a U.S. or U.S. related paying agent (including a broker) will be subject to U.S.

- 49 -

information reporting requirements and may also be subject to the 31% U.S. backup withholding tax, unless the paying agent is furnished with a duly completed and signed Form W-9. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS.

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Corporation may be entitled, at the option of the U.S. Holder, to either receive a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and applies to all foreign taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign sources income bears to his or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. In addition, this limitation is calculated separately with respect to specific classes of income such as “passive income,” “high withholding tax interest,” “financial services income,” “shipping income,” and certain other classifications of income. Dividends distributed by the Corporation will generally constitute “passive income” or, in the case of certain U.S. Holders, “financial services income” for these purposes. The availability of the foreign tax credit and the application of the limitations on the credit are fact specific, and U.S. Holders of common shares of the Corporation should consult their own tax advisors regarding their individual circumstances.

Disposition of Common Shares of the Corporation

A U.S. Holder will recognize gain or loss upon the sale of common shares of the Corporation equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Corporation. Preferential tax rates apply to long-term capital gains of U.S. Holders who are individuals, estates or trusts. This gain or loss will be capital gain or loss if the common shares are a capital asset in the hands of the U.S. Holder, which will be long-term capital gain or loss if the common shares of the Corporation are held for more than one year. Lower long-term capital gain rates will apply if the U.S. Holder is an individual, estate or trust and such U.S. Holder has held the common shares for more than eighteen months. Deductions for net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders that are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital loss may be carried back three years and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

Other Considerations

In the following circumstances, the above sections of this discussion may not describe the United States federal income tax consequences resulting from the holding and disposition of common shares:

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total combined voting power or the total value of the Corporation’s outstanding shares is owned, directly or indirectly, by five or fewer individuals who are citizens or residents of the United States and 60% or more of the Corporation’s gross income for such year was derived from certain passive sources (e.g. from dividends received from its subsidiaries), the

- 50 -

Corporation may be treated as a “foreign personal holding company.” In that event, U.S. Holders that hold common shares would be required to include in gross income for such year their allocable portions of such passive income to the extent the Corporation does not actually distribute such income.

Foreign Investment Company

If 50% or more of the combined voting power or total value of the Corporation’s outstanding shares are held, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31)), and the Corporation is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest therein, it is possible that the Corporation may be treated as a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares to be treated as ordinary income rather than capital gain.

Passive Foreign Investment Company

Certain United States income tax legislation contains rules governing “passive foreign investment companies” (“PFIC”) which can have significant tax effects on U.S. Holders of foreign corporations. These rules do not apply to non-U.S. Holders. Section 1296 of the Code defines a PFIC as a corporation that is not formed in the United States and, for any taxable year, either (i) 75% or more of its gross income is “passive income”, which includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if the Corporation is a controlled foreign corporation or makes an election, adjusted tax basis) of its assets that produce or are held for the production of “passive income” is 50% or more. The Corporation does not believe that it is a PFIC. Each U.S. Holder of the Corporation is urged to consult a tax advisor with respect to how the PFIC rules affect their tax situation.

A U.S. Holder who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC is subject to United States federal income taxation under one of two alternative tax regimes at the election of each such U.S. Holder. The following is a discussion of such two alternative tax regimes applied to such U.S. Holders of the Corporation. In addition, special rules apply if a foreign corporation qualifies as both a PFIC and a “controlled foreign corporation” (as defined below) and a U.S. Holder owns, directly or indirectly, ten percent (10%) or more of the total combined voting power of classes of shares of such foreign corporation (See more detailed discussion at “Controlled Foreign Corporation” below).

A U.S. Holder who elects in a timely manner to treat the Corporation as a QEF (an “Electing U.S. Holder”) will be subject, under Section 1293 of the Code, to current federal income tax for any taxable year in which the Corporation qualifies as a PFIC on his pro rata share of the Corporation’s (i) ”net capital gain” (the excess of net long-term capital gain over net short-term capital loss), which will be taxed as long-term capital gain to the Electing U.S. Holder and (ii) ”ordinary earnings” (the excess of earnings and profits over net capital gain), which will be taxed as ordinary income to the Electing U.S. Holder, in each case, for the shareholder’s taxable year in which (or with which) the Corporation’s taxable year ends, regardless of whether such amounts are actually distributed.

The effective QEF election also allows the Electing U.S. Holder to (i) generally treat any gain realized on the disposition of their common shares of the Corporation (or deemed to be realized on the pledge of their shares) as capital gain; (ii) treat his share of the Corporation’s net capital gain, if any, as long-term capital gain instead of ordinary income; and (iii) either avoid interest charges resulting from PFIC status altogether, or make an annual election, subject to certain limitations, to defer payment of current taxes on his share of the Corporation’s annual realized net capital gain and ordinary earnings subject, however, to

- 51 -

an interest charge. If the Electing U.S. Holder is not a corporation, such an interest charge would be treated as “personal interest” that is not deductible.

The procedure a U.S. Holder must comply with in making an effective QEF election will depend on whether the year of the election is the first year in the U.S. Holder’s holding period in which the Corporation is a PFIC. If the U.S. Holder makes a QEF election in such first year, i.e., a timely QEF election, then the U.S. Holder may make the QEF election by simply filing the appropriate documents at the time the U.S. Holder files his tax return for such first year. If, however, the Corporation qualified as a PFIC in a prior year, then in addition to filing documents, the U.S. Holder must elect to recognize (i) under the rules of Section 1291 of the Code (discussed below), any gain that he would otherwise recognize if the U.S. Holder sold his stock on the qualification date or (ii) if the Corporation is a controlled foreign corporation, the U.S. Holder’s pro rata share of the Corporation’s post-1986 earnings and profits as of the qualification date. The qualification date is the first day of the Corporation’s first tax year in which the Corporation qualified as a “qualified electing fund” with respect to such U.S. Holder. The elections to recognize such gain or earnings and profits can only be made if such U.S. Holder’s holding period for the common shares of the Corporation includes the qualification date. By electing to recognize such gain or earnings and profits, the U.S. Holder will be deemed to have made a timely QEF election. A U.S. Holder who made elections to recognize gain or earnings and profits after May 1, 1992 and before January 27, 1997 may, under certain circumstances, elect to change such U.S. Holder’s qualification date to the first day of the first QEF year. U.S. Holders are urged to consult a tax advisor regarding the availability of and procedure for electing to recognize gain or earnings and profits under the foregoing rules. In addition, special rules apply if a foreign corporation qualifies as both a PFIC and a “controlled foreign corporation” (as defined below) and a U.S. Holder owns, directly or indirectly, ten percent (10%) or more of the total combined voting power of classes of shares of such foreign corporation (See more detailed discussion at “Controlled Foreign Corporation” below).

If the Corporation no longer qualifies as a PFIC in a subsequent year, a timely QEF election will remain in effect, although not applicable, during those years that the Corporation is not a PFIC. Therefore, if the Corporation requalifies as a PFIC, the QEF election previously made is still valid, and the U.S. Holder is required to satisfy the requirements of that election. Furthermore, a QEF election remains in effect with respect to a U.S. Holder, although dormant, after a U.S. Holder disposes of its entire interest in the Corporation. Upon the U.S. Holder’s reacquisition of an interest in the Corporation, the QEF election will apply to the newly acquired stock of the Corporation.

Effective for tax years of U.S. Holders beginning after December 31, 1997, U.S. Holders who hold (actually or constructively) marketable stock of a foreign corporation that qualifies as a PFIC, may annually elect to mark such stock to the market (a “mark-to-market election”). If such an election is made, such U.S. Holder will not be subject to the special taxation rules of Section 1291 described below for the taxable year for which the mark-to-market election is made. A U.S. Holder who makes such an election will include in income for the taxable year for which the election was made in an amount equal to the excess, if any, of the fair market value of the common shares of the Corporation as of the close of such tax year over such U.S. Holder’s adjusted basis in such common shares. In addition, the U.S. Holder is allowed a deduction for the lesser of (i) the excess, if any, of such U.S. Holder’s adjusted tax basis in the common shares over the fair market value of such shares as of the close of the tax year, or (ii) the excess, if any, of (A) the mark-to-market gains for the common shares in the Corporation included by such U.S. Holder for prior tax years, including any amount which would have been included for any prior tax year but for Section 1291 interest on tax deferral rules discussed below with respect to Non-Electing U.S. Holders, over (B) the mark-to-market losses for shares that were allowed as deductions for prior tax years. U.S. Holder’s adjusted tax basis in the common shares of the Corporation will be increased to reflect the amount included or deducted as a result of a mark-to-market election. A mark-to-market election only applies to the taxable year in which the election was made. A separate election must be made by a U.S. Holder for each subsequent taxable year. Because the Internal Revenue Service has not established

- 52 -

procedures for making a mark-to-market election, U.S. Holders should consult their tax advisor regarding the manner of making such an election.

