UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT TO THE
1934 ACT REPORTING REQUIREMENTS
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2001
Commission File No. 000-29477
PLAYANDWIN, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-039116
(State of organization) (I.R.S. Employer Identification No.)
7050 Weston Rd., Vaughn, Ontario, Canada L4L 8G7
(Address of principal executive offices)
Registrant's telephone number, including area code (905) 850-3940
Check whether the issuer (1) filed all reports required to
be file by Section 13 or 15(d) of the Exchange Act during
the past 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X
As of October 22, 2001, there were 6,831,002 shares of
common stock outstanding (post-split)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Playandwin, Inc. And Subsidiaries
(A Development State Company)
Consolidated Balance Sheet
(Unaudited)
<Table>
<s> <c>
August 31,
2001
ASSETS
Current
Cash $ 242
Prepaid expenses and other current assets 45,070
-----------
45,312
Investment 1,036
Furniture And Equipment, net 12,326
Intellectual Property 39,765
-----------
$ 98,439
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current
Accounts payable and accrued liabilities $ 402,949
Loans payable - stockholders 81,474
Note payable 16,195
Advances from officer 110,580
-----------
611,198
-----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common Stock - $0.001 par
Class A - 200,000,000 shares authorized;
56,503,109 shares issued and outstanding 56,503
Class B - 9,643,359 shares authorized, issued
and outstanding 9,643
Additional paid-in capital 5,582,300
Accumulated other comprehensive income 1,054
Deficit accumulated during the development stage (6,162,259)
-----------
Total Stockholders' Equity (Deficiency) (512,759)
-----------
Total Liabilities And Stockholders' Equity (Deficiency) $ 98,439
===========
</Table>
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Consolidated Statement of Operations
(Unaudited)
<Table>
<s> <c> <c> <c> <c>
Total From
For The Three Months Ended For The Six Months Ended Inception To
August 31, August 31, August 31, August 31, August 31, 2001
2001 2000 2001 2000
Revenues $ - $ - $ - $ - $ -
General And Administrative Expenses 231,096 353,644 391,553 635,594 6,162,259
------------ ------------ ------------ ----------- -------------
Loss From Operations Before Income Taxes (231,096) (353,644) (391,553) (635,594) (6,162,259)
Provision For Income Taxes - - - - -
------------ ------------ ------------ ----------- -------------
Net Loss (231,096) (353,644) (391,553) (635,594) (6,162,259)
Other Comprehensive Loss, net of tax
Foreign currency translation 10,296 (5,250) 23,786 (6,991) 1,054
adjustment
------------ ------------ ------------ ----------- -------------
Comprehensive Loss $ (220,800) $ (358,894) $ (367,767) $ (642,585) $ (6,161,205)
============ ============ ============ =========== =============
Loss Per Common Share - basic and diluted $ 0.00 $ (0.01) $ (0.01) $ (0.02)
============ ============ ============ ===========
Weighted Average Number of Common 53,678,109 30,944,760 52,265,609 30,159,524
Share Outstanding - basic and diluted ============ ============ ============ ===========
</Table>
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
August 31, 2001
(Unaudited)
<Table>
<c> <c> <c> <c> <c> <c>
Accumulated Deficit
Other Accumulated Total
Common Stock Additional Comprehensive During the Stockholders'
Class A Class B Paid-in Income Development Equity
Shares Amount Shares Amount Capital (Loss) Stage (Deficiency)
Balance at
February 29,
2001 50,853,109 $ 50,853 9,643,359 $ 9,643 $5,395,250 $(22,732) $(5,770,706) $(337,692)
Shares issued
for services
07/05/01
at $0.057
per share 200,000 200 - - 11,200 - - 11,400
Shares issued
for services
07/12/01 at
$0.034 per share 1,950,000 1,950 - - 64,350 - - 66,300
Shares issued
for debt
conversion
07/12/01 at
$0.034 per share 2,500,000 2,500 - - 82,500 - - 85,000
Shares issued
for services
07/16/01 at
$0.30 per share 1,000,000 1,000 - - 29,000 - - 30,000
Foreign currency
translation
adjustment - - - - - 23,786 - 23,786
Net loss - - - - - - (391,553) (391,553)
---------- --------- --------- --------- ---------- --------- ------------ -----------
Balance at
