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

FORM 10-K/AAmendment No. 2

| |  | ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF           1934
| |  | ----------------------------------------------------------------------------------------------

For the fiscal year
ended June 30, 2006

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 number
0-27494

SILVERSTAR HOLDINGS,
LTD. (Exact name of
Registrant as specified in its charter)

|Bermuda                         | N/A                                 
|------------------------------- | ------------------------------------
|(State or other jurisdiction of | (I.R.S. Employer Identification No.)
|incorporation or organization) 

|Clarendon House, Church Street, Hamilton HM CX, Bermuda
|-------------------------------------------------------
|(Address of Principal Executive Offices with Zip Code) 

Registrants
telephone number, including area code: 441-295-1422

Securities registered pursuant to
Section 12(b) of the Act:

|                    |                                          
|------------------- | -----------------------------------------
|Title of each class | Name of each exchange on which registered
|                    |                                          
|None                | None                                     
|                    |                                          

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

|Common Stock, $0.01 par value
|-----------------------------
|("Common Stock")             

Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes     No

Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of
the Act. Yes     No

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   No

Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K.

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act. Check one: Large accelerated filer   Accelerated filer 
Non-accelerated filer

Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

The aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such common
equity, as of the last business day of the registrants most recently completed
second fiscal quarter $10,230,204.

As of September 14, 2006, there were
8,327,197 shares of the Registrants Common Stock outstanding and 814,786 shares of
the Registrants Class B Common Stock outstanding.



---

# EXPLANATORY NOTE

Silverstar
Holdings, Ltd., (the Company) is filing this Amendment No. 2
(Amendment No. 2) to its Annual Report on Form 10-K for the fiscal year
ended June 30, 2006, originally filed with the Securities and Exchange Commission on
January 16, 2006, as amended on October 3, 2006 (the Original Filing),
for the purpose of amending the Officer Certification filed as Exhibit 32.1 which
inadvertently identified the Form 10-K for the year ended June 30, 2004 instead of the
Form 10-K for the year ended June 30, 2006 at the time it was. The Company is filing as
exhibits to this Form 10-K/A new certifications under Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002. Except for the amendments described above, this Form 10-K/A
does not modify or update the disclosures, in, or exhibits to, the Original Filing.

# TABLE OF CONTENTS

|            |                                                                             |     
|----------- | --------------------------------------------------------------------------- | ----
|            |                                                                             | Page
|           
|            | PART I                                                                      |     
|ITEM 1.     | Business                                                                    | 1   
|ITEM 1A.    | Risk Factors                                                                | 4   
|ITEM 2.     | Properties                                                                  | 12  
|ITEM 3.     | Legal Proceedings                                                           | 12  
|ITEM 4.     | Submission of Matters to a Vote of Security Holders                         | 12  
|           
|            | PART II                                                                    
|           
|ITEM 5.     | Market for Registrant's Common Equity, Related Stockholder Matters         
|            | and Issuer Purchases of Equity Securities                                   | 13  
|ITEM 6.     | Selected Consolidated Historical Financial Data                             | 14  
|ITEM 7.     | Management's Discussion and Analysis of Financial Condition                
|            | and Results of Operations                                                   | 15  
|ITEM 7A.    | Quantitative and Qualitative Disclosures About Market Risk                  | 22  
|ITEM 8.     | Consolidated Financial Statements and Supplementary Data                    | 23  
|ITEM 9.     | Changes in and Disagreements with Accountants on Accounting                
|            | and Financial Disclosure                                                    | 24  
|ITEM 9A.    | Controls and Procedures                                                     | 24  
|ITEM 9B.    | Other Information                                                           | 24  
|           
|            | PART III                                                                   
|           
|ITEM 10.    | Directors and Executive Officers of the Registrant                          | 25  
|ITEM 11.    | Executive Compensation                                                      | 26  
|ITEM 12.    | Security Ownership of Certain Beneficial Owners, Management                
|            | and Related Stockholder Matters                                             | 31  
|ITEM 13.    | Certain Relationships and Related Transactions                              | 32  
|ITEM 14.    | Principal Accountant Fees and Services                                      | 32  
|           
|            | PART IV                                                                    
|           
|ITEM 15.    | Exhibits, and Financial Statement Schedules                                 | 33  
|ITEM 15(a). | Index to Consolidated Financial Statements and Financial Statement Schedule
|            | Signatures                                                                  | 35  



---

# PART I

# CAUTIONARY NOTICE
REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements of Silverstar
Holdings, Ltd. included in this Report, including matters discussed under the captions
Legal Proceedings in Part I, Item 3 and Managements Discussion
and Analysis of Financial Condition and Results of Operations in Part II,
Item 7 are forward-looking statements. Forward-looking statements include
statements about the competitiveness of the PC software game market, potential future
growth and earnings, the business strategies of Silverstar, and other statements that are
not historical facts. The words anticipate, estimate,
project, intend, expect, believe,
forecast and similar expressions are also intended to identify the
forward-looking statements, but some of these statements may use other phrasing. These
forward-looking statements are not guarantees of future performance and are subject to a
number of risks, uncertainties and other factors that could cause our
actual results, performance or achievements to differ materially from those expressed or
implied by these forward-looking statements. These factors include, among other things:

| |  | we
may be unable to implement key elements of our business strategy;
|- |  | --------------------------------------------------------------------

| |  | we
may have insufficient capital to acquire additional businesses;
|- |  | ------------------------------------------------------------------

| |  | we
may be unable to retain key personnel;
|- |  | -----------------------------------------

| |  | we
may face increased competition from other PC entertainment software developers and
publishers; and
|- |  | -----------------------------------------------------------------------------------------------------

| |  | we
may experience rapid fluctuations in exchange rates; and
|- |  | -----------------------------------------------------------

| |  | we
may continue to experience a reduction in the sales volume of, and shelf space allocated
to PC games at major US retailers.
|- |  | ------------------------------------------------------------------------------------------------------------------------------

Many of these factors are beyond our
ability to control or predict, and readers are cautioned not to put undue reliance on such
forward-looking statements. We disclaim any obligation to update or revise publicly or
otherwise any forward-looking statements to reflect subsequent events, new information or
future circumstances, except as required by law.

ITEM 1.Business

Overview

We are a holding company that seeks
to acquire businesses fitting a predefined investment strategy. We are the parent company of Strategy
First Inc., a leading developer and worldwide publisher of entertainment software for the
Personal Computer (PC). We are also a minority shareholder in Magnolia Broadband Wireless,
a development stage company which is developing mobile wireless broadband products.