If a U.S. Holder does not make a timely QEF election during a year in which it holds (or is deemed to have held) the shares in question and the Corporation is a PFIC (a “Non-electing U.S. Holder”), then special taxation rules under Section 1291 of the Code will apply to (i) gains realized on the disposition (or deemed to be realized by reasons of a pledge) of his common shares of the Corporation and (ii) certain “excess distributions”, as specifically defined, by the Corporation.

A Non-electing U.S. Holder generally would be required to pro rate all gains realized on the disposition of his common shares of the Corporation and all excess distribution of his common shares and all excess distributions over the entire holding period for the Corporation. All gains or excess distributions allocated to prior years of the U.S. Holder (other than years prior to the first taxable year of the Corporation during such U.S. Holder’s holding period and beginning after January 1, 1987 for which it was a PFIC) would be taxed at the highest tax rate for each such prior year applicable to ordinary income. The Non-electing U.S. Holder also would be liable for interest on the foregoing tax liability for each such prior year calculated as if such liability had been due with respect to each such prior year. A Non-electing U.S. Holder that is not a corporation must treat this interest charge as “personal interest” which, as discussed above, is wholly non-deductible. The balance of the gain of the excess distribution will be treated as ordinary income in the year of the disposition or distribution, and no interest charge will be incurred with respect to such balance.

If the Corporation is a PFIC for any taxable year during which a Non-electing U.S. Holder holds common shares of the Corporation, then the Corporation will continue to be treated as a PFIC with respect to such common shares, even if it is no longer definitionally a PFIC. A Non-electing U.S. Holder may terminate this deemed PFIC status by electing to recognize a gain (which will be taxed under the rules discussed above for Non-electing U.S. Holders) as if such common shares had been sold on the last day of the last taxable year for which it was a PFIC.

Under Section 1291(f) of the Code, the IRS has issued proposed regulations that, subject to certain exceptions, would treat as taxable certain transfers of PFIC stock by Non-Electing U.S. Holders that are generally not otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. Generally, in such cases the basis of the Corporation common shares in the hands of the transferee and the basis of any property received in the exchange for those common shares would be increased by the amount of gain recognized. An Electing U.S. Holder would not be taxed on certain transfers of PFIC stock, such as gifts, exchanges pursuant to corporate reorganizations, and transfers at death. The transferee’s basis in this case will depend on the manner of the transfer. In a transfer at death, for example, the transferee’s basis is equal to (i) the fair market value of the Electing U.S. Holder’s common shares, less (ii) the excess of the fair market value of the Electing U.S. Holder’s common shares reduced by the U.S. Holder’s adjusted basis in these common shares at death. The specific tax effect to the U.S. Holder and the transferee may vary based on the manner in which the common shares are transferred. Each U.S. Holder of the Corporation is urged to consult a tax advisor with respect to how the PFIC rules affect their tax situation.

Certain special, generally adverse, rules will apply with respect to common shares of the Corporation while the Corporation is a PFIC whether or not it is treated as a QEF. For example under Section 1297(b)(6) of the Code, a U.S. Holder who uses PFIC stock as security for a loan (including a margin loan) will, except as may be provided in regulations, be treated as having made a taxable disposition of such shares.

- 53 -

Controlled Foreign Corporation

If more than 50% of the voting power of all classes of shares or the total value of the shares of the Corporation is owned, directly or indirectly, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own 10% or more of the total combined voting power of all classes of shares of the Corporation (“United States shareholder”), the Corporation could be treated as a “controlled foreign corporation” under Subpart F of the Code. This classification would effect many complex results one of which is the inclusion of certain income of a CFC which is subject to current U.S. tax. The United States generally taxes a United States shareholder of a CFC currently on their pro rata shares of the Subpart F income of the CFC. Such U.S. shareholders are generally treated as having received a current distribution out of the CFC’s Subpart F income and are also subject to current U.S. tax on their pro rata shares of the CFC’s earnings invested in U.S. property. The foreign tax credit described above may reduce the U.S. tax on these amounts. In addition, under Section 1248 of the Code, gain from the sale or exchange of shares by a U.S. Holder of common shares of the Corporation who is or was a United States shareholder at any time during the five-year period ending with the sale or exchange is treated as ordinary income to the extent of earnings and profits of the Corporation attributable to the shares sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the foreign corporation generally will not be treated as a PFIC with respect to United States shareholders of the CFC. This rule generally will be effective for taxable years of United States shareholders beginning after 1997 and for taxable years of foreign corporations ending with or within such taxable years of United States shareholders. Special rules apply to United States shareholders who are subject to the special taxation rules under Section 1291 discussed above with respect to a PFIC. Because of the complexity of Subpart F, and because it is not clear that Subpart F would apply to U.S. Holders of common shares of the Corporation, a more detailed review of these rules is outside of the scope of this discussion.

F.                     DIVIDENDS AND PAYING AGENTS

Not Applicable.

G.                     STATEMENTS BY EXPERTS

Not Applicable.

H.                    DOCUMENTS ON DISPLAY

The documents concerning the Corporation may be viewed at Suite 1880, 1055 West Georgia Street, Vancouver, British Columbia, Canada V6E 3P3, during normal business hours.

I.                     SUBSIDIARY INFORMATION

Not Applicable.

ITEM 11.         QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not Applicable.

ITEM 12.         DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable.

- 54 -

PART III

ITEM 13.         DEFAULTS, DIVIDEND ARREARAGES AND DELINQUINCIES

Not Applicable.

ITEM 14.         MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not Applicable.

ITEM 15.         CONTROLS AND PROCEDURES

Evaluation Of Disclosure Controls And Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Our disclosure controls and procedures are designed to provide a reasonable level of assurance of achieving our disclosure control objectives. Our Principal Executive Officer and Principal Accounting Officer have concluded that our disclosure controls and procedures are, in fact, effective at this reasonable assurance level as of the period covered.

Changes In Internal Controls Over Financial Reporting

In connection with the evaluation of our internal controls during our last fiscal year, our Principal Executive Officer and Principal Financial Officer have determined that there are no changes to our internal controls over financial reporting that has materially affected, or is reasonably likely to materially effect, our internal controls over financial reporting.

ITEM 16.         [RESERVED]

ITEM 16A.      AUDIT COMMITTEE FINANCIAL EXPERT

The Corporation has no financial expert. The Corporation’s management believes that the cost related to retaining a financial expert at this time is prohibitive. Further, because of the nature of the Corporation’s start-up operations, the Corporation believes the services of a financial expert are not warranted.

ITEM 16B.      CODE OF ETHICS

The Corporation has not yet adopted a corporate code of ethics. The Corporation’s board of directors is considering, over the next year, establishing a code of ethics to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.

ITEM 16C.      PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed for the two most recently completed fiscal years ended August 31, 2004 for professional services rendered by the principal accountant for the audit of the Corporation’s annual

- 55 -

financial statements and review of the financial statements included in the Corporation’s Annual Report on Form 20-F and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

	Year Ended August 31, 2004	Year Ended August 31, 2003
Audit Related Fees	$30,815	$26,243
Tax Fees	$2,800	$2,200
All Other Fees	$18,590	$7,538
Total	$52,205	$35,981

ITEM 16D.      EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not Applicable.

ITEM 16E.      PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

None.

- 56 -

PART IV

ITEM 17.         FINANCIAL STATEMENTS

The Report and Consolidated Financial Statements for the years ended August 31, 2004, 2003, and 2002 reported on by Loewen, Stronach & Co., Chartered Accountants. The Financial Statements were prepared in accordance with Canadian GAAP and are presented in Canadian dollars. There are differences between United States and Canadian GAAP which are set forth in Note 10 of the Report and Consolidated Financial Statements for the years ended August 31, 2004, 2003, and 2002.

ITEM 18.         FINANCIAL STATEMENTS

Not applicable.

ITEM 19.         EXHIBITS

The following financial statements and related schedules are included in this Item:

(a)	Financial Statements
	Auditors’ Report
	Consolidated Balance Sheets as at August 31, 2004 and 2003.
	Consolidated Statements of Loss and Deficit for the years ended August 31, 2004, 2003, and 2002.
	Consolidated Statements of Cash Flow for the years ended August 31, 2004, 2003, and 2002.
	Notes to Consolidated Financial Statements.

- 57 -

SUNGOLD INTERNATIONAL HOLDINGS CORP.
(Formerly Sungold Entertainment Corp.)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2004

(A Development Stage Company)

(Presented in Canadian Dollars)

LOEWEN, STRONACH & CO.
Chartered Accountants

AUDITORS' REPORT

To The Shareholders of Sungold International Holdings Corp.