August 31, 2001 56,503,109 $ 56,503 9,643,359 $ 9,643 $5,582,300 $ 1,054 $(6,162,259) $ (512,759)
========== ========= ========= ========= ========== ========= ============ ===========
</Table>
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
<Table>
<s> <c> <c> <c> <c> <c>
Total From
For The Three Months Ended For The Six Months Ended Inception To
Aug. 31, 2001 Aug. 31, 2000 Aug. 31, Aug. 31, Aug. 31, 2001
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss and comprehensive loss $ (231,096) $ (353,644) $ (391,553) $ (635,594) $(6,162,259)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 52,019 52,826 104,021 105,652 470,296
Write-off of due from related party - - - - 43,840
Write-off of intellectual property - - - - 86,620
Common stock issued for services rendered 107,700 - 107,700 - 3,114,467
Expense for shares sold below market value - - - - 402,150
Changes in assets and liabilities
Prepaid expenses and other current assets 46,726 10,314 41,782 10,200 (16,557)
Accounts payable and accrued expenses 17,363 (13,725) 104,263 (63,370) 402,949
------------ ---------- ------------ ----------- ------------
Net Cash Provided By (Used In) Operating
Activities (7,288) (304,229) (33,787) (583,112) (1,658,494)
------------ ---------- ------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITY
Purchase of furniture and equipment - - - (7,081) (26,940)
Increase in intellectual property - - (1,908) - (126,386)
Increase in investment - - - - (1,036)
Advances to related party - - - - (56,944)
Repayments from related party - - - - 13,104
------------ ---------- ------------ ----------- ------------
Net Cash Used In Investing Activity - - (1,908) (7,081) (198,202)
------------ ---------- ------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible debt - - - - 85,000
Advances from note payable - - - - 16,195
Increase (decrease) in bank overdraft - (7,190) - 2,607 -
Advances from (to) officer (4,493) - 11,537 - 110,580
Issuance of common stock for cash - 329,109 - 609,734 1,562,635
Increase (decrease) in loans payable -
stockholders - (24,712) (98) (24,712) 81,474
------------ ---------- ------------ ----------- ------------
Net Cash Provided By (Used In) Financing
Activities (4,493) 297,207 11,439 587,629 1,855,884
------------ ---------- ------------ ----------- ------------
CHANGE IN FOREIGN CURRENCY TRANSLATION
ADJUSTMENT 10,296 (5,250) 23,786 (6,991) 1,054
------------ ---------- ------------ ----------- ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,485) (12,272) (470) (9,555) 242
CASH AND CASH EQUIVALENTS, Beginning of period 1,727 12,272 712 9,555 -
------------ ---------- ------------ ----------- ------------
CASH AND CASH EQUIVALENTS, End of period $ 242 $ - $ 242 $ - $ 242
============ ========== ============ =========== ============
</Table>
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
<Table>
<c> <c> <c> <c> <c>
Total From
For The Three Months Ended For The Six Months Ended Inception To
Aug. 31, Aug. 31, Aug. 31, Aug. 31, Aug. 31,
2001 2000 2001 2000 2001
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for
Interest $ - $ - $ - $ - $ -
========== ========== =========== ========== ==========
Income taxes $ - $ - $ - $ - $ -
========== ========== =========== ========== ==========
</Table>
Playandwin, Inc. And Subsidiaries
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements have
been prepared by Playandwin, Inc. (the "Company") pursuant to the
rules and regulations of the Securities and Exchange Commission.
The information furnished herein reflects all adjustments
(consisting of normal recurring accruals and adjustments) which
are, in the opinion of management, necessary to fairly present
the operating results for the respective periods. Certain
information and footnote disclosures normally present in annual
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been omitted
pursuant to such rules and regulations. The results of the six
months ended August 31, 2001 are not necessarily indicative of
the results to be expected for the full year ending February 28,
2002. These financial statements should be read in conjunction
with the financial statements and related footnotes for the year
ended February 28, 2001 included in the annual report filed on
Form 10-KSB for that year.