# History

We were founded in September 1995 as
a Bermuda corporation to pursue opportunities in South Africa. At that time, our business
plan was to acquire, own and operate seasoned, closely held companies in South Africa with
annual sales in the range of approximately $5 million to $50 million. In 1999, we shifted
our focus to the Internet, technology and e-commerce sectors, and away from South Africa,
by acquiring a majority stake in Leisureplanet.com, an Internet travel services company.
In 2001, we acquired 100%

1



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of Student Sports, Inc, which we sold
in 2003. In November 2000, we acquired Fantasy Sports, Inc. In April 2006, we sold all the
assets of Fantasy Sports, Inc. As a result of these changes and developments, we have
reestablished our investment criteria. Currently, our strategy focuses on the following:

| |  | acquiring
controlling stakes in high quality electronic entertainment software businesses with
strong management teams that are positioned to use technology and Internet related
platforms to fuel above average growth;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | investing
in companies that show an ability to contribute, in the short to medium term, to earnings
per share through operating profit or capital appreciation; and
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | operating
in partnership with committed, incentivised, entrepreneurial management who show the
vision and ability to grow their businesses into industry or niche leaders.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Description of Our
Subsidiaries and Investments

# Strategy First, Inc.

In April 2005, we acquired Strategy
First Inc. (www.strategyfirst.com), a leading developer and worldwide publisher of
entertainment software for the Personal Computer (PC). Founded in 1990, Strategy First
publishes software games primarily for the PC platform, including O.R.B, the Disciples
franchise, Sacred Lands, Kohan: Immortal Sovereigns, Steel Beasts, Galactic Civilizations,
and the Jagged Alliance franchise. Strategy Firsts products are sold on CDs
and more recently over the Internet and meet the needs of serious gamers who are seeking a
more intense strategy based game experience. In North America, Strategy Firsts PC
games are distributed primarily through third-party software distributors, who service the
mass-merchants and major retailers. In territories outside North America, Strategy First
licenses its PC games to third-party software distributors, who are responsible for the
manufacturer and distribution of our PC games, in specific geographic territories. Our
products sell at retail prices varying from $19.99 to $49.99, depending on the quality of
the particular game.

We acquired Strategy First through
the jurisdiction of the Montreal bankruptcy court. As per the approved plan of
arrangement, we paid cash consideration to creditors of approximately $600,000; we issued
approximately 400,000 shares of our common stock and assumed approximately $400,000 in
existing bank debt, as well as contingent consideration based on the future profitability
of Strategy First.

Strategy First had previously
encountered financial difficulties due to its policy of developing its games in-house,
which required significant overhead expenses both in terms of payroll and other
development costs. Prior to our acquisition, Strategy First shifted its strategy to become
a publisher selling other developers games. This shift resulted in lowering Strategy
Firsts expenses and its breakeven threshold. We intend to continue to operate
Strategy First as a publisher and have no plans to re-enter the development business.

The worldwide consumer entertainment
software market is very competitive. We compete with other companies having operations
that vary from small companies with limited resources to large companies with greater
resources than we have including Electronic Arts, Vivendi Games, Activision THQ, and Take
Two Interactive.

The changing characteristics of the
worldwide consumer entertainment software market in recent years have been impacted by
many factors, such as:

| |  | an
increasing number of technologically advanced PCs with more powerful operating systems,
enhanced graphics and video cards, expanded memory chips, as well as higher capacities
and faster speeds for CD and hard drives in the home and office;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | greater  access
by consumers to the Internet through high-speed access modes (such as cable modems and
DSL connections);
|- |  | ------------------------------------------------------------------------------------------------------------------------

2



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| |  | increased
interest in online game play; the increasing number of game console devices in the home;
and
|- |  | ------------------------------------------------------------------------------------------------------

| |  | the
development of increasingly advanced technologies supporting game play (such as hand held
game devices, mobile phones and personal digital assistants).
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of this increased
competition in the overall consumer entertainment market, market data suggests that the
retail market for PC game software has decreased over the past two years. This trend is
particularly pronounced in North America.

Furthermore, the North American PC
software game market has gravitated towards mass merchant retailers thereby increasing the
competition for shelf space for PC games. This increased competition has emphasized the
importance of marketing, merchandising and brand name recognition. A significant result of
these market pressures is an industry trend toward the consolidation of consumer
entertainment PC software publishers and distributors, in addition to the diversification
of products offered by these companies. The trends toward industry consolidation and
increased competition for game content and retail shelf space are more pronounced in North
America than in international markets and are expected to continue for the foreseeable
future.

We intend to continue operating as a
low cost publisher of PC based games. We will work to strengthen our North American
distribution network through a combination of alliances with more established distributors
and a strong in house sales effort. We will endeavor to broaden the range of our titles
beyond the Strategy/Role playing category and improve the overall quality of our titles.
We will strive to increase our international presence through distribution alliances,
thereby taking advantage of the relatively stronger international PC game market. We have
launched an online store where games are sold to consumers in both boxed and direct
download formats. We intend to build on this online initiative to lessen our reliance on
the retail sales channel particularly in North America.

# Magnolia Broadband
Wireless

On April 14, 2000, we entered into a
Securities Purchase Agreement with Magnolia Broadband, Inc. Magnolia is a start up company
that is developing wireless broadband solutions for the mobile telecommunications
industry. Mobile telecommunications has been and continues to be one of the fastest
growing and most dynamic segments of the telecommunications industry. According to
recent industry statistics, semiconductor revenue for wireless handsets exceeded $50
billion in 2004, driven by sales volume of over 1.2 billion handsets that year.

Magnolia is developing technology to
become one of the first companies to integrate smart antenna technologies into Radio
Frequency (RF) chip sets utilized in mobile phones. Its aim is to create chip sets that
increase the capacity and coverage of existing networks at little additional cost.

Magnolia is a fabless semiconductor
company building RF solutions by combining innovative Signal Processing technologies and
novel Integrated Circuit solutions for the cellular industry. The combination of these
innovations enables the wireless network operators to push out the Diversity Antenna
capabilities to the edge of their networks, while enabling the handset manufacturers to
offer these benefits economically.

We initially invested $2,500,000 in
Magnolia and received shares of preferred stock in Magnolia. We also received board
representation rights and registration rights. In October 2001, we invested an additional
$450,000 of a total $1,500,000 offering of Magnolias Series A Preferred Stock.We co-invested along with Seaway Partners, LLC, and CIP Capital, LP. In April and May
2002 Magnolia raised a further $7.5 million in an offering of Series B Preferred Stock. In
June 2003 Magnolia raised a further $6 million dollars in an offering of Series C
Preferred Stock. In April 2004, Magnolia raised a further $3 million

3



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in an offering of convertible notes.
In November 2004, Magnolia raised a further $13.5 million in an offering of preferred
stock. We did not participate in any of these rounds. In  2006, Magnolia raised a
further $7 million in an offering of preferred stock. We invested $300,000 in this
offering. Currently we own approximately 2.5%of Magnolia on a fully diluted basis
including the exercise of all employee stock options. Our
investment in Magnolia at June 30, 2006, which is now accounted for under the lower of
cost or market method, was $1,131,066.

# Discontinued Operations

# Fantasy Sports, Inc.

On April 7, 2006, the Company sold
all the assets and certain liabilities of Fantasy Sports to a subsidiary of SkillJam
Technologies Corporation, the wholly owned subsidiary of FUN Technologies Inc. (FUN), the
subsidiary of Liberty Media Corporation for approximately $4.4 million, including $3.85
million paid in cash at closing. Fantasy Sports owns and operates one of
Americas oldest and largest subscription based NASCAR fantasy sports games. In
addition, the Company has developed, and offers, subscription based college football,
basketball, and other motor sport fantasy games. We originally acquired Fantasy Sports in
November 2000.