We have audited the consolidated balance sheet of Sungold International Holdings Corp. (a development stage company) (formerly Sungold Entertainment Corp.) as at August 31, 2004 and 2003 and the consolidated statements of loss and deficit and cash flows for the years ended August 31, 2004, 2003 and 2002 and for the cumulative period from April 7, 1986 (inception) to August 31, 2004. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance 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.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the company as at August 31, 2004 and 2003 and the results of its operations and cash flows for the years ended August 31, 2004, 2003 and 2002 and for the cumulative period from April 7, 1986 (inception) to August 31, 2004 in accordance with Canadian generally accepted accounting principles which differ in certain respects from United States generally accepted accounting principles (refer to Note 10). As required by the Company Act of British Columbia, we report that, in our opinion, these principles have been applied on a consistent basis.

	“Loewen, Stronach & Co.”
	Chartered Accountants
Vancouver, BC
December 14, 2004

Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Conflict

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the company’s ability to continue as a going concern, such as described in Note 1 to the financial statements. Our report to the shareholders dated December 14, 2004 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors’ report when these are adequately disclosed in the financial statements.

	“Loewen, Stronach & Co.”
	Chartered Accountants
Vancouver, BC
December 14, 2004

SUNGOLD INTERNATIONAL HOLDINGS CORP.
(Formerly Sungold Entertainment Corp.)

CONSOLIDATED BALANCE SHEET

AUGUST 31, 2004

(A Development Stage Company)
(Presented in Canadian Dollars)

	2004		2003
	$		$
ASSETS
CURRENT ASSETS
Cash	185,657		47,928
Prepaid expenses and deposits	58,768		4,154
	244,425		52,082
PRE-DEVELOPMENT COSTS (Note 3)	825,154		762,042
EQUIPMENT (Note 4)	522,455		604,282
	1,592,034		1,418,406
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities	200,334		175,238
Loans payable (Note 6 a)	9,696		17,390
Obligation under capital leases	-		17,253
	210,030		209,881
SHAREHOLDERS’ EQUITY
SHARE CAPITAL (Note 5)	19,959,566		18,574,369
CONTRIBUTED SURPLUS	51,922		51,922
DEFICIT	(18,629,484	)	(17,417,766	)
	1,382,004		1,208,525
	1,592,034		1,418,406

APPROVED BY THE DIRECTORS:
“Art Cowie”	Director
“Walter Wolff”	Director

(See accompanying notes to consolidated financial statements)

SUNGOLD INTERNATIONAL HOLDINGS CORP.
(Formerly Sungold Entertainment Corp.)

CONSOLIDATED STATEMENT OF LOSS AND DEFICIT

FOR THE YEAR ENDED AUGUST 31, 2004

(A Development Stage Company)
(Presented in Canadian Dollars)

	April 7, 1986
	(inception) to
	August 31, 2004		2004		2003	2002
	$		$		$	$
REVENUE
Gain on disposition of marketable securities	838,947		-		-	-
Interest income and miscellaneous	43,336		-		12	11
Sales	33,179		-		1,305	19,446
	915,462		-		1,317	19,457
EXPENSES
Advertising and promotion	3,261,763		122,508		594,941	808,511
Professional and consulting fees	2,455,333		488,500		547,829	242,565
Management fees	1,887,606		58,353		286,603	246,000
Investor relations	1,036,507		35,192		214,843	169,935
Travel and conferences	1,033,965		168,116		201,229	138,468
Office and miscellaneous	793,643		59,673		164,044	60,936
Internet services	770,015		23,831		184,249	410,144
Amortization	654,109		126,899		144,616	161,923
Office rent and services	519,919		63,452		80,595	69,017
Transfer agent and filing fees	342,607		50,287		33,078	34,902
Insurance	262,953		563		61,470	71,552
Financing fees	218,000		-		-	-
Finder fees	154,031		-		-	-
Interest and bank charges	151,782		12,561		8,314	4,923
Stock based compensation	51,922		-		51,922	-
Settlement agreement	40,000		-		-	-
Prizes	34,726		-		5,641	29,085
Fees and commissions	29,741		-		-	-
Interest on capital leases	26,628		1,005		11,962	10,543
Loss on disposition of equipment	826		826		-	-
Quebec capital tax	500		-		250	250
Foreign exchange loss (gain)	(13,688	)	(48	)	10,269	4,526
	13,712,888		1,211,718		2,601,855	2,463,280
Impairment write-down of pre-development
costs and investment	5,832,058		-		2,017,420	158,817
	19,544,946		1,211,718		4,619,275	2,662,097
LOSS	18,629,484		1,211,718		4,617,958	2,602,640
DEFICIT– beginning	-		17,417,766		12,799,808	10,197,168
DEFICIT – ending	18,629,484		18,629,484		17,417,766	12,799,808
Weight Average Number of Shares			92,239,057		63,900,867	42,409,898
Adjusted for Sept 8, 2003, 21 for 20 stock split			-		3,993,531	3,993,531
			92,239,057		67,894,398	46,403,429
Loss per share			0.0131		0.0680	0.0560

(See accompanying notes to consolidated financial statements)

SUNGOLD INTERNATIONAL HOLDINGS CORP.
(Formerly Sungold Entertainment Corp.)

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED AUGUST 31, 2004

(A Development Stage Company)
(Presented in Canadian Dollars)

	April 7, 1986
	(inception) to
	August 31 2004		2004		2003		2002
	$		$		$		$
OPERATING ACTIVITIES
Loss	(18,629,484	)	(1,211,718	)	(4,617,958	)	(2,602,640	)
Items not involving cash:
Amortization	654,109		126,899		144,616		161,923
Stock-based compensation	51,922		-		51,922		-
Write-down of pre-development costs and
investment	5,832,057		-		2,017,420		158,817
Gain on disposition of marketable securities	(838,947	)	-		-		-
Loss on disposition of equipment	14,858		826		-		-
	(12,915,485	)	(1,083,993	)	(2,404,000	)	(2,281,900	)
Cash provided by changes in non-cash
working capital items:
Prepaid expenses and deposits	(58,768	)	(54,614	)	370,799		(329,186	)
Accounts payable and accrued liabilities	200,334		25,096		142,414		(82,886	)
Loans payable (See note 3 to statement of
cash flows below)	1,977,454		1,377,503		317,764		282,187
	(10,796,465	)	263,992		(1,573,023	)	(2,411,785	)
INVESTING ACTIVITIES
Pre-development costs	(5,269,827	)	(63,112	)	(11,146	)	(32,908	)
Proceeds of disposition of equipment	38,028		23,682		-		-
Acquisition of equipment	(1,172,605	)	(69,580	)	(207,414	)	(7,690	)
	(6,404,404	)	(109,010	)	(218,560	)	(40,598	)
FINANCING ACTIVITIES
Repayment of obligation under capital leases	(57,029	)	(17,253	)	(19,423	)	(16,049	)
Issuance of shares	15,717,808		-		1,835,162		2,388,010
Proceed of disposition of marketable securities	1,725,747		-		-		-
	17,386,526		(17,253	)	1,815,739		2,371,961
INCREASE (DECREASE) IN CASH	185,657		137,729		24,156		(80,422	)
CASH – beginning	-		47,928		23,772		104,194
CASH – ending	185,657		185,657		47,928		23,772

Notes to statement of cash flows:
1)	Cash consists of balances with banks
2)	Interest and income taxes paid:
	Interest paid	178,410	13,566	20,276	15,466
	Income taxes paid	-	-	-	-

3)      During the year the Company issued 19,500,000 private placement units to settle $1,385,197 of debts. Since April 7, 1986 (inception) to August 31, 2004, the Company issued 31,250,000 private placement units to settle $1,967,758 of debts.

(See accompanying notes to consolidated financial statements)

SUNGOLD INTERNATIONAL HOLDINGS CORP.
(Formerly Sungold Entertainment Corp.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED AUGUST 31, 2004

(A Development Stage Company)
(Presented in Canadian Dollars)

Note 1	GOING CONCERN AND NATURE OF OPERATIONS
	On December 12, 2003, Sungold Entertainment Corp. changed its name to Sungold International Holdings Corp. (“the Company”) and continued under the Canada Business Corporate Act from the British Columbia Company Act. In connection with the Company’s name change the Company changed its trading symbol from “SGGNF” to “SGIHF” on the OTC Bulletin Board. The principal activity is developing and promoting horseracing, virtual horseracing, internet payment systems and other internet related products. To date, the Company has not earned significant revenues and is considered to be in a development stage.
	The recoverability of the amounts shown for pre-development costs is primarily dependent on the ability of the Company to put its pre-development projects into economically viable products in the future. The Company plans to meet anticipated financing needs in connection with its obligations by the exercise of stock options, share purchase warrants, and through private placements, public offerings or joint-venture participation by others.
	These consolidated financial statements have been prepared assuming that the Company will continue as a  going concern. The Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
	The Company’s shares are trading in the United States on the O.T.C. bulletin board.
Note 2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	a)	Commitments and Contingencies
		The Company’s activities are subject to various governmental laws and regulations relating to horseracing, virtual horseracing, copyrights, trademarks and patents. These regulations are continually changing. The Company believes its activities comply in all material respects with all applicable laws and regulations.
	b)	Use of estimates
		The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities at the date of financial statements and revenue and expenses for the year reported. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future years could be significant. Actual  results will likely differ from those estimates.
	c)	Basis of Consolidation
		These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, SafeSpending Inc., Horsepower Broadcasting Network Inc. – in the process of being wound up, Horsepower Broadcasting Network (HBN) International Ltd. and Racing Unified Network (R.U.N.) Inc. All inter-company transactions and balances have been eliminated.