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 July 5, 2001, the Company issued 200,000 shares of its common
stock for services rendered having a fair value of $11,400.
On July 12, 2001, the Company issued 1,950,000 shares of its
common stock for services rendered having a fair value of
$66,300.
On July 12, 2001, the Company issued 2,500,000 shares of its
common stock for conversion of debt having a fair value of
$85,000.
On July 16, 2001, the Company issued 1,000,000 shares of its
common stock for services rendered having a fair value of $30,000
NOTE 4 - SUBSEQUENT EVENTS
On September 25, 2001, the Company adopted resolutions of
authorize a reverse split on a 1:20 basis. The number of its
authorized shares was decreased to 10,000,000 shares of its
common stock, par value $0.001 pursuant to NRS 78.207.
On October 16, 2001, the Company amended its Articles of
Incorporation to increase the number of authorized shares to
200,000,000 shares of common stock, par value $0.001 and
50,000,000 shares of preferred stock, par value $0.001.
On October 9, 2001, the Company registered 3,675,000 shares
of its common stock on Form S-8 to be issued to eligible
participants of the Company's Consulting and Legal Services
Plan. Of this amount, 3,550,000 shares have been issued. Of
those shares which have been issued, 1,990,000 shares were
issued on October 9, 2001 at a value of $0.62 per share,
which is the current market value on the date of issuance.
On October 11, 2001, the Company issued 1,435,000 shares of
the registered shares of stock pursuant to the filing of the
Form S-8, which were issued at a value of $0.88 per share,
which is the current market value on the date of issuance.
On October 18, 2001, the Company issued an additional
125,000 shares at a value of $0.95 per share, which is the
current market value on the date of issuance.
On October 9, 2001 the Company issued 670,930 shares of its
common stock for conversion of debt at a conversion rate of
$0.30 per share, with a market value at $0.62 per share. The
difference between the conversion rate and the market will
be recognized as additional interest expense. The issuance
of these shares were authorized by resolutions of the Board
of Directors in reliance upon the exemption from
registration requirements of Section 5 of the Act, as
provided in Section 4(2) of the Act.
On October 18, 2001, the Company authorized a dividend to
its shareholders of record as of October 29, 2001. The
dividend entitles the record shareholders to receive one
share of the Company's wholly-owned subsidiary, Playandwin
Canada, Inc. for each common share held of Playandwin, Inc.
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, 2001
included in its Annual Report on form 10 - KSB. The discussion of
results, causes and trends will necessarily continue in the
future.
Results Of Operations
Three Months Ended August 31, 2001
For the three months ended August 31, 2001 and the three months
ended August 31, 1999, the Company had no revenues.
The net loss for the three months ended August 31, 2001 was
$231,096 compared to a net loss of $353,644 for the three months
ended August 31, 2000. These losses consisted primarily of
General & Administrative ("G & A") expenses of $179,704 and
$300,818 respectively and amortization expense of $51,392 and
$52,826 respectively. The decrease in G & A was primarily due to:
i) a $95,000 decrease in professional fees; and ii) a $36,000
decrease in wages.
Six Months Ended August 31, 2001
For the six months ended August 31, 2001 and the six months ended
August 31, 2000, the Company had no revenue.
The net loss for the six months ended August 31, 2001 was
$391,553 compared with a net loss of $692,467 for the six months
ended August 31, 2000. These losses consisted primarily of G & A
expenses of $288,769 and $586,815 respectively and amortization
expense of $102,784 and $105,652 respectively. The decrease in G
& A was primarily due to: i) a $125,000 decrease in professional
fees and consultants hired to assist in the implementation and
development of the Company's operations, ii) a $95,000 decrease
in product development costs; and iii) a $60,000 decrease in
wages.