# Employees

As of September 5, 2006, we employed
15 employees through our subsidiaries, 12 of whom were full-time salaried employees and
three of whom were part time employees.

We provide performance based and
equity based compensation programs to reward and motivate significant contributors among
our employees. Although none of our employees is represented by a labor union, we have not
experienced any work stoppages and consider our relations with our employees to be good.

# Item 1A.      Risk Factors

Our business is subject to many risks
and uncertainties, which may affect our future financial performance. If any of the events
or circumstances described below occurs, our business and financial performance could be
harmed, our actual results could differ materially from our expectations and the market
value of our securities could decline. The risks and uncertainties discussed below are not
the only ones we face. There may be additional risks and uncertainties not currently known
to us or that we currently do not believe are material that may harm our business and
financial performance.

# RISKS ASSOCIATED WITH
OUR STRATEGY FIRST SUBSIDIARY

MANY OF OUR TITLES HAVE SHORT
LIFECYCLES AND FAIL TO GENERATE SIGNIFICANT REVENUES.

The market for entertainment software
is characterized by short product lifecycles and frequent introduction of new products.
Many software titles do not achieve sustained market acceptance or do not generate a
sufficient level of sales to offset the costs associated with product development. A
significant percentage of the sales of new titles generally occurs within the first three
months following their release. Therefore, our continued profitability depends upon our
ability to acquire and sell new, commercially successful titles and to replace revenues
from titles in the later stages of their lifecycles. Any competitive, financial,
technological or other factor which delays or impairs our ability to introduce and sell
our software could adversely affect our future operating results.

4



---

WE MAY FAIL TO ANTICIPATE CHANGING
CONSUMER PREFERENCES.

Our business is speculative and is subject
to all of the risks generally associated with the entertainment software industry, which
has been cyclical in nature and has been characterized by periods of significant growth
followed by rapid declines. Our future operating results will depend on numerous factors
beyond our control, including:

| |  | the
 popularity,  price and timing of new  software and  hardware  platforms  being  released
 and  distributed  by us and our          competitors;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

| |  | international,
 national and regional economic conditions,  particularly economic conditions adversely
affecting discretionary          consumer spending;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | changes
in consumer demographics;
|- |  | ---------------------------------

| |  | the
availability of other forms of entertainment; and
|- |  | -----------------------------------------------------

| |  | critical
reviews and public tastes and preferences, all of which change rapidly and cannot be
predicted.
|- |  | --------------------------------------------------------------------------------------------------------

In order to plan for acquisition and
promotional activities, we must anticipate and respond to rapid changes in consumer tastes
and preferences. A decline in the popularity of entertainment software or particular
platforms could cause sales of our titles to decline dramatically.

WE MAY NOT BE ABLE TO PROTECT OUR
PROPRIETARY RIGHTS.

We acquire proprietary software and
technologies. We attempt to protect our software and production related intellectual
property under copyright, trademark and trade secret laws as well as through contractual
restrictions on disclosure, copying and distribution.

Entertainment software is susceptible
to unauthorized copying. Unauthorized third parties may be able to copy or to reverse
engineer our software to obtain and use programming or production techniques that we
regard as proprietary. In addition, our competitors could independently develop
technologies substantially equivalent or superior to our technologies.

WE MAY BE SUBJECT TO INTELLECTUAL
PROPERTY CLAIMS.

As the number of entertainment
software products increases and the features and content of these products continue to
overlap, software developers increasingly may become subject to infringement claims. Many
of our products are highly realistic and feature materials that are based on real world
examples, which may inadvertently infringe upon the intellectual property rights of
others. Our products often utilize complex technology that may become subject to the
intellectual property rights of others. Although we believe that we make reasonable
efforts to ensure that our products do not violate the intellectual property rights of
others, it is possible that third-parties still may claim infringement. From time to time,
we receive communications from third-parties regarding such claims. Existing or future
infringement claims against us, whether valid or not, may be time consuming and expensive
to defend.

Intellectual property litigation or
claims could force us to do one or more of the following:

| |  | cease
selling, incorporating or using products or services that incorporate the challenged
intellectual property;
|- |  | -----------------------------------------------------------------------------------------------------------------

| |  | obtain
a license from the holder of the infringed  intellectual  property,  which if available
at all, may not be available on           commercially favorable terms; or
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5



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| |  | redesign
the effected entertainment software products, which could cause us to incur additional
costs, delay introduction and possibly reduce commercial appeal of our products.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Any of these actions may cause
material harm to our business and financial results.

RATING SYSTEMS FOR ENTERTAINMENT
SOFTWARE, POTENTIAL LEGISLATION AND CONSUMER OPPOSITION COULD INHIBIT SALES OF OUR
PRODUCTS.

The home video game industry requires
entertainment software publishers to provide consumers with information relating to
graphic violence or sexually explicit material contained in software titles. Certain
countries have also established similar rating systems as prerequisites for sales of
entertainment software in such countries. We believe that we comply with such rating
systems and display the ratings received for our titles. Our software titles generally
receive a rating of G (all ages) or T (age 13 and over), although
certain of our titles receive a rating of M (age 18 and over), which may limit
the potential markets for these titles.

Several proposals have been made for
federal legislation to regulate the entertainment software, motion picture and recording
industries, including a proposal to adopt a common rating system for entertainment
software, television and music containing violence and sexually explicit material and an
inquiry by the Federal Trade Commission with respect to the marketing of such material to
minors. Consumer advocacy groups have also opposed sales of entertainment software
containing graphic violence and sexually explicit material by pressing for legislation in
these areas and by engaging in public demonstrations and media campaigns. If any groups
were to target our titles, we might be required to significantly change or discontinue a
particular title.

WE ARE EXPOSED TO SEASONALITY IN THE
PURCHASES OF OUR PRODUCTS.

The entertainment software industry
is highly seasonal, with the highest levels of consumer demand occurring during the year
end holiday buying season. As a result, our net revenues, gross profits and operating
income have historically been highest during the second half of the calendar year. Delays
in development, licensor approvals or manufacturing can also affect the timing of the
release of our products, causing us to miss key selling periods such as the year end
holiday buying season.

WE OPERATE IN A HIGHLY COMPETITIVE
INDUSTRY.

The entertainment software industry
is intensely competitive and new entertainment software products and platforms are
regularly introduced. Our competitors vary in size from small companies with limited
resources to very large corporations with significantly greater financial, marketing and
product development resources than we have. Due to these greater resources, certain of our
competitors can spend more money and time on developing and testing products, undertake
more extensive marketing campaigns, adopt more aggressive pricing policies, pay higher
fees to licensors for desirable motion picture, television, sports and character
properties and pay more to third-party software developers than we can. We believe that
the main competitive factors in the entertainment software industry include: product
features and playability; brand name recognition; compatibility of products with popular
platforms; access to distribution channels; quality of products; ease of use; price;
marketing support; and quality of customer service.