..../2

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 2 – 

Note 2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
	d)	Translation of Foreign Currencies:
		Accounts recorded in foreign currency have been converted to Canadian dollars as follows:
		•    Current assets and current liabilities at exchange rates at the end of the year;
		•    Other assets at historical rates;
		•    Revenues and expenses at the average rate of exchange for the month incurred.
		Gains and losses resulting from the fluctuation of foreign exchange rates are included in thedetermination of income.
	d)	Pre-development costs
		The Company is in the development stage and capitalizes all costs related to its pre-development  projects in accordance with Accounting Guideline No. 11, “Enterprises in the Development Stage”,  issued by the Canadian Institute of Chartered Accountants. These costs will be amortized on the basis  of revenue generated in relation to the project following commencement of operations. When  management decides a project is to be abandoned, costs of the abandoned project are written off to  operations.
		The costs deferred at any time do not necessarily reflect present or future values. The ultimate recovery of such amounts depends on the Company successfully developing the project.
	e)	Equipments and Amortization
		Equipment is recorded at cost with amortization provided on a declining balance as follows:
		Computer equipment  30%
		Software – Horsepower ™  20%
		The above rates have been utilized to reflect the anticipated life expectancy. In the year acquired and put in use, only one-half the normal rate is applied.
	f)	Income Taxes
		Income taxes are provided for in accordance with the liability method. Under this method of tax  allocation, future income tax assets and liabilities are determined based on differences between the  financial statements carrying values and their respective income tax bases (temporary differences).  Future income tax assets and liabilities are measured using the enacted tax rates expected to be in  effect when the temporary differences are likely to reverse. The effect on future income tax assets and  liabilities of a change in rates is included in operations in the year in which the change is enacted or  substantively enacted. The amount of future income tax assets recognized is limited to the amount that  is more likely than not to be realized.

..../3

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 3– 

Note 2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
	g)	Loss Per Share
		Loss per share is determined using the treasury stock method on the weighted average number of  shares outstanding during the year. All outstanding options, purchase warrants and private placement  units are anti-dilutive, and therefore have no effect on the determination of loss per share.
	h)	Stock-based Compensation Plans
		The Company uses the value based method. Under this method, the value of stock-based compensation plan is the sum of two component parts: its intrinsic value and its time value. The intrinsic value reflects the extent to which it is “in the money” at any date; and the time value is the value of the potential increases to the plan holder at any given time. The estimated time value is added to the intrinsic value to determine the fair value of the plan at any time. The Company has a stock-based compensation plan, which is described in Note 5 b).
Note 3	PRE-DEVELOPMENT COSTS
	a)	Vancouver Racecourse / Richmond Equine Training Centre project
		In July 2004, the Company obtained an option to purchase 126 acres of land southwest of No. 8 Road and Westminster Highway in Richmond, BC, Canada (“Land”) for the purpose of developing a horse training complex, subject to approval of all zoning and regulatory authorities. The agreement gave the Company the option to purchase the Land for $10,500,000 until January 2, 2005.
		The Company is currently in discussions with various parties to determine if the stakeholders will support a renovation of Hastings Park horse track facility in Vancouver, British Columbia to a regulation sized one mile facility in conjunction with its Richmond project.
		In September 2004, the Company renegotiated to extend the agreement with a party who is interested in both the Vancouver one-mile racecourse and the Richmond equine training centre project. The agreement set out the intention of both parties that upon the Company receiving the appropriate permission from the Cities of Vancouver and of Richmond, BC and from the Province of British Columbia to develop the project, the interested party would purchase 6 million common treasury shares of Sungold International Holdings Corp. at US$4.00 per share by way of a private placement. The agreement was extended to October 1, 2005. (See Related Party Transactions Note 6 b).

			Impairment
	2003	Additions	Write off	2004
	$	$	$	$
Consulting and legal fees	613,799	2,919	-	616,718
Options	-	10,000	-	10,000
Other direct costs	1,528	-	-	1,528
	615,327	12,919	-	628,246

..../4

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 4– 

Note 3	PRE-DEVELOPMENT COSTS (Continued)
	b)	HorsepowerTMproject (formerly Horsepower™ Software Development project and Horsepower™ Operating project)
		On September 15, 1999, the Company incorporated a wholly owned subsidiary, Horsepower.com Network Inc. in the Province of British Columbia under the Company Act (BC) to develop a virtual Horserace wagering system - HorsepowerTM. On March 22, 2000, the subsidiary name changed to Horsepower Network.com Inc., and on January 25, 2001, the subsidiary name changed to Horsepower Broadcasting Network Inc. (“HBNI”). Sungold reserves the rights to all HorsepowerTMintellectual property.
		On February 20, 2001, the Company incorporated a wholly owned subsidiary, Horsepower Broadcasting Network (HBN) International Ltd. (“HBN”), in the Province of Quebec under the Canada Business Corporation Act. Initially, HBN operated the Horsepower World Pool pari-mutual wagering system licensed by the Kahnawake Gaming Commission and operated on the Kahnawake Territory in Quebec. In March 2003, HBN made a strategic decision to offer Horsepower pari-mutual wagering and the Horsepower World Pool virtual simulcast racing system, exclusively through licensed Authorized Racing Affiliates (ARA) land based Racetrack and Teletheatres worldwide.
		As a result of the proposed wind up of HBNI, the Company combined Horsepower™ Software Development project and Horsepower™ Operating project into one project, named Horsepower™ project. The Company’s management mandated Horsepower Broadcasting International (HBN) Ltd. to assume 100% control of all proposed Horsepower Development and Pari-mutuel Wagering Operations. The Horsepower Racetrack Affiliated Marketing program will be assigned in 2005 to the new subsidiary -Racing Unified Network (R.U.N.) Inc.
		During the year, the Company signed a software development agreement (See related parties transactions note) to develop and integrate the existing Horsepower™ program with Inter Tote System Protocol, a common interface between various Tote systems existing with Authorized Racetrack Affiliates (ARA). The hardware and software development costs are capitalized under equipment and amortized annually when put in use. In addition, the Company incurred legal fees for numerous trademark applications for its Horsepower™ project, and those application costs were deferred under its HorsepowerTMproject.

			Impairment
	2003	Additions	Write off	2004
	$	$	$	$
Legal and consulting fees	58,999	20,120	-	79,119

..../5

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 5– 

Note 3	PRE-DEVELOPMENT COSTS (Continued)
	c)	SafeSpending project
		In May 2001, the Company acquired the entire world wide right, title and interest to the internet payment system technology of SafeSpending from SafeSpending Services Inc. The SafeSpending internet payment system will be a prepaid spending system that uses a unique and personalized PIN number which can be used to make anonymous purchases online from merchants and individuals. The acquisition agreement includes all copyrights, trademarks, source codes and SafeSpending’s intellectual property. Under the terms of agreement the Company has agreed to pay a 7.5 percent royalty of net revenue of the Company upon the Company receiving $1,000,000 in net revenue from operation, sale or license of the technology.
		In May 2003, the Company changed the name of its subsidiary, Sungold Entertainment USA, Inc., an Arizona Corporation, to SafeSpending Inc. During the year, the Company incurred legal costs for SafeSpending’s patent and trademark applications, and deferred those costs under the SafeSpending project.

				Impairment
		2003	Additions	Write off	2004
		$	$	$	$
	Acquisition cost	62,300	-	-	62,300
	Legal and consulting fees	25,416	30,073	-	55,489
		87,716	30,073	-	117,789
				Impairment
		2003	Additions	Write off	2004
		$	$	$	$
TOTAL PRE-DEVELOPMENT COSTS		762,042	63,112	-	825,154

..../6

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 6– 

Note 4 EQUIPMENT

	2004			2003
	Cost	Less	Net Book	Net Book
		Accumulated	Value	Value
		Amortization
	$	$	$	$
Software – HorsepowerTM(1)	830,684	383,746	446,938	471,697
Computer equipment(2), (3)	313,057	237,540	75,517	85,619
Computers under capital leases(2)	-	-	-	23,784
Furniture and fixtures(3)	-	-	-	23,182
	1,143,741	621,286	522,455	604,282

		(1)	During the year, the Company incurred $69,580 software development costs to modify its existence Horsepower ™ software program utilizing Inter Tote System Protocol. As the modification portion is still under development and has not been put in use, no amortization has been provided on the current cost.
		(2)	During the year, the Company paid out its capital leases and all computers under capital leases were reclassified to computer equipment.
		(3)	During the year, furniture and fixtures, and a computer were sold to a management consultant of the Company at market value.
Note 5	SHARE CAPITAL

	2004	2003
	$	$
Authorized:
Unlimited common shares without par value
100,000,000 Class “A” preference shares
without par value(1)
100,000,000 Class “B” preference shares
without par value(2)
Issued and outstanding:
103,364,740 common
(2003 – 79,871,209 common)	19,959,566	18,574,369

(1)	On December 12, 2003, 100,000,000 authorized Class “A” Preference shares with a par value of $10 each were amended to be without par value.
(2)	On December 12, 2003, 100,000,000 authorized Class “B” Preference shares with a par value of $50 each were amended to be without par value.