Liquidity And Capital Resources
Historically, the Company has not incurred any revenues. The
current period operating cash flow surplus of approximately
$49,000 was funded primarily by $12,000 received from an officer
of the Company and $37,000 increase in accounts payable.
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
operation estimated to be approximately $1,000,000 and ii)
general and administrative costs estimated to be approximately
$250,000. 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 $70,000 per $1
million guaranteed.
The Company estimates that the above requirements will be
expended during the fiscal year 2002. The Company has entered
into a "best efforts basis" private placement of its equity
securities with an investment banking firm, Austin Capital
Management to raise the required funds under the commitments. The
Company is also pursuing other opportunities within the gaming
industry for financing alternative for Racingo.
Current Developments
On June 25, 2001, the Company announced that it had entered into
an Internet Investor Relations Agreement with Agora International
Enterprises Corp. as well as an Investor Relations contract with
LiquidT, Inc.
Subsequent Events
On September 19, 2001, Mr. John G. Simmonds resigned as a member
of the board of directors, effective immediately. The remaining
members of the board did not fill the vacancy created by Mr.
Simmonds' resignation.
On September 25, 2001, the Company adopted resolutions of
authorize a reverse split on a 1:20 basis. The number of its
authorized shares was decreased to 10,000,000 shares of its
common stock, par value $0.001 pursuant to NRS 78.207.
On October 16, 2001, the Company amended its Articles of
Incorporation to increase the number of authorized shares to
200,000,000 shares of common stock, par value $0.001 and
50,000,000 shares of preferred stock, par value $0.001.
On October 9, 2001, the Company registered 3,675,000 shares of
its common stock on Form S-8 to be issued to eligible
participants of the Company's Consulting and Legal Services Plan.
Of this amount, 3,550,000 shares have been issued.
On October 9, 2001 the Company issued 670,930 shares of its
common stock for conversion of debt at a conversion rate of $0.30
per share. The issuance of these shares were authorized by
resolutions of the Board of Directors in reliance upon the
exemption from registration requirements of Section 5 of the Act,
as provided in Section 4(2) of the Act.
On October 18, 2001, the Company authorized a dividend to its
shareholders of record as of October 29, 2001. The dividend
entitles the record shareholders to receive one share of the
Company's wholly-owned subsidiary, Playandwin Canada, Inc. for
each common share held of Playandwin, Inc.
NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS
This report contains statements that are forward-looking
statements within the meaning of the federal securities laws.
These include statements about our expectations, beliefs,
intentions or strategies for the future, which we indicate by
words or phrases such as "anticipate," "expect," "intend,"
"plan," "will," "believe" and similar language. These statements
involve known and unknown risks, including those resulting from
economic and market conditions, the regulatory environment in
which we operate, competitive activities, and other business
conditions, and are subject to uncertainties and assumptions set
forth elsewhere in this registration statement. Our actual
results may differ materially from results anticipated in these
forward-looking statements. We base our forward-looking
statements on information currently available to us, and we
assume no obligation to update these statements.
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.
The information required under this Item 2 is incorporated by
reference in its entirety to Note 3 of the financial statements.
With respect to the issuances and transfers made, the Registrant
relied on Section 4(2) of the Securities Act of 1933, as amended,
unless otherwise stated.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
3.1a The exhibit, consisting of the Company's Articles of
Incorporation, is attached to the Company's Amended Form 10-
SB, filed on May 31, 2000. This exhibit is incorporated by
reference to that Form.
3.1b The Company's Certificate of Change Pursuant to NRS 78.209
is hereby incorporated by referenced to the Form 10-QSB
filed on January 22, 2001.
3.1c Certificate of Change Pursuant to NRS 78.209 is hereby
incorporated by referenced to the Registration Statement on
Form S-8 filed on October 9, 2001.
3.2 The exhibit, consisting of the Company's Restated Bylaws,
are hereby incorporated by referenced to the Registration
Statement on Form S-8 filed on October 9, 2001.
Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Playandwin, Inc.
By:/s/ Stewart Garner
Stewart Garner,
President/Secretary/Treasurer
Date: October 24, 2001