IF OUR PRODUCTS CONTAIN DEFECTS, OUR
BUSINESS COULD BE HARMED SIGNIFICANTLY.

Software products as complex as the
ones we publish may contain undetected errors when first introduced or when new versions
are released. Despite extensive testing prior to release, we cannot be certain that errors
will not be found in new products or releases after shipment, that could result in loss of
or delay in market acceptance. This loss or delay could significantly harm our business
and financial results.

6



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WE RELY ON INDEPENDENT THIRD PARTIES
TO DEVELOP MOST OF OUR SOFTWARE PRODUCTS.

We rely on independent third-party
entertainment software developers to develop most of our software products. Since we
depend on these developers we remain subject to the following risks

| |  | continuing
strong demand for developers resources, combined with the recognition they receive
in connection with their work, may cause developers who worked for us in the past either
to work for our competitors in the future or to renegotiate our agreements with them on
terms less favorable for us;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | limited
financial resources and business expertise and inability to retain skilled personnel may
force developers out of business prior to completing our products or require us to fund
additional costs; and
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | our
competitors may acquire the businesses of key developers or sign them to exclusive
development arrangements. In either case, we would not be able to continue to engage such
developers services for our products, except for those that they are contractually
obligated to complete for us.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We also compete with other forms of
entertainment and leisure activities. For example, we believe that the overall growth in
the use of the Internet and online services by consumers may pose a competitive threat if
customers and potential customers spend less of their available time using entertainment
software and more using the Internet and online services.

THE RETAIL MARKET FOR PC GAME
SOFTWARE IS DECREASING WHICH COULD HAVE AN ADVERSE IMPACT ON OUR FINANCIAL CONDITION.

The changing characteristics of the
worldwide consumer entertainment software market in recent years have been impacted by
many factors, such as:

| |  | an
increasing number of technologically advanced PCs with more powerful operating systems,
enhanced graphics and video cards, expanded memory chips, as well as higher capacities
and faster speeds for CD and hard drives in the home and office;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | greater
access by consumers to the Internet through high-speed access modes (such as cable modems
and DSL connections);
|- |  | -----------------------------------------------------------------------------------------------------------------------

| |  | increased
interest in online game play;
|- |  | ---------------------------------------

| |  | the
increasing number of game console devices in the home; and
|- |  | --------------------------------------------------------------

| |  | the
development of increasingly advanced technologies supporting game play (such as hand held
game devices, mobile phones and personal digital assistants).
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of this increased
competition in the overall consumer entertainment market, market data suggests that the
retail market for PC game software has decreased over the past two years. If this trend
continues it could have an adverse impact on our financial condition.

7



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THE PC SOFTWARE GAME MARKET HAS
GRAVITATED TOWARDS MASS MERCHANT RETAILERS.

The North American PC software game
market has gravitated toward mass merchant retailers thereby increasing the competition
for shelf space for PC games. This increased competition has emphasized the importance of
marketing, merchandising and brand name recognition. A significant result of these market
pressures is an industry trend toward the consolidation of consumer entertainment PC
software publishers and distributors, in addition to the diversification of products
offered by these companies. The trends toward industry consolidation and increased
competition for game content and retail shelf space are more pronounced in North America
than in international markets and are expected to continue for the foreseeable future.

WE MAY FACE DIFFICULTY OBTAINING
ACCESS TO RETAIL SHELF SPACE NECESSARY TO MARKET AND SELL OUR PRODUCTS EFFECTIVELY.

Retailers of our products typically
have a limited amount of shelf space and promotional resources, and there is intense
competition among consumer entertainment software products for high quality retail shelf
space and promotional support from retailers. To the extent that the number of products
and platforms increases, competition for shelf space may intensify and may require us to
increase our marketing expenditures. Retailers with limited shelf space typically devote
the most and highest quality shelf space to those products expected to be best sellers. We
cannot be certain that our new products will achieve such best
seller status. Due to increased competition for limited shelf space, retailers and
distributors are in an increasingly better position to negotiate favorable terms of sale,
including price discounts, price protection, marketing and display fees and product return
policies. Our products constitute a relatively small percentage of any retailers
sales volume. We cannot be certain that retailers will continue to purchase our products
or to provide our products with adequate levels of shelf space and promotional support on
acceptable terms. A prolonged failure in this regard may significantly harm our business
and financial results.

WE MAY PERMIT OUR CUSTOMERS TO RETURN
OUR PRODUCTS AND TO RECEIVE PRICING CONCESSIONS WHICH COULD REDUCE OUR NET REVENUES AND
RESULTS OF OPERATIONS.

We are exposed to the risk of product
returns and price protection with respect to our distributors and retailers. Return
policies allow distributors and retailers to return defective, shelf-worn and damaged
products in accordance with terms granted. Price protection, when granted and applicable,
allows customers a credit against amounts they owe us with respect to merchandise unsold
by them. We may permit product returns from, or grant price protection to, our customers
under certain conditions. The conditions our customers must meet to be granted the right
to return products or price protection are, among other things, compliance with applicable
payment terms, delivery to us of weekly inventory and sell-through reports, and consistent
participation in the launches of our premium title releases. We may also consider other
factors, including the facilitation of slow-moving inventory and other market factors.
When we offer price protection, we offer it with respect to a particular product to all of
our retail customers; however, only those customers who meet the conditions detailed above
can avail themselves of such price protection. Although we maintain a reserve for returns
and price protection, and although we may place limits on product returns and price
protection, we could be forced to accept substantial product returns and provide
substantial price protection to maintain our relationships with retailers and our access
to distribution channels. Product returns and price protection that exceed our reserves
could significantly harm our business and financial results.

TECHNOLOGY CHANGES RAPIDLY IN OUR
BUSINESS, AND IF WE FAIL TO ANTICIPATE OR SUCCESSFULLY IMPLEMENT NEW TECHNOLOGIES, THE
QUALITY, TIMELINESS AND COMPETITIVENESS OF OUR PRODUCTS AND SERVICES WILL SUFFER

Rapid technology changes in our
industry require us to anticipate, sometimes years in advance, which technologies we must
implement and take advantage of in order to make our products and services competitive in
the market. Therefore, we usually start our product development with a range of technical
development goals that we hope to be able to achieve. We may not be able to achieve these
goals, or

8



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our competition may be able to
achieve them more quickly than we can. In either case, our products and services may be
technologically inferior to our competitors, less appealing to consumers, or both.
If we cannot achieve our technology goals within the original development schedule of our
products and services, then we may delay their release until these technology goals can be
achieved, which may delay or reduce revenue and increase our development expenses.
Alternatively, we may increase the resources employed in research and development in an
attempt to accelerate our development of new technologies, either to preserve our product
or service launch schedule or to keep up with our competition, which would increase our
development expenses.

# RISK ASSOCIATED WITH
OUR OPERATIONS

THERE IS NO ASSURANCE THAT WE CAN
SUCCESSFULLY IMPLEMENT OUR BUSINESS PLAN THAT CALLS FOR THE ACQUISITION OF ADDITIONAL
ENTERTAINMENT SOFTWARE BUSINESSES TO CREATE A LARGER PRESENCE IN THE MARKET PLACE.