..../7

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 7– 

Note 5	SHARE CAPITAL (continued)
	a)	Shares issued during the year:

	2004		2003
	#	$	#	$
For debt – private placements	19,500,000	1,385,197	11,750,000	582,561
21 for 20 stock split – Sept 8, 2003	3,993,531	-	-	-
	23,493,531	1,385,197	11,750,000	582,561
For cash – private placements	-	-	16,000,000	1,673,938
– exercise of share
purchase warrants	-	-	2,000,000	161,224
	-	-	18,000,000	1,835,162
	23,493,531	1,385,197	29,750,000	2,417,723

b)	Stock options and stock based compensation
	The Company has a fixed stock option plan on the issuance of options of up to 10% of the Company’s issued share capital. The following are outstanding incentive share purchase options:

Date of Grant	Price	Balance   Aug 31, 2003	Granted	Exercised  / Expired  / Cancelled	Balance  August 31, 2004	Expiration date
February 16, 2001	US$0.1500	100,000	-	-	100,000	February 16, 2006
February 28, 2001	US$0.0600	1,050,000	-	-	1,050,000	February 28, 2006
March 5, 2001	US$0.0850	79,900	-	-	79,900	March 5, 2006
August 10, 2001	US$0.1200	300,000	-	-	300,000	August 10, 2006
October 22, 2001	US$0.1000	100,000	-	100,000	-	Cancelled
October 23, 2001	US$0.1200	100,000	-	100,000	-	Cancelled
December 20, 2001	US$0.0900	100,000	-	-	100,000	December 20, 2006
January 4, 2002	US$0.0800	802,764	-	72,000	730,764	January 4, 2007
January 24, 2002	US$0.0725	400,000	-	-	400,000	January 24, 2007
May 17, 2002	US$0.0200	272,000	-	272,000	-	Cancelled
October 11, 2002	US$0.1500	200,000	-	-	200,000	October 11, 2007
October 16, 2002	US$0.1500	300,000	-	-	300,000	October 16, 2007
January 23, 2003	US$0.1100	136,000	-	-	136,000	January 23, 2008
May 27, 2003	US$0.0500	64,000	-	-	64,000	May 27, 2008
May 28, 2003	US$0.0500	150,000	-	-	150,000	May 28, 2008
		4,154,664	-	544,000	3,610,664

In 2001, the Canadian Institute of Chartered Accountants issued Section 3870 for Stock-based Compensations, which requires the use of fair value based method for fiscal years beginning on or after January 1, 2002 and applied to awards granted on or after the date of adoption. The Company adopted the recommendations prospectively for the fiscal year starting September 1, 2002.

Under this fair value based method, the value of stock-based compensation plan is the sum of two component parts: its intrinsic value and its time value. The intrinsic value reflects the extent to which it is “in the money” at any date; and the time value is the value of the potential increases to the plan holder at any given time. The estimated time value is added to the intrinsic value to determine the fair value of the plan at any time.

... /8

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 8 – 

Note 5	SHARE CAPITAL (continued)
	b)	Stock options and stock based compensation (continued)
		During the year no options were granted. In fiscal 2003, the Company granted 850,000 share purchase options, all to non-employees as follows:

Date of Grant	Price	Granted  #	Exercisable  #	Exercised  #	Compensation  $	Expiration date
Oct. 11, 2002	US$0.1500	200,000	200,000	-	16,600	October 11, 2007
Oct. 16, 2002	US$0.1500	300,000	300,000	-	24,900	October 16, 2007
Jan. 23, 2003	US$0.1100	136,000	136,000	-	8,282	January 23, 2008
May 27, 2003	US$0.0500	64,000	64,000	-	640	May 27, 2008
May 28, 2003	US$0.0500	150,000	150,000	-	1,500	May 28, 2008
		850,000	850,000	-	51,922

The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

Risk-free interest rate	3.00	%
Dividend yield	0
Estimated hold period prior to exercise (years)	3
Volatility in the price of the Company’s common shares	150	%

Between January 1, 2002 and August 31, 2002, the Company granted 946,764 share purchase options to directors at US$0.08 per share until Jan 4, 2007, 136,000 share purchase options to a director at US$0.08 per share until Jan 15, 2007, 400,000 share purchase options to a director at US$0.0725 per share until Jan 24, 2007, 136,000 share purchase options to a director at US$0.23 per share until March 26, 2007 and 272,000 share purchase options to a director at US$0.20 per share until May 17, 2007.

Had compensation cost of the stock based employee compensation been recorded, based upon the fair value of share options, additional compensation expense for the year ended August 31, 2002 would have been $111,430. The pro forma loss per share, assuming this additional compensation expense would have been ($0.0584) . The Pro forma results may be materially different than actual results realized.

The Black-Scholes valuation model was developed for use in estimating the fair value of traded options which are fully transferable and highly traded. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its director stock options.

Outstanding share purchase options which were issued prior January 1, 2002 have neither been charged to income nor included in the calculation of pro forma loss, in accordance with Section 3870 of the CICA Handbook, which is to take effect prospectively.

... /9

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 9 – 

Note 5	SHARE CAPITAL (continued)
	c)	Share purchase warrants:

Date of Grant	Price	Balance  Aug 31, 2003	Granted	Exercised	Expired /  Cancelled	Balance  May 31, 2004	Expiration date
October 12, 2000	US$0.200	319,000	-	-	319,000	-	Cancelled
September 7, 2001	US$0.200	1,000,000	-	-	-	(1) 1,000,000	September 7, 2004
October 24, 2001	US$0.150	420,000	-	-	-	(1) 420,000	October 24, 2004
November 4, 2001	US$0.150	1,000,000	-	-	-	(1) 1,000,000	November 4, 2004
December 14, 2001	US$0.060	2,333,334	-	-	-	(1) 2,333,334	December 14, 2004
January 7, 2002	US$0.060	1,700,000	-	-	-	1,700,000	January 7, 2005
January 30, 2002	US$0.060	1,000,000	-	-	-	1,000,000	January 30, 2005
March 1, 2002	US$0.110	300,000	-	-	-	300,000	March 1, 2005
March 26, 2002	US$0.170	1,000,000	-	-	-	1,000,000	March 26, 2005
April 4, 2002	US$0.165	1,000,000	-	-	-	1,000,000	April 4, 2005
May 7, 2002	US$0.160	400,000	-	-	-	400,000	May 7, 2005
May 30, 2002	US$0.150	600,000	-	-	-	600,000	May 30, 2005
July 10, 2002	US$0.075	2,500,000	-	-	-	2,500,000	July 10, 2005
July 24, 2002	US$0.080	250,000	-	-	-	250,000	July 24, 2005
July 23, 2002	US$0.080	1,500,000	-	-	-	1,500,000	July 23, 2005
August 21, 2002	US$0.090	100,000	-	-	-	100,000	August 21, 2005
September 27, 2002	US$0.080	3,000,000	-	-	-	3,000,000	September 27, 2005
November 1, 2002	US$0.070	3,000,000	-	-	-	3,000,000	November 1, 2005
January 24, 2003	US$0.100	2,000,000	-	-	2,000,000	-	Cancelled
March 26, 2003	US$0.050	3,000,000	-	-	-	3,000,000	March 26, 2006
April 10, 2003	US$0.040	3,750,000	-	-	-	3,750,000	April 10, 2006
May 16, 2003	US$0.030	3,000,000	-	-	-	3,000,000	May 16, 2006
June 11, 2003	US$0.030	3,000,000	-	-	-	3,000,000	June 11, 2006
July 7, 2003	US$0.031	2,500,000	-	-	-	2,500,000	July 7, 2006
August 21, 2003	US$0.075	1,000,000	-	-	-	1,000,000	August 21, 2006
September 5, 2003	US$0.060	-	2,000,000	-	-	2,000,000	September 5, 2006
October 31, 2003	US$0.060	-	2,000,000	-	-	2,000,000	October 31, 2006
February 10, 2004	US$0.040	-	4,000,000	-	-	4,000,000	February 10, 2007
February 18, 2004	US$0.045	-	2,500,000	-	-	2,500,000	February 18, 2007
March 30, 2004	US$0.0525	-	1,500,000	-	-	1,500,000	March 20, 2007
June 04, 2004	US$0.060	-	3,000,000	-	-	3,000,000	June 04, 2007
August 20, 2004	US$0.060	-	4,500,000	-	-	4,500,000	August 20, 2007
		39,672,334	19,500,000	-	2,319,000	56,853,334

