UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT TO THE 1934
ACT REPORTING REQUIREMENTS
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2000 Commission File No.
000-29477
2
PLAYANDWIN, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-039116
(State of organization) (I.R.S. Employer Identification No.)
7050 Weston Rd., Vaughn, Ontario, Canada L4L 8G7
(Address of principal executive offices)
Registrant's telephone number, including area code (905) 850-3940
Check whether the issuer (1) filed all reports required to be
file by Section 13 or 15(d) of the Exchange Act during the past
12 months and (2) has been subject to such filing requirements
for the past 90 days. Yes X
As of May 31, 2000, there were 7,402,857 shares of Class A common
stock outstanding and 3,486,260 shares of Class B common stock
outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Unaudited financial statements as of May 31, 2000, and for the
three-month period then ended.
Playandwin, Inc. And Subsidiaries
(A Development State Company)
Consolidated Balance Sheets
(Unaudited)
May 31, May 31,
2000 1999
ASSETS
Current
Cash and cash equivalents $ 12,272 $ -
Prepaid expenses and other current assets 369,447 -
Due from related company - 43,840
-------------- ------------
381,719 43,840
Investment 1,036 -
Furniture And Equipment, net 17,528 8,113
Intellectual Property 39,765 123,132
-------------- ------------
--
$ 440,048 $ 175,085
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
Current
Bank indebtedness $ - $ 9,797
Accounts payable and accrued liabilities 166,390 164,014
Loans payable - stockholders 31,391 31,391
Convertible note payable 84,238 -
----------- ------------
282,019 205,202
----------- ------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common Stock - $0.001 par
Class A - 50,000,000 shares authorized;
7,402,857 and 3,486,260 shares issued and 7,403 3,487
outstanding
Class B - 3,486,260 shares authorized,
issued
and outstanding 3,487 -
Additional paid-in capital 1,582,822 575,406
Accumulated foreign currency translation
adjustment (6,523) 2,478
Deficit accumulated during the development
stage (1,429,160) (611,488)
-------------- ------------
Total Stockholders' Equity (Deficiency) 158,029 (30,117)
-------------- ------------
Total Liabilities And Stockholders' Equity
(Deficiency) $ 440,048 $ 175,085
======== ========
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
Three Month Three Month
Period Period
Ended Ended
May 31, May 31,
2000 1999
Revenues $ - $ -
General And Administrative Expenses 283,691 12,931
------------- ------------
Loss From Operations Before Income Taxes (283,691) (12,931)
Provision For Income Taxes - -
-------------- ------------
Net Loss (283,691) (12,931)
Other comprehensive Loss, net of tax
Foreign currency translation adjustment (1,741) (2,128)
-------------- --------------
Comprehensive Loss $ (285,432) $ (15,059)
========= ========
Loss Per Common share - basic and diluted $ (0.04) $ (0.01)
========= ========
Weighted Average Number Of Common
Share Outstanding - basic and diluted 7,343,572 3,486,260
========= ========
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
Three Month Three Month
Period Period
Ended Ended
May 31, May 31,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (283,691) $ (12,931)
Adjustments to reconcile net loss to net
cash used
in operating activities
Depreciation and amortization 1,434 408
Changes in assets and liabilities
Prepaid expenses and other current
assets 60,835 -
Accounts payable and accrued expenses (49,645) 14,006
------------- -----------
Net Cash Provided By (Used In) Operating
Activities (271,067) 1,483
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITY
Purchase of furniture and equipment (5,100) (409)
----------- -----------
Net Cash Used In Investing Activity (5,100) (409)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in bank overdraft - 1,054
Issuance of common stock for cash 280,625 -
------------ -----------
Net Cash Provided By Financing Activities 280,625 1,054
------------ -----------
CHANGE IN FOREIGN CURRENCY TRANSLATION
ADJUSTMENT (1,741) (2,128)
------------ -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,717 -
CASH AND CASH EQUIVALENTS, Beginning of
period 9,555 -
------------ ------------
CASH AND CASH EQUIVALENTS, End of period $ 12,272 $ -
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for
Interest $ - $ -
------------ -----------
Income taxes $ - $ -
------------ -----------
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
May 31, 2000
(Unaudited)
Accumulated Deficit
Foreign Accumulated Total
Common Stock Additional Currency During the Stockholders'
Class A Class B Paid-in Translation Development Equity
Shares Amount Shares Amount Capital Adjustment Stage (Deficiency)
Balance at
February 29,
2000 7,225,000 $7,225 3,486,260 $3,487 $1,302,375 $(4,782) $(1,145,469) $162,836
Shares issued
for cash
04/03/00 at
$1.75
per share 175,000 175 -- - 275,450 - - 275,625
Shares issued
for
services
03/31/00 at
$1.75 per
share 2,857 3 - - 4,997 - - 5,000
Foreign
currency
translation
adjustment - - - - - (1,741) - (1,741)
Net loss - - - - - - (278,691) (278,691)
---------- ------- --------- -------- --------- ---------- --------- ---------
Balance at May
31, 2000 7,402,857 $7,403 3,486,260 $3,487 $1,582,822 $(6,523) $(1,429,160) $158,029
========= ====== ========= ======= ========== ======== ============ ========
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements have
been prepared by Playandwin, Inc. (the "Company") pursuant to the
rules and regulations of the Securities and Exchange Commission.