We seek to acquire complimentary
businesses in the entertainment software market. The success of our business plan is
predicated on us finding appropriate acquisitions and growing their operations. There is
no assurance that we will be able to access such companies or to complete their
acquisition. Furthermore, there is no assurance that our current financial resources will
be sufficient to achieve the goals of our business plan. There is no assurance that we
will be able to raise additional capital if the need arises.

AS A SIGNIFICANT  AMOUNT
OF OUR ASSETS ARE DENOMINATED IN FOREIGN  CURRENCY AND WE CONDUCT BUSINESS
 INTERNATIONALLY,  WE ARE SUBJECT TO CURRENCY AND FOREIGN REGULATORY RISKS

Strategy First is incorporated
in Canada and sells products throughout the United States and Europe. Its functional
currency is the Canadian Dollar. This has exposed the company to market risk with respect
to fluctuations in the relative value of the Euro, British Pound, the Canadian
Dollar, and the US Dollar.

Certain of the Companys cash
balances and the remaining proceeds from the sale of its South African subsidiaries are
denominated in South African Rand. This has exposed the Company to market risk with
respect to fluctuations in the relative value of the South African Rand against the US
Dollar.

We expect to repatriate our funds
held in South Africa to the United States. We believe that repatriation of the full amount
is allowable under current South African foreign currency regulations. Over the last eight
years, we have, from time to time, repatriated funds from South Africa without
restriction. However, there can be no guarantee that the South African foreign currency
regulations will not change in the future in a manner that might restrict our ability to
repatriate the remaining assets.

WE CURRENTLY ARE DISPUTING A TAX
LIABILITY WITH THE SOUTH AFRICAN REVENUE SERVICE AND WE MAY BE FORCED TO EXPENSE
ADDITIONAL AMOUNTS IN THIS MATTER.

In April 2006, our First South
African subsidiary received a letter from the South African Revenue Service
(SARS) challenging certain tax treatment of dividends and operating loss carry
forwards for the years 2002 through 2004. Subsequently SARS issued a tax assessment for
approximately $2.7 million. The Company believes that its South African tax filings are in
full compliance with all applicable laws and is vigorously defending its position in this
regard. However, until such time as these issues are resolved, the Company will retain an
amount equal to the assessment in South Africa to cover any potential liability that may
arise. The Company has recorded an estimated liability of $600,000 in this regard but may be forced
to increase this amount should it receive adverse information as it continues its
appeal of the SARS assessment.

9



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SINCE WE DO NOT INTEND TO DECLARE
DIVIDENDS IN THE FORESEEABLE FUTURE, THE RETURN ON YOUR INVESTMENT WILL DEPEND UPON
APPRECIATION OF THE MARKET PRICE OF YOUR SHARES.

We have never paid any dividends on
our common stock. Our board of directors does not intend to declare any dividends in the
foreseeable future, but intends to retain all earnings, if any, for use in our business
operations. As a result, the return on your investment in us will depend upon any
appreciation in the market price of our common stock. The holders of common stock are
entitled to receive dividends when, as and if declared by the board of directors out of
funds legally available for dividend payments. The payment of dividends, if any, in the
future is within the discretion of our board of directors and will depend upon our
earnings, capital requirements and financial condition, and other relevant factors.

SILVERSTAR AND ITS OPERATING
SUBSIDIARIES DEPEND ON THE CONTINUED SERVICES OF KEY PERSONNEL.

Our success depends upon the continued
contributions of our executive officers, some of whom are also our principal shareholders,
and the continued contributions of the management of our operating subsidiaries. Our
business could be adversely affected by the loss of services of, or a material reduction
in the amount of time devoted to us by our executive officers or the executive officers of
our subsidiary. We do not carry key man insurance.

# RISKS RELATING TO OUR
COMMON STOCK

THE PRICE OF OUR COMMON STOCK IS
HIGHLY VOLATILE.

The price of our common stock is highly
volatile. Fluctuations in the market price of our common stock may be a result of any
number of factors or a combination of factors including, but not limited to:

| |  | the
 number of shares in the  market and the number of shares we may be  required  to issue
in the future  compared  to market          demand for our shares;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | our
performance and meeting  expectations of performance,  including the development and
 commercialization of our current and          proposed products and services;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | market
conditions for internet and media companies in the small capitalization sector; and
|- |  | ------------------------------------------------------------------------------------------

| |  | general
economic and market conditions.
|- |  | ---------------------------------------

OUR EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS TOGETHER, MAY EXERCISE CONTROL OVER ALL MATTERS SUBMITTED TO A VOTE
OF STOCKHOLDERS.

Our executive officers, directors own
1,119,818 shares of our Class A common stock and 780,137 shares of our Class B common
stock, representing approximately 21% of our outstanding capital stock and approximately
42% of the total voting power and are able to elect all of the our directors and otherwise
control our operations. Furthermore, the disproportionate vote afforded the Class B common
stock could also serve to impede or prevent a change of control. As a result, potential
acquirees may be discouraged from seeking to acquire control through the purchase of our
common stock, which could have a depressive effect on the price of our securities and will
make it less likely that shareholders receive a premium for their shares as a result of
any such attempt.

10



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ANTI-TAKEOVER MEASURES IN OUR
MEMORANDUM OF ASSOCIATION COULD ADVERSELY AFFECT THE VOTING POWER OF THE HOLDERS OF OUR
COMMON STOCK.

Our Memorandum of Association
authorizes the issuance of up to 5,000,000 shares of preferred stock with such
designations, rights and preferences as may be determined from time to time by our board
of directors. Accordingly, our board of directors is empowered, without shareholder
approval, but subject to applicable government regulatory restrictions, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights which could adversely
affect the voting power or other rights of the holders of our common stock. In the event
of issuance, the preferred stock could be utilized, under certain circumstances, as a
method of discouraging, delaying or preventing a change in control of us. Although we have
no present intention to issue any shares of our preferred stock, we cannot assure we will
not do so in the future.

THE RIGHTS OF STOCKHOLDERS UNDER
BERMUDA LAW MAY NOT BE AS EXTENSIVE AS THE RIGHTS OF STOCKHOLDERS UNDER THE LAWS OF
JURISDICTIONS IN THE UNITED STATES.

Our corporate affairs are governed by
our Memorandum of Association and by-laws, as well as the common law of Bermuda relating
to companies and the Companies Act 1981. Our by-laws limit the right of security holders
to bring an action against our officers and directors. The laws of Bermuda relating to
shareholder rights, protection of minorities, fiduciary duties of directors and officers,
matters of corporate governance, corporate restructuring, mergers and similar
arrangements, takeovers, shareholder suits, indemnification of directors and inspection of
corporate records, may differ from those that would apply if we were incorporated in a
jurisdiction within the United States. The rights of shareholders in a Bermuda company may
not be as extensive as the rights of a shareholder of a United States company and,
accordingly, the holders of our shares of common stock may be more limited in their
ability to protect their interests in us. In addition, there is uncertainty whether the
courts of Bermuda would enforce judgments of the courts of the United States and of other
foreign jurisdictions. There is also uncertainty whether the courts of Bermuda would
enforce actions brought in Bermuda which are predicated upon the securities laws of the
United States.