              ⁽¹⁾See Subsequent Events note 9

... /10

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 10– 

Note 6	RELATED PARTY TRANSACTIONS
	a)	Loans payable of $9,696 (US$7,384) [2003 - $17,390 (US$12,250)] are from a director and officer of a subsidiary of the Company.
	b)	The Company extended an intention agreement with a company with a common director, for its Richmond/Vancouver Horseracing project. (See Pre-development Costs Note 3 a).
	c)	During the year management fees of $58,353 [2003 - $286,603] were paid to a director and officer.  The fees are in the normal course of business and are measured at the exchange amount, which is the  amount of consideration established and agreed to by the related party.
	d)	During the year consulting fees of $392,386 [2003 - $286,645] were paid to a director, a company with  common director, an officer, and a director and officer of a subsidiary of the Company. The fees are  in the normal course of business and are measured at the exchange amount, which is the amount  of consideration established and agreed to by the related parties.
	e)	During the year the Company signed a $275,825 software development agreement with a consulting  company for its Horsepower™ program. As of August 31, 2004, the Company paid $69,580 as  progress payments. The owner of the consulting company is also the Chief Technical Officer of a  subsidiary - Horsepower Broadcasting Network (HBN) International Ltd. The fees are in the normal  course of business and are measured at the exchange amount, which is the amount of  consideration established and agreed to by the related parties.
Note 7	FINANCIAL INSTRUMENTS
	The Company’s financial instruments consist of cash, accounts payable and accrued liabilities and loans  payable. The loans payable are repayable in US dollars and subject to Canadian and United States currency  exchange rate fluctuation. Unless otherwise noted, it is management’s opinion that the Company is not  exposed to significant interest, currency or credit risks arising from these financial statements. The fair value  of these financial instruments approximates their carrying value, unless otherwise noted.
Note 8	ACCUMULATED LOSSES AND INCOME TAXES
	The company has accumulated non-capital losses for income tax purposes of $10,204,294 which may be carried forward and used to reduce taxable income in future years. Under present tax legislation, these losses will expire as follows:

Year	Amount
	$
2005	474,086
2006	653,279
2007	1,273,366
2008	1,714,246
2009	2,427,247
2010	2,473,112
2014	1,188,958
	10,204,294

..../11

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 11– 

Note 8	ACCUMULATED LOSSES AND INCOME TAXES (continued)
	The company also has accumulated capital losses for income tax purposes of $3,143,556 that may be carried forward indefinitely and used to reduce capital gains in the future.
	The Company follows the asset and liability method of accounting for income taxes. Future income taxes assets and liabilities are determined based on temporary differences between the accounting and tax bases of existing assets and liabilities, and are measured using tax rates expected to apply when these differences reverse. A valuation allowance is recorded against any future tax asset if it is more likely than not that the asset will not be realized.
	In assessing the realizability of future tax assets, management considers whether it is more likely than not that some portion of all of the future tax assets will not be realized. The ultimate realization of future tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of future tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The amount of future tax asset considered realizable could change materially in the near term based on future taxable income during the carry forward period.
Note 9	SUBSEQUENT EVENTS
	a)	On September 7, 2004, 1,000,000 US$0.20 share purchase warrants expired.
	b)	On October 1, 2004, the Company announced a private placement of 2,500,000 units at US$0.06 each and subsequently issued the units as shares for debts of US$150,000.
	c)	On October 24, 2004, 420,000 US$0.15 share purchase warrants expired.
	d)	On November 4, 2004, 1,000,000 US$0.15 share purchase warrants expired.
	e)	On December 14, 2004, 2,333,334 US$0.06 share purchase warrants expired.

... /12

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 12 – 

Note 10	UNITED STATES ACCOUNTING PRINCIPLES
	These consolidated financial statements have been prepared in accordance with Canadian generally  accepted accounting principles (“CDN GAAP”) which differ in certain respects from those principles that the  Company would have followed had its consolidated financial statements been prepared in accordance with  generally accepted accounting principles in United States (“US GAAP”). The Company is considered to be  a pre-operational Company under US GAAP.
	The significant differences related principally to the following items and the adjustments necessary to  restate the loss and shareholders’ equity in accordance with US GAAP are outlined as follows:
	a)	Pre-Development Costs
		Under CDN GAAP, pre-development expenditures are capitalized and amortized over the benefit period of the deferred expenditures once operations commence or written off if abandoned or impaired. US GAAP requires that pre-development expenditures be expensed as incurred until it is determined that commercially viable operations exist and the expenses then incurred are recoverable.
	b)	Foreign Currency Translation
		Under US GAAP, all asset and liability accounts are translated at the exchange rates in effect at the balance sheet dates. Income statement amounts are translated at the average rate of exchange for the year. The resulting differences are accumulated in a separate component of shareholders’ equity.
	c)	Comprehensive Income
		Under US GAAP, SFAS No. 130 requires that companies report comprehensive income as a measure of overall performance. Comprehensive income includes all changes in equity during a year except those resulting from investments by owners and distribution to owners. There is no similar concept under Canadian GAAP. The Company has determined that it had no comprehensive income other than the loss in any of the years presented.

.... /13

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 13 – 

Note 10	UNITED STATES ACCOUNTING PRINCIPLES (Continued)
	d)	The following are balance sheet items under US GAAP that differ from Canadian GAAP:

	2004		2003		2002
	$		$		$
Pre-development costs	-		-		-
Share capital	24,670,304		23,285,107		20,867,384
Foreign currency adjustments	13,688		13,640		23,909
Accumulated Deficit During Development Stage	(24,179,064	)	(22,904,186	)	(20,302,771	)

e)      The following table summarizes the effect on Deficit of differences between CDN GAAP and US GAAP:

	2004		2003		2002
	$		$		$
Deficit - CDN GAAP	(18,629,484	)	(17,417,766	)	(12,799,808	)
Cumulative effect of previous
years’ adjustments	(5,486,420	)	(7,502,963	)	(7,633,398	)
	(24,115,904	)	(24,920,729	)	(20,433,206	)
US GAAP material adjustments:
•         Effect of the write-off of pre-
development costs on net loss	(63,112	)	2,006,274		125,909
•         Foreign currency adjustments	(48	)	10,269		4,526
	(63,160	)	2,016,543		130,435
Deficit - US GAAP	(24,179,064	)	(22,904,186	)	(20,302,771	)

..../14

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 14 – 

Note 10	UNITED STATES ACCOUNTING PRINCIPLES (continued)
	f)	The following table summarizes the effect on shareholders’ equity after considering the US GAAP
		adjustments:

			Deficit		Foreign
	Common	Additional	Accumulated		Currency	Total
	Shares	Paid-in	During		Translation	Shareholders’
	Amount	Capital	Development		Adjustments	Equity
			Stage
	$	$	$		$	$
Common Shares issued /net loss:
August 31, 1986
•         Shares for cash	107,501	-	-		-	107,501
•         Net loss under US GAAP	-	-	-		-	-
August 31, 1987	107,501	-	-		-	107,501
•         Shares for cash	166,971	-	-		-	166,971
•         Net loss under US GAAP	-	-	-		-	-
August 31, 1988	274,472	-	-		-	274,472
•         Shares for cash	401,667	-	-		-	401,667
•         Shares for property	227,000	-	-		-	227,000
•         Net loss under US GAAP	-	-	(753,962	)	-	(753,962	)
August 31, 1989	903,139	-	(753,962	)	-	149,177
•         Shares for cash	622,215	-	-		-	622,215
•         Shares for property	1,897,000	-	-		-	1,897,000
•         Net loss under US GAAP	-	-	(575,612	)	-	(575,612	)
August 31, 1990	3,422,354	-	(1,329,574	)	-	2,092,780
•         Shares for cash	100,250	-	-		-	100,250
•         Net loss under US GAAP	-	-	(350,482	)	-	(350,482	)
August 31, 1991	3,522,604	-	(1,680,056	)	-	1,842,548
•         Shares for cash	402,900	-	-		-	402,900
•         Net loss under US GAAP	-	-	(1,420,584	)	-	(1,420,584	)
August 31, 1992	3,925,504	-	(3,100,640	)	-	824,864
•         Shares for cash	465,875	-	-		-	465,875
•         Shares for property	150,000	-	-		-	150,000
•         Net loss under US GAAP	-	-	(289,189	)	-	(289,189	)
August 31, 1993	4,541,379	-	(3,389,829	)	-	1,151,550
•         Shares for cash	576,500	-	-		-	576,500
•         Net loss under US GAAP	-	-	(836,050	)	-	(836,050	)
August 31, 1994	5,117,879	-	(4,225,879	)	-	892,000
•         Shares for cash	175,000	-	-		-	175,000
•         Foreign currency	-	-	-		3,448	3,448
•         Net loss under US GAAP	-	-	(738,384	)	-	(738,384	)
August 31, 1995	5,292,879	-	(4,964,263	)	3,448	332,064
•         Shares for cash	255,750	-	-		-	255,750
•         Foreign currency	-	-	-		3,329	3,329
•         Net loss under US GAAP	-	-	(501,749	)	-	(501,749	)
August 31, 1996	5,548,629	-	(5,466,012	)	6,777	89,394

