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| LPLE.OB > SEC Filings for LPLE.OB > Form 10QSB on 14-May-2004 | All Recent SEC Filings |
14-May-2004
Quarterly Report
OVERVIEW
During the first quarter of 2004, the Company remains committed to the successof the SkillPoker system and is creating an innovative marketing campaign aimedat increasing the traffic in view of the completed online poker product.LegalPlay Entertainment Inc. is also closely following the developments vis avis the U.S. government's view of the legality of online gaming includingpossible regulatory guidelines.
We continued to operate our business through our three subsidiary companies:Casino Marketing S.A., a Costa Rican registered company which performs technicalmanagement for our licensees; 564448 BC Ltd., a British Columbia registeredcompany which performs administrative management services to Casino Marketing;and Skill Poker.com Inc., a Washington state registered company incorporated inJanuary 29, 2003, through which the patent pending Skill Poker system wasdeveloped and through which the Skill Poker system is operated.
In the past three months, we focused our resources on our patent pendingtechnology in relation to the game of Skill Poker. We have been operating thesite and will continue in our efforts to market the system.
Given the nature of the legislative climate in the United States with respect tothe regulation or prohibition of online gaming through such potential laws asthe Kyl Bill and the Bacchus Bill, management is of the opinion that skill basedgaming has the potential to become a significant market to online gaming. Givencertain restrictions currently being imposed on internet based companies withrespect to the advertising of online gaming, we will maintain our mandate tobecome a major participant in online entertainment whilst remaining fullycompliant with gaming related legislation. Our plan is to focus resources onour Skill Poker subsidiary and its related operations.
We commenced the final stages of beta testing of our horse racing analysissoftware, a web based application which will be available on a subscriptionbasis at http://www.DailyHorse.com. The initial analysis during the beta testingwas positive. We are also discussing potential collaboration with contentproviders with respect to both horse racing related data and news with a view tocompleting the portal for public release. There is no assurance we will besuccessful in our collaboration or that we will be able to generate revenue fromthe collaboration.
Our future revenues are dependent on the successful marketing and consumeracceptance of the Skill Poker and DailyHorse systems and as such we willdedicate certain financial resources in this regard. There can be no assurancesthat we will be successful in marketing our Skill Poker system or that we willbe able to generate any revenue in connection with the system.
Our mandate for the foreseeable future is to market the Skill Poker system witha view to achieving consumer acceptance and significant revenue generation.
We are in immediate need of further working capital and are considering optionswith respect to financing in the form of debt, equity or a combination thereof,and may also consider disposing of assets as a method through which to raiseadditional working capital.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We have adopted various accounting policies that govern the application ofaccounting principles generally accepted in the United States of America in thepreparation of our financial statements. Our significant accounting policiesare described in the footnotes to our financial statements at December 31, 2003. The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requires us tomake estimates and assumptions that affect the amounts reported in the financialstatements and accompanying notes.
Although these estimates are based on our knowledge of current events andactions it may undertake in the future, they may ultimately differ from actualresults. Certain accounting policies involve significant judgments andassumptions by us which have a material impact on our financial condition andresults. Management believes its critical accounting policies reflect its mostsignificant estimates and assumptions used in the presentation of our financialstatements. Our critical accounting policies include revenue recognition,accounting for stock based compensation and the evaluation of the recoverabilityof long lived and intangible assets. We do not have off-balance sheetarrangements, financings, or other relationships with unconsolidated entities orother persons, also known as "special purpose entities".
THREE-MONTH PERIOD ENDED MARCH 31, 2004
RESULTS OF CONTINUING OPERATIONS
The following table sets forth for the periods indicated selected informationfrom LegalPlay Entertainment Inc . 's consolidated financial statements ofoperations:
Three Months Ended Three Months Ended March 31 March 31 2004 2003
$ $Tournament fees 4,352 -Cost of Revenue 31,685 -Gross Margin (Loss) (27,333) -Operation expenses 147,326 223,810Income (Loss) before discontinued (174,659) (223,810)operations Income (Loss) from discontinued operations - 295,405
Net (loss) Income during the period $ (174,659) $ 71,595
Information shown is for the three months ended March 31, 2004 and March 31,2003 respectively.
RESULTS OF CONTINUING OPERATIONS
NET SALES. Net sales for the three months ended March 31, 2004 were $4,352compared to $0 for the three months ended March 31, 2003. This is a result fromtournament fees which became activities in fourth quarter of 2003.
We expect to enhance our revenue through the operation of our Skill Poker systemthrough our wholly owned subsidiary, Skill Poker.com Inc. We should begin toachieve revenues from the Skill Poker system during the 2nd quarter of 2004.These are forward-looking statements, particularly as related to our businessplans of the company, within the meaning of Section 27A of the Securities Act of1933 and Sections 21E of the Securities Exchange Act of 1934 and are subject tothe safe harbor created by these sections. Actual results may differ materiallyfrom our expectations and estimates.
OPERATING EXPENSES. Operating expenses for the three months ended March 31,2004 were $147,326 compared to $223,810 at March 31, 2004. Our operatingexpenses were reduced as a result of our efforts to preserve cash through thereduction of expenses where applicable. The major expense items for the threemonths ended March 31, 2004 were for wages for $52,422, as compared to 42,143for the three mont h s ended march 31, 2003.
PROVISION FOR INCOME TAXES. No tax provision was made for the three months endedMarch 31, 2004
FINANCIAL CONDITION AND LIQUIDITY
On March 31, 2004, our net working capital was $3,784 compared to a net workingcapital of $154,841 at December 31, 2003. At March 31, 2004 the Company had cashand cash equivalents totaling $35,050 compared to $209,517 at December 31, 2003. We are in immediate need of further working capital and are considering optionswith respect to financing in the form of debt, equity or a combination thereof,and may also consider disposing of assets as a method through which to raiseadditional working capital.
Net cash used for operating activities for the three months ended March 31, 2004was $169,658. The decrease in cash was mainly due to developing and marketingthe Skill Poker system, legal fees relating to the URL dispute and generaloffice operations.
Net cash used for investing activities for the three months ended March 31, 2004was $5,809 for the acquisition of the computer and other equipment for the SkillPoker.
Net cash provided by financing activities for three months ended March 31, 2004was $1,000. The increase resulted from stock options exercised.
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