OUR COMMON STOCK MAY BE
DELISTED FROM NASDAQ

The National Association of
Securities Dealers, Inc. has established certain standards for the continued listing of a
security on the NASDAQ Capital Market. The standards for continued listing require, among
other things, that the minimum bid price for the listed securities be at least $1.00 per
share. A deficiency in the bid price maintenance standard will be deemed to exist if the
issuer fails the individual stated requirement for thirty consecutive trading days, with a
180-day cure period with respect to the NASDAQ Capital Market. During November and
December 2004 and March 2005 our common stock traded below a price of $1.00 per share.
There can be no assurance that we will continue to satisfy the requirements for
maintaining a NASDAQ Capital Market listing. If our common stock were to be excluded from
NASDAQ, the market price of our common stock and the ability of holders to sell such stock
would be adversely affected, and we would be required to comply with the initial listing
requirements to be relisted on NASDAQ.

OUR COMMON STOCK MAY
BECOME SUBJECT TO THE SECS PENNY STOCK RULES

If our common stock is excluded from
NASDAQ and the price per share of our common stock is below $5.00, our securities would
become subject to certain penny stock rules promulgated by the Securities and
Exchange Commission unless we satisfy certain net asset and revenue tests. The application
of these rules to our common stock may adversely impact both your ability to resell our
common stock (liquidity) and the market price of these shares. The penny stock rules
require a broker-dealer, prior to 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 of 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

11



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market value of each penny stock held
in the customers account. 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
make a special written determination of suitability of the investor purchasing the penny
stock.

# ITEM 2.     Properties

Our principal executive offices are
located at Clarendon House, Church Street, Hamilton, HM CX, Bermuda, which space is made
available to us pursuant to a corporate services agreement entered into with a corporate
services company in Bermuda.

Strategy First, Inc. leases an office
at 147 St-Paul West, Suite 210, Montreal, Quebec Canada. The office occupies approximately
3,800 square feet. The lease expires on November 30, 2006, and costs us approximately
$56,000 per year.

Our United States management
subsidiary, First South Africa Management Corp., a Delaware corporation incorporated in
1995, leases an office at 1900 Glades Road, Suite 435, Boca Raton, Florida 33431. The
lease expires inJanuary 2009 and costs us approximately $25,000 per year for
approximately 800 square feet.

We believe the facilities we own or
occupy are adequate for the purposes for which they are currently used and are well
maintained.

# ITEM 3.      Legal Proceedings

Other than as set forth below we are
not currently a party to any material legal proceedings. We may become from time to time
involved in legal proceedings in the ordinary course of business. We may not be successful
in defending these or other claims. Regardless of the outcome, litigation can result in
substantial expense and could divert the efforts of our management.

In April 2006, our First South
African subsidiary received a letter from the South African Revenue Service
(SARS) challenging certain tax treatment of dividends and operating loss carry
forwards for the years 2002 through 2004. Subsequently SARS issued a tax assessment for
approximately $2.7 million. The Company believes that its South African tax filings are in
full compliance with all applicable laws and is vigorously defending its position in this
regard. However, until such time as these issues are resolved, the Company will retain cash in an
amount approximately equal to the assessment in South Africa to satisfy any potential liability that may
arise. The Company has recorded an estimated liability of $600,000 in this regard but may be forced
to increase this amount should it receive adverse information as it continues  its
appeal of the SARS assessment.

In January 2006, we brought an action
against JoWood Software Productions AG seeking damages in the amount of approximately
$850,000 for expenses incurred in connection with our unsuccessful acquisition of shares
of JoWood. The case is being heard in the Vienna Commercial Court in Austria.
JoWood was unsuccessful in having the case dismissed. Further hearings and a judgment are
anticipated toward the end of 2006.

# ITEM 4.     Submission of
Matters to a Vote of Security Holders

None.

12



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# PART II

# ITEM 5.      Market for
Registrants Common Equity and Related Stockholder Matters

Our common stock is listed for
quotation on the NASDAQ Capital Market under the symbol SSTR. The following
table sets forth, for the periods indicated the high and low closing sales prices for our
common stock, as reported by the NASDAQ Capital Market.

|                         | High  | Low  
|------------------------ | ----- | -----
|Common Stock Fiscal 2005 |       |      
|1st Quarter              | $0.97 | $0.60
|2nd Quarter              | $1.16 | $0.82
|3rd Quarter              | $1.34 | $1.06
|4th Quarter              | $1.80 | $1.12
|                        
|Common Stock Fiscal 2006
|1st Quarter              | $2.54 | $1.40
|2nd Quarter              | $1.76 | $1.20
|3rd Quarter              | $1.64 | $1.16
|4th Quarter              | $1.50 | $1.15

The closing price of our common stock
on September 14, 2006 was $1.85.

As of September 14, 2006, there were
approximately 2,500 holders of our common stock, inclusive of holders whose shares were
held by brokerage firms, depositaries and other institutional firms in street
name for their customers.

We have never declared or paid any
cash dividends on our Class A or Class B common stock. We do not anticipate declaring or
paying any dividends on our Class A or Class B common stock in the foreseeable future. We
currently intend to retain future earnings, if any, to finance the expansion of our
business.

# Equity Compensation Plan
Information

The following table contains a
summary of the number of shares of our common stock to be issued upon the exercise of
options, warrants and rights outstanding at June 30, 2006, the weighted average exercise
price of those outstanding options, warrants and rights, and the number of additional
shares of our common stock remaining available for future issuance under the plans as at
June 30, 2006.

13



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|Plan Category                                                 | Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights | Weighted average exercise
price of outstanding
options, warrants and
rights | Number of securities
remaining available for
further issuance
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------------------------------------------
|Equity compensation plans approved by shareholders*           | 517,405                                                                                     | 1.23                                                                        | 867,405                                                      
|Equity compensation plan notapproved by shareholders**        | 450,000                                                                                     | 2.00                                                                        | NA                                                           
|Stock options issued to directors and employees***            | 320,000                                                                                     | 3.93                                                                        | NA                                                           
|Warrants issued in connection with services****               | 180,000                                                                                     | $0.81                                                                       | NA                                                           
|Warrants issued in connection with raising capital *****      | 202,189                                                                                     | $6.00                                                                       | NA                                                           
|Warrants issued for acquisition of Strategy First, Inc. ***** | 200,000                                                                                     | $2.50                                                                       | NA                                                           
|Warrants issued for convertible debt *******                  | 791,319                                                                                     | $1.89                                                                       | NA                                                           

|* | See
NOTE 14 to the Financial Statements
|- | ---------------------------------------

|** | These
options can not be exercised until approved by shareholders
|-- | -----------------------------------------------------------------

|*** | These
options were granted pursuant to various employment agreements
|--- | --------------------------------------------------------------------

|**** | These
warrants were granted to a consultant for services to be rendered. These warrants expire
July 1, 2007.
|---- | ------------------------------------------------------------------------------------------------------------

|**** | These warrants were issued in connection with raising capital during
2000. These warrants expire July 31, 2007.
|---- | ---------------------------------------------------------------------------------------------------------------

|****** | These
warrants were issued in connection with the issuance of Strategy First, Inc. These
warrants expire April 21, 2008.
|------ | ------------------------------------------------------------------------------------------------------------------------

|******* | These warrants were issued in connection with the
issuance of convertible debt. These warrants expire October 31, 2010.
|------- | -----------------------------------------------------------------------------------------------------------------------