..../15

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 15 – 

Note 10 UNITED STATES ACCOUNTING PRINCIPLES (continued)

			Deficit		Foreign
	Common	Additional	Accumulated		Currency		Total
	Shares	Paid in	During		Translation		Shareholders’
	Amount	Capital	Development		Adjustments		Equity
			Stage
	$	$	$		$		$
August 31, 1996 – balance forward	5,548,629	-	(5,466,012	)	6,777		89,394
•         Shares for cash	1,250,000	-	-		-		1,250,000
•         Share-based compensation	1,345,680	-	(1,345,680	)	-		-
•         Foreign currency	-	-	-		(1,646	)	(1,646	)
•         Net loss under US GAAP	-	-	(1,046,798	)	-		(1,046,798	)
August 31, 1997	8,144,309	-	(7,858,490	)	5,131		290,950
•         Shares for cash	1,351,967	-	-		-		1,351,967
•         Share-based compensation	2,078,946	-	(2,078,946	)	-		-
•         Foreign currency	-	-	-		11,140		11,140
•         Net loss under US GAAP	-	-	(1,297,719	)	-		(1,297,719	)
August 31, 1998	11,575,222	-	(11,235,155	)	16,271		356,338
•         Shares for cash	1,044,358	-	-		-		1,044,358
•         Share-based compensation	1,286,112	-	(1,286,112	)	-		-
•         Foreign currency	-	-	-		(18,372	)	(18,372	)
•         Net loss under US GAAP	-	-	(1,300,904	)	-		(1,300,904	)
August 31, 1999	13,905,692	-	(13,822,171	)	(2,101	)	81,420
•         Shares for cash	2,182,351	-	-		-		2,182,351
•         Foreign currency	-	-	-		18,438		18,438
•         Net loss under US GAAP	-	-	(1,956,433	)	-		(1,956,433	)
August 31, 2000	16,088,043	-	(15,778,604	)	16,337		325,776
•         Shares for cash	2,391,331	-	-		-		2,391,331
•         Foreign currency	-	-	-		12,098		12,098
•         Net loss under US GAAP	-	-	(2,051,962	)	-		(2,051,962	)
August 31, 2001	18,479,374	-	(17,830,566	)	28,435		677,243
•         Shares for cash	2,388,010	-	-		-		2,388,010
•         Foreign currency	-	-	-		(4,526	)	(4,526	)
•         Net loss under US GAAP	-	-	(2,472,205	)	-		(2,472,205	)
August 31, 2002	20,867,384	-	(20,302,771	)	23,909		588,522
•         Shares issuance	2,417,723	-	-		-		2,417,723
•         Share-based compensation	-	51,922	-		-		51,922
•         Foreign currency	-	-	-		(10,269	)	(10,269	)
•         Net loss under US GAAP	-	-	(2,601,415	)	-		(2,601,415	)
August 31, 2003	23,285,107	51,922	(22,904,186	)	13,640		446,483
•         Shares issuance	1,385,197	-	-		-		1,385,197
•         Foreign currency	-	-	-		48		48
•         Net loss under US GAAP	-	-	(1,274,878	)	-		(1,274,878	)
August 31, 2004	24,670,304	51,922	(24,179,064	)	13,688		556,850

..../16

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 16 – 

Note 10	UNITED STATES ACCOUNTING PRINCIPLES (continued)
	g)	The following table summarizes the effect on Net Loss of differences between CDN GAAP and US GAAP:

	Cumulative		2004		2003		2002
	Amounts
	From
	Apr 7/86 to
	Aug 31/04
	$		$		$		$
Net loss under CDN GAAP	(18,629,484	)	(1,211,718	)	(4,617,958	)	(2,602,640	)
US GAAP material adjustments:
•         Effect of the write-off of pre-
development costs on net loss	(825,154	)	(63,112	)	2,006,274		125,909
•         Share-based compensation	(4,710,738	)	-		-		-
•         Foreign currency adjustments	(13,688	)	(48	)	10,269		4,526
Net loss under US GAAP	(24,179,064	)	(1,274,878	)	(2,601,415	)	(2,472,205	)
Loss per share under US GAAP			0.0138		0.0383		0.0533
Weighted average number of shares			92,239,057		67,894,398		46,403,429

... /17

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 17 – 

Note 10	UNITED STATES ACCOUNTING PRINCIPLES (continued)
	k)	New Accounting Standards
		Under the Securities and Exchange Commission’s Staff Accounting Bulletin No.74, the Company is required to disclose certain information related to recently issued accounting standards. The recently issued accounting standards are summarized as follows:
		U.S. Standards
		In December 2003, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (SAB) No. 104 “ Revenue Recognition”, which codifies, revises and rescinds certain sections of SAB 101, “revenue Recognition”, in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The Company does not expect that adoption of SAB 104 will have a material impact on its results from operations or financial position.
		In March 2004, the SEC issued Staff Accounting Bulletin (SAB) No. 105 “Loan Commitments Accounted for as Derivative Instruments”, which summarizes the views of the SEC staff regarding the application of generally accepted accounting principles to loan commitments accounted for as derivative instruments. SAB 105 must be applied to loan commitments entered into after March 31, 2004. The Company does not expect that adoption of SAB 105 will have a material impact on its results from operations or financial position.
		In March 2004, the Public Company Accounting Oversight Board (United States) (“PCAOB”) approved an auditing standard that addresses both the work required to audit internal controls over financial reporting and the relationship between that audit and the audit of financial statements. Auditing standard No. 1 is effective for audits of companies on May 15, 2004.
		Canadian Standards
		In March 2003, the Canadian Institute of Chartered Accountants (“CICA”) issued new Section 3110,AssetRetirement Obligationseffective for financial years beginning on or after January 1, 2004. The new standard focuses on the recognition and measurement of liabilities for obligations associated with the retirement of property, plant and equipment when those obligations result from the acquisition, construction, development or normal operation of the assets. The standard requires the recognition of any statutory, contractual or other legal obligation, normally when incurred. The obligations are measured initially at fair value and the resulting costs capitalized into the carrying amount of the related asset. In subsequent periods, the liability is adjusted for the accretion of discount and any changes in the amount or timing of the underlying future cash flows. The asset retirement cost is amortized to income on a systematic and rational basis. The Company does not expect that adoption of Section 3110 will have a material impact on its results from operations or financial position.
		In June 2003 and amended in September 2004, the CICA issued Accounting Guideline 15Consolidation ofVariable Interest Entities(AcG-15), is harmonized with FASB Interpretation No. 46, with the same title, to provide guidance for applying the principles in Subsidiaries, Section 1590, to certain special-purpose entities. The consolidation requirement in the Guideline will be effective for all annual and interim periods beginning on or after November 1, 2004. The Company does not expect that adoption of AcG-15 will have a material impact on its results from operations or financial position.