The information furnished herein reflects all adjustments
(consisting of normal recurring accruals and adjustments) which
are, in the opinion of management, necessary to fairly present
the operating results for the respective periods. Certain
information and footnote disclosures normally present in annual
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been omitted
pursuant to such rules and regulations. The results of the three
months ended May 31, 2000 are not necessarily indicative of the
results to be expected for the full year ending February 28,
2001.
NOTE 2 - EARNINGS PER SHARE
In 1997, the Financial Accounting Standard Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." SFAS No. 128 replaced the previously
reported primary and fully diluted earnings per share with basic
and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of
options, warrants, and convertible securities. Diluted earnings
per share is very similar to the previously reported fully
diluted earnings per share. Basic earnings per share is computed
using the weighted-average number of common shares outstanding
during the period. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive.
NOTE 3 - SALE OF SECURITIES
On March 30, 2000, the Company issued 175,000 of its common stock
for consideration of $275,625 cash, pursuant to Rule 504 of
Regulation D to one investor.
On March 31, 2000, the Company issued 2,857 shares of its common
stock for services rendered. The shares were valued at $5,000,
which was current market value of the Company's stock on the date
of issuance.
NOTE 4 - RACINGO TOTE SERVICES AND SOFTWARE LICENSE AGREEMENT
On May 24, 2000, the Company entered a Racingo Tote Services and
Software License Agreement with Autotote Systems, Inc. This
agreement is to replace the Non-Binding Memorandum of
Understanding dated February 7, 2000. See Item 2 and Exhibits for
more details.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
Management's Discussion and Analysis of Financial Condition
General
The following discussion and analysis should be read in
conjunction with the Company's consolidated financial statements
and related footnotes for the year ended February 29, 2000
included in its Annual Report on Form 10-KSB. The discussion of
results, causes and trends should not be construed to imply any
conclusion that such results or trends will necessarily continue
in the future.
Overview
On May 24, 2000, the Company entered a Racingo Tote Services And
Software License Agreement with Autotote Systems, Inc. This
agreement is to replace the Non-Binding Memorandum of
Understanding dated February 7, 2000. Under the terms of the
Agreement, Autotote has granted the Company an exclusive five (5)
year license (the "Racingo Software License"), renewable for an
additional five (5) years upon mutual agreement, to use the
Racingo Software with respect to the use, conduct, delivery,
sale, distribution or exploitation of Racingo under the On- and
Off-Track Racingo License and the On-Line Racingo License. The
Company will grant Autotote an exclusive license (the "Racingo
License"), for the term of this Agreement, to use the
intellectual property rights and know-how identified under the
terms "Racingo", "Racingo Copyrights", "Racingo Patent" and
"Racingo Trademarks". In consideration for these terms,
5.1 Where Autotote is the Tote Supplier. The Company shall pay
to Autotote a fee equal to the greater of:
(a) 23% of the Company's Take-Out from all racing tracks for
which Autotote is the Tote Supplier; or
(b) 1.25% of the Racingo Wager from all racing tracks for which
Autotote is the Tote Supplier.
5.2 Where Autotote is not the Tote Supplier. The Company shall
pay to Autotote a fee equal to 5% of the Company's Take-Out from
all racing tracks for which Autotote is not the Tote Supplier.
5.3 Transaction / Interface Fees. The Company acknowledges that
Autotote shall be entitled to charge each racing track its
standard transaction or interface fee of 0.125% of the Racingo
Wager for that track, whether or not Autotote is the Tote
Supplier for that track.