# ITEM 6.     Selected
Financial Data

Selected Consolidated
Financial Information

|                                                   | Years Ended June 30,
|-------------------------------------------------- | --------------------
|
|Revenues                                           |                     
|Total operating expenses                           |                     
|Operating loss                                     |                     
|Foreign tax contingency                            |                     
|Interest income, net                               |                     
|Foreign currency gain (loss)                       |                     
|Net income (loss) from continuing operations       |                     
|Income (Loss) from discontinued operations         |                     
|Gain (Loss) on disposition                         |                     
|Net (loss) income                                  |                     
|Income (Loss) per share from continuing operations |                     

|Balance Sheet Data                 | As of June 30,
|---------------------------------- | --------------
|
|Total assets                       |               
|Long term liabilities              |               
|Net working capital (deficiency)** |               
|Stockholders' equity               |               

**Net working capital
(deficiency) is the net of current assets and current liabilities.

14

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ITEM 7.  MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our
financial condition and results of operations should be read in conjunction with our
consolidated financial statements and the notes thereto included elsewhere in this report.
This discussion and analysis includes forward-looking statements that are subject to
risks, uncertainties and other factors described under the caption Risk
Factors beginning on Page 4. These factors could cause our actual results in current
and future periods to differ materially from those expressed in, or implied by, those
forward-looking statements. See Special Note Regarding Forward-Looking
Statements.

# Background and History

We were incorporated in September
1995. Our business plan is to actively pursue acquisitions fitting a pre defined
investment strategy. Currently our strategy focuses on the following:

| |  | acquiring
controlling stakes in high quality electronic entertainment software businesses with
strong management teams that are positioned to use technology and Internet related
platforms to fuel above average growth;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Investing
in companies that show an ability to contribute, in the short to medium term, to earnings
per share through operating profit or capital appreciation; and
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | operating
in partnership with committed, incentivised, entrepreneurial management who show the
vision and ability to grow their businesses into industry or niche leaders.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We sold our last remaining South
African operations in November 2000. We still have significant assets that are denominated
in South African Rand. The assets include cash and notes receivables. Currently we do not
have a financial hedging program to protect against the depreciation of the SA Rand
against the US dollar and, therefore, as long as we hold assets in South Africa we will
continue to record income statement gains or losses to the extent that the Rands
value fluctuates relative to the US dollar.

On November 17, 2000, we acquired all
of the assets and certain liabilities of Fantasy Sports from GoRacing Interactive
Services, Inc. Founded in 1993, Fantasy Sports operates the fantasycup.com, website and
specializes in subscription based NASCAR, college football and other fantasy sports games.
On April 7, 2006, we disposed of substantially all the assets and liabilities of Fantasy
Sports.

In accordance with accounting
principles generally accepted in the United States of America the operating results and
net assets related to Fantasy Sports have been included in discontinued operations in our
consolidated statements of operations and consolidated balance sheets. Discontinued
operations for the year ended June 30, 2006, represent operating results for nine months.

The discontinued operations generated
sales of $1.49 million and net gains from operations of $.16 million for the year ended
June 30, 2006.

On April 21, 2005, we acquired
Strategy First Inc. (www.strategyfirst.com), a leading developer and worldwide publisher
of entertainment software for the PC. We acquired the company through the jurisdiction of
the Montreal bankruptcy court. Pursuant to the approved plan of arrangement, we paid cash
consideration to the creditors of Strategy First of $609,000; we issued 377,000 shares of
our common stock; warrants to purchase 200,000 shares of our common stock; and assumed
approximately $400,000 in existing bank debt, as well as contingent consideration based on
the future profitability of Strategy First. Founded in 1990, Strategy First publishes
software games primarily for the PC platform. Some of its  popular games include O.R.B, the
Disciples franchise, Sacred Lands, Kohan: Immortal Sovereigns, Steel Beasts, Galactic
Civilizations, and the Jagged Alliance franchise. Two months of operating results for
Strategy First are included in fiscal 2005.

15



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On October 31, 2005, we
consummated a transaction pursuant to a Securities Purchase Agreement, dated October 21,
2005 (the Purchase Agreement), with DKR SoundShore Oasis Holding Fund Ltd.
(the Purchaser).Pursuant to the Purchase Agreement, we issued to the
Purchaser a $5,000,000 principal amount Variable Rate Secured Convertible Debenture due
October 31, 2008 (the Debenture) and a warrant to purchase 791,139 shares of
the our common stock at an exercise price of $1.896 per share (the
Warrant). We intend to use the proceeds of this offering for acquisitions and
working capital.

# Results of Operations

Due to the classification of the
results from Fantasy Sports as Discontinued Operations and as only two months operating
results for Strategy First were included in 2005 the following management discussion and
analysis of financial condition and results of operations may not provide an accurate
comparison between the current and past fiscal years.

# Fiscal 2006 Compared to
Fiscal 2005

Revenues

Revenues increased $2.95 million to
$3.3 million in fiscal 2006 as compared to $0.35 million in the prior year. The increase
in revenues in 2006 was primarily the result of including operations from Strategy First
for a full year in fiscal 2006 as compared to two months in fiscal 2005.

Cost of Sales

Cost of sales increased $1.38 million
to $1.5 million in fiscal 2006 as compared to $.12 million in the prior year. Cost of
sales relate solely to the operations of Strategy First. The increase in cost of sales was
primarily the result of including operations from Strategy First for a full year in fiscal
2006 as compared to two months in fiscal 2005.

Selling, General and
Administrative Expenses

Selling, general and administrative
expenses increased $1.6 million to $2.9 million in fiscal 2006 as compared to $1.3 million
in fiscal 2005. Selling, general and administrative expenses related to
corporate overhead were $1.1 million in fiscal 2006 and 2005. The increase in selling,
general and administrative expenses was primarily the result of including operations from
Strategy First for a full year in fiscal 2006 as compared to two months in fiscal 2005.
Strategy Firsts sales, general and administrative expenses were $1.8 million in
fiscal 2006 as compared to $0.2 million in fiscal 2005 when only two months
operations were recorded. Included in these amounts are stock based compensation charges
of $0.1 million for fiscal 2006 as compared to $0.05 million in fiscal 2005.