..../18

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 18 – 

NOTE 10	UNITED STATES ACCOUNTING PRINCIPLES (continued)
	k)	New Accounting Standards (continued)
		Canadian Standards (Continued)
		In July 2003, the CICA issued new Handbook Sections 1100,Generally Accepted Accounting Principles, and 1400General Standards of Financial Statement Presentation. Section 1100 describes what constitutes Canadian GAAP and its sources, and provides guidance on sources to consult when selecting accounting policies and appropriate disclosure when a matter is not dealt with explicitly in the primary sources of GAAP, thereby recodifying the Canadian GAAP hierarchy. Section 1400 clarifies what is fair presentation in accordance with GAAP and provides general guidance on financial presentation. These sections apply to fiscal years beginning on or after October 1, 2003. The Company adopted the standards for current year and does not expect the adoption has a material impact of its results from operations or financial position.
		In December 2003, the CICA issued Emerging Issues Committee Abstract, EIC-141Revenue Recognition, EIC-142,Revenue Arrangements with Multiple Deliverables, and EIC-143Accounting for Separately PricedExtended Warranty and Product Maintenance Contracts, which highlight broad principles that are considered when determining the appropriate application of revenue recognition policies. EIC-141, 142 and 143 are effective in the first interim or annual fiscal period beginning December 17, 2003. As the Company is still in pre-operating stage with no revenue, the Company does not expect that adoption of EIC-141, EIC-142 and EIC-143 will have a material impact on its results from operations or financial position.
		In January 2004, the CICA issued Emerging Issues Committee Abstract, EIC-144Accounting by a Customer(Including a Reseller) for Certain Consideration Received From a Vendor, which provides guidance on how a customer (including a reseller) of a vendor’s products should account for cash consideration received from a vendor. EIC-144 should be applied retroactively to all financial statements for the first interim or annual fiscal period ending after August 15, 2004. As the Company is still in pre-operating stage with no revenue, the Company does not expect that adoption of EIC-144 will have a material impact on its results from operations or financial position.
		In January 2004, the CICA issued Accounting Guideline 15Investment companies(AcG-18). The guideline provides guidance regarding an investment company’s measurement of its investments, determining whether an entity is an investment company; and when an investor in an investment company should account for the investment company’s investments in the same manner as the investment company accounts for those investments. AcG-18 is effective for fiscal year beginning on or after July 1, 2004. The Company does not expect that adoption of AcG-18 will have a material impact on its results from operations or financial position.
		In March 2004, the CICA issued Emerging Issues Committee Abstract, EIC-145Accounting for AssetsAcquired upon the Formation of an Income Trust. EIC-145 should be applied to transactions that are initiated on or after January 1, 2004. As the Company does not anticipate the formation of income trusts, the Company does not expect that adoption of EIC-145 will have a material impact on its results from operations or financial position.

..../19

SUNGOLD INTERNATIONAL HOLDINGS CORP. 
(Formerly Sungold Entertainment Corp.) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

FOR THE YEAR ENDED AUGUST 31, 2004 

(A Development Stage Company)
(Presented in Canadian Dollars)

PAGE – 19 – 

NOTE 10	UNITED STATES ACCOUNTING PRINCIPLES (continued)
	k)	New Accounting Standards (continued)
		Canadian Standards (Continued)
		In March 2004, the CICA issued Emerging Issues Committee Abstract, EIC-146Flow-Through Shares, which required that the future income tax liability should be recognized, and the shareholders’ equity reduced, on the date that the company renounces the flow-through shares tax credits associated with the expenditures. In addition, the Committee noted that the benefits of the loss carryforward to be recognized would have been recognized as a reduction of income tax expense included in the determination of net income or loss in the period incurred, except for the failure to meet the requirement of the “more likely than not” test. EIC-146 should be applied to transactions that are initiated on or after March 19, 2004. As the Company does anticipate issuing any flow-through shares, the Company does not expect that adoption of EIC-146 will have a material impact on its results from operations or financial position.
		In March 2004, the CICA amended Section 3461,Employee Future Benefitsfor financial years beginning on or after June 30, 2004, with earlier adoption encouraged. The amendments improve and expand the disclosure requirements, including clarifying the nature of accounting policy disclosures that should be made. As the Company does not have any employee pension plans, the Company does not expect that adoption of Section 3461 will have a material impact on its results from operations or financial position.
		In April 2004, the CICA issued Emerging Issues Committee Abstract, EIC-147Implementation of AccountingChanges Resulting from the Application of CICA 1100 Generally Accepted Accounting Principles. The abstract discussed a change involving in the basis of measurement of a recognized asset or liability between cost and fair value, a change involving in the accounting method for an investment between the cost, equity and consideration methods and adjustment to net income arising from the implementation of CICA 1100. EIC-147 should be applied to transactions that are initiated on or after April 19, 2004. The Company adopted the standards for current year and did not expect the adoption has a material impact of its results from operations or financial position.
		In July 2004, the CICA issued Emerging Issues Committee Abstract, EIC-148Accounting for Shares thatProvide Investors with a Sale Right. EIC-148 should be applied to transactions that are initiated on or after July 30, 2004. As the Company does not have any shares that provide investors with a sale right, the Company does not expect that adoption of EIC-148 will have a material impact on its results from operations or financial position.

(b) Exhibits

Exhibit Number	Description
1.1	Certificate of Incorporation for 307198 B.C. Ltd. dated April 7, 1986.(1)
1.2	Certificate for 307198 B.C. Ltd. changing name to Fircrest Resources Ltd. dated July 2, 1986.(1)
1.3	Certificate for Fircrest Resources Ltd. changing name to NTC Capital Corporation dated October 30, 1991. (1)
1.4	Certificate of Change of Name for NTC Capital Corporation changing name to Sungold Gaming Inc. dated March 1, 1994.(1)
1.5	Certificate of Change of Name for Sungold Gaming Inc. changing name to Sungold Gaming International Ltd. dated May 26, 1997.(1)
1.6	Altered Memorandum of the Corporation dated February 22, 2002, effective June 13, 2002, amending share capital.(3)
1.7	Articles of Continuance.(4)
1.8	Bylaw No. 1 of the Corporation.(4)
4.1	Consulting Agreement between Sungold Gaming International Ltd. and Kim N. Hart dated May 1, 1998.(1)
4.2	Consulting Agreement between Sungold Gaming International Ltd. and Anne Kennedy dated July 1, 1998.(1)
4.3	Consulting Agreement between Horsepower Network.com Inc. and Kim N. Hart dated May 1, 2000.(4)
4.4	Agreement dated May 2, 2001 between the Corporation and Safespending Services Inc.(2)
4.5	Agreement dated May 2, 2001 between the Corporation and Jerome Nootebos.(2)
4.6	Consulting Agreement between Horsepower Broadcasting Network (HBN) International Ltd. and Larry Simpson dated October 11, 2002.(3)
4.7	Amendment to Consulting Agreement dated January 2, 2003, between the Corporation and Kim N. Hart.(3)
4.8	Amendment to Consulting Agreement dated January 2, 2003, between the Corporation and Anne Kennedy.(3)
4.9	Letter of Intent-Extension between TAC International Investments LLC and the Corporation dated September 30, 2003.(4)
4.10	Amendment to Consulting Agreement dated October 1, 2003, between the Corporation and Anne Kennedy.(1)
4.11	Amendment to Consulting Agreement dated October 1, 2003, between the Corporation and Kim N. Hart.(1)
4.12	Amendment to Consulting Agreement dated January 2, 2004, between the Corporation and Anne Kennedy.(4)
4.13	Amendment to Consulting Agreement dated January 2, 2004, between the Corporation and Kim N. Hart.(4)
4.14	Amendment to Consulting Agreement dated January 2, 2004, between Horsepower Broadcasting Network (HBN) International Ltd. and Kim N. Hart.(4)
4.15	Business Services Agreement dated January 18, 2005, between Sungold International Holdings Corp. and Hart Ventures.
4.16	Option Agreement dated March, 2004 between the Corporation and A.C. Gilmore & Sons (Farms) Ltd.
4.17	Consulting Agreement dated June 28, 2004 between the Corporation and T-SWAT Consulting Ltd.
4.18	License Agreement dated May 12, 2004 between Truro Raceway and Horsepower Broadcasting Network (HBN) International Ltd.
4.19	License Agreement dated August 13, 2004 between Inverness Raceway and Horsepower Broadcasting Network (HBN) International Ltd.
4.20	License Agreement dated April 2, 2004 between Manitoba Jockey Club dba as Assinbonia Downs and Horsepower Broadcasting Network (HBN) International Ltd.
4.21	License Agreement dated March 8, 2004 between Pompano Park Racing and Horsepower Broadcasting Network (HBN) International Ltd.
4.22	License Agreement dated September 28, 2004 between Fredericton Exhibition Limited and Horsepower Broadcasting Network (HBN) International Ltd.
4.23	License Agreement dated November 15, 2004 between Flagler Greyhound Track and Horsepower Broadcasting Network (HBN) International Ltd.
4.24	License Agreement dated November 24, 2004 between Buffalo Trotting Association and Horsepower Broadcasting Network (HBN) International Ltd.

- 58 -

Exhibit Number	Description
4.25	Letter of Intent-Extension between TAC International Investments LLC and the Corporation dated July 30, 2004.
6	See Note 10 to the Corporation’s consolidated financial statements included in Item 17 of this Form 20-F for information on how earnings per share information was calculated.
8	List of significant subsidiaries.
12.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)	Previously filed as an exhibit to the Corporation’s Registration Statement on Form 20-F filed on February 20, 2002.
(2)	Previously filed as an exhibit to the Corporation’s Annual Report on Form 20-F filed on February 28, 2002.
(3)	Previously filed as an exhibit to the Corporation’s Annual Report on Form 20-F filed on March 17, 2003.
(4)	Previously filed as an exhibit to the Corporation’s Annual Report on Form 20-F filed March 19, 2004.

- 59 -

SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

	SUNGOLD INTERNATIONAL HOLDINGS CORP.
Date: March 15, 2005	By:	“Art Cowie”
		Art Cowie
		President and Chief Executive Officer