Results Of Operations
For the three months ended May 31, 2000 and the three months
ended May 31, 1999, the Company had no revenue. The net loss for
the three months May 31, 2000 was $283,691 compared with a net
loss of $12,931 for the three months ended May 31, 1999. These
losses consisted primarily of General and Administrative ("G&A")
expenses of $230,865 and $12,523 respectively and amortization
expense of $52,826 and $408 respectively. The increase in G&A was
primarily due to i) a $105,000 increase in professional fees for
costs incurred to become a reporting entity and consultants hired
to assist in the implementation and development of the Company's
operations; ii) a $32,000 increase in product development costs;
and iii) a $29,000 increase in management wages. The increase in
amortization expense of $53,000 over 1999 is primarily due to the
amortization of the value of the stock options that were granted
to four advisory board members.
Liquidity And Capital Resources
Historically, the Company has not incurred any revenues. The
current period operating cash flow deficit of approximately
$271,000 was funded primarily by $276,000 received from the
issuance of the Company's common stock.
The Company has certain cash requirements to initiate its
business plan. Management has estimated these requirements to be
as follows: i) begin the operations of the Racingo Land Based
estimated to be approximately $3,000,000 U.S.; ii) begin the
operations of the Fantasy Racingo based operations estimated to
be approximately $550,000 U.S.; and iii) general and
administrative costs estimated to be approximately $700,000 U.S.
The Company must also arrange for insurance for guaranteed
jackpots. Management has been in discussion with an insurance
carrier and has an estimated cost of $50,000 per $1 million
guaranteed.
The Company estimates that the above requirements will be
expended during the fiscal year 2001.
As of the date of this Form 10 - QSB, the Company has entered
into a non-exclusive "best efforts basis" private placement of
its equity securities with an investment banking firm, Private
Capital Group, Inc., Clearwater, Florida, to raise the required
funds under the commitments. Private Capital Group, Inc.
specializes in facilitating growth capital for emerging
companies.
NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS
This statement includes projections of future results and
"forward-looking statements" as that term is defined in Section
27A of the Securities Act of 1933 as amended (the "Securities
Act"), and Section 21E of the Securities Exchange Act of 1934 as
amended (the "Exchange Act"). All statements that are included in
this Registration Statement, other than statements of historical
fact, are forward-looking statements. Although Management
believes that the expectations reflected in these forward-looking
statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors
that could cause actual results to differ materially from the
expectations are disclosed in this Statement, including, without
limitation, those expectations reflected in forward-looking
statements contained in this Statement.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Company has been threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities.
With respect to the issuances and transfers made, the Registrant
relied on Section 4(2) of the Securities Act of 1933, as amended.
No advertising or general solicitation was employed in offering
the shares. The securities were offered for investment only and
not for the purpose of resale or distribution, and the transfer
thereof was appropriately restricted.
On January 13, 1999, the Company issued 200,000 shares of its
common stock for consideration of $150,000 pursuant to Rule 504,
Regulation D.
On October 20, 1999, the Company issued 50,000 shares of its
common stock for a consideration of $75,000.
On November 11, 1999, the Company issued 50,000 shares of its
common stock for a total consideration of $75,000.
On November 30, 1999, the Company issued 1,375,000 shares of its
common stock to William Thompson for the proprietary rights to
process soybeans.
On January 16, 2000, Penguin exercised 50,000 shares of the
80,000 options granted to Penguin. (see Item 11; Note 1, below)
On March 30, 2000, the Company issued 175,000 shares of its
common stock for a consideration of $306,250 pursuant to Rule 504
of Regulation D to one investor.
On March 31, 2000, the Company issued 2,857 shares of its common
stock for service rendered. The shares were valued at $5,000,
which was the current market value of the Company's common stock
on the date of issuance.
In general, under Rule 144 adopted pursuant to the Securities Act
of 1933, a person (or persons whose shares are aggregated) who
has satisfied a one year holding period, under certain
circumstances, may sell within any three-month period a number of
shares which does not exceed the greater of one percent of the
then outstanding Common Stock or the average weekly trading
volume during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares
without any quantity limitation by a person who has satisfied a
two-year holding period and who is not, and has not been for the
preceding three months, an affiliate of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
3.1 The exhibits, consisting of the Company's Articles of
Incorporation, are attached to the Company's Amended Form 10-
SB, filed on May 31, 2000. These exhibits are incorporated
by reference to that Form.
3.2 The exhibits, consisting of the Company's Bylaws, are
attached to the Company's Amended Form 10-SB, filed on May
31, 2000. These exhibits are incorporated by reference to
that Form.
10.1 The Racingo Tote Services And Software License Agreement
10.2 Racingo Rules and Regulations
27 Financial Data Schedule
Reports on Form 8-K: None.