Amortization and
Depreciation

Amortization of intangible assets was
$0.15 million in fiscal 2006 as compared to $0.02 million in fiscal 2005. The increase was
due to the full year amortization of intangible assets related to Strategy First in fiscal
2006 as compared to two months in fiscal 2005. Depreciation expense was $0.03 million in
fiscal 2006 as compared to $0.01 million in fiscal 2005. The increase is related to
Strategy Firsts operations being recorded for the full year in 2006.

Foreign Currency Gains

Foreign currency gains or losses are
almost exclusively related to the assets remaining from the sale of discontinued South
African operations. The foreign currency losses during fiscal 2006 were $0.75 million as
compared to gains of $0.08 million in fiscal 2005. These gains or losses are the result of
the fluctuations of the South African Rand against the US dollar. During the year ended
June 30, 2006, the

16



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Rand depreciated approximately 9%
against the US dollar, while it depreciated approximately 7% in fiscal 2005. In 2005, the
increase in the market value of our Rand put/US dollar call option offset the
foreign currency losses which resulted in an overall gain for the year. These foreign
currency gains are non cash items until converted into US dollars when any accumulated
gains or losses will be converted into cash. During the year ended June 30, 2006, we
received approximately R20 million (South African Rand) ($2.75 million) as final payment of notes and interest owed by
Salwin Pty, Ltd.

Acquisition Costs Incurred

During the year ended June 30, 2006,
we incurred approximately $0.32 million pursuing the unsuccessful acquisition of and
subsequent litigation against a European software company. We are seeking damages for
breach of contract from this European software company.

Amortization of
Convertible Debt Discounts and Issuance Costs

Amortization of convertible debt
discounts and issuance costs were $0.77 million in fiscal 2006. There were no charges of
this nature in fiscal 2005. These expenses relate to the issuance of our $5 million
convertible debenture to DKR Oasis in October 2005.

Interest Income

Interest income of $0.63 million was
recorded during fiscal 2006 as compared to interest income of $0.58 million in fiscal
2005. Interest income is primarily earned on cash balances as well as on notes receivable
from the sale of our South African businesses. Interest income is, therefore affected by
the fluctuation of movements in the US and South African interest rates as well as by the
fluctuation of the South African Rand against the US dollar.

Interest Expense

Interest expense during fiscal 2006
was $0.56 million as compared to $0.01 million in the prior year. This increase is
attributable to interest incurred in connection with the issuance of our $5 million
convertible debenture to DKR Oasis in October 2005.

Provision for Income Taxes

We are registered in Bermuda, where
no income tax laws are applicable. Two of our subsidiaries are subject to U.S. income
taxes, one subsidiary is subject to Canadian income taxes and one is subject to South
African income taxes. Up to this date, none of them has had taxable income as they have
incurred losses for tax purposes. The deferred tax asset generated by the tax losses and
temporary differences has been fully reserved.

In early April 2006, our subsidiary
First South African Holdings received a letter from the South African Revenue Service
(SARS) challenging certain tax treatment of dividends and operating loss carry
forwards for the years 2002 through 2004. Subsequently SARS has issued an assessment for
approximately $2.7 million.

We believe that our South African tax
filings are in full compliance with all applicable laws and are vigorously defending its
position in this regard. However, until such time as these issues are resolved, we will
retain cash in an amount approximately equal to the assessment in South Africa to satisfy any potential liability
that may arise.

Not withstanding the above and after
reviewing this potential liability with outside experts and conducting a further review
into the circumstances of the assessment, we have recorded an estimated liability of approximately
$600,000 at this time.

17



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We will continue to vigorously defend
our position in this matter. However, circumstances may dictate that we increase this
liability as we proceed. There is, therefore, no assurance that the $600,000 amount will
be sufficient to offset the ultimate tax liability. Conversely, we believe that we have
strong defenses in this matter and we may ultimately obtain a ruling that results in a
lesser liability. As this is a fluid situation, we will assess our liability in this
regard on a quarterly basis and may adjust this $600,000 liability in the future.

Discontinued Operations

During fiscal 2006, we recognized
gains of $0.16 million from the discontinued operations of Fantasy Sports, Inc. as
compared to $0.42 million in fiscal 2005.

Net Income

We have recognized a net loss of
$1.98 million during fiscal 2006 compared to net income of $0.16 million during the prior
year. For fiscal year 2006, net loss includes non-cash foreign currency losses of
approximately $0.75 million, $0.60 million accrued for an estimated foreign tax liability, $0.32
million costs incurred within an abandoned acquisition and $0.77 million amortization
costs related to the issuance of our $5 million convertible debenture. During fiscal 2005,
we recognized $0.08 million in non cash foreign currency gains and did not incur any
expenses in regard to the other categories.

# Fiscal 2005 Compared to
Fiscal 2004

Revenues

Revenues were $0.35 million in fiscal
2005 as compared to $0.0 million in the prior year. In fiscal 2005, we recognized two
months income from Strategy First while we had no income from continued operations
in fiscal 2004.

Cost of Sales:

The cost of sales was $0.12 million
in fiscal 2005 as compared to $0.0 million in the prior year.

Selling, General and
Administrative Expenses

Selling, general and administrative
expenses for fiscal 2005 were $1.28 million, as compared to $0.94 million in the prior
year. During fiscal 2005, selling, general and administrative expenses related to
corporate overhead were $1.1 million as compared to $0.93 million in fiscal 2004. Strategy
Firsts sales, general and administrative expenses were $0.2 million in fiscal 2005
as compared to $0.0 in fiscal 2004.

Amortization and
Depreciation

Amortization of intangible assets
increased to $0.02 million in fiscal 2005 from $0.0 million in fiscal 2004 as a result of
the acquisition of Strategy First in April 2005. Depreciation expense was $0.01 million in
fiscal 2005 as compared to $0.01 million in fiscal 2004.

Foreign Currency Gains

Foreign currency gains or losses are
related to the financial assets remaining in the South African operations. The foreign
currency gains during fiscal 2005 were$0.08 million as compared to gains of $1.3
million in fiscal 2004. These gains are the result of fluctuations of the South African
Rand against the US dollar. During the year ended June 30, 2005, the Rand depreciated
approximately 7% against the US dollar while it appreciated 17% in fiscal 2004.
These foreign currency gains or losses are non-cash items until converted into US dollars,
when any accumulated gains or losses will be converted to cash.

18



---

Interest Income

Interest income of $0.57 million was
recorded during fiscal 2005 as compared to interest income of $0.63 million in the prior
year. Interest income is primarily earned on Notes Receivable from the sale of our South
African business and is affected by the fluctuation of the South African Rand against the
US dollar, as well as movement in South African prime interest rates.

Interest Expense

Interest expense during fiscal 2005
and 2004 was $0.0 million.

Provision for Income Taxes

The Company is registered in Bermuda,
where no income tax laws are applicable. Three of the Companys subsidiaries are
subject to US income taxes, and one is subject to South African income taxes. Up to this
date, none of our US and Canadian subsidiaries have had taxable income as they have
incurred losses for tax purposes. The deferred tax asset generated by the tax losses and
temporary differences has been fully reserved.

Discontinued Operations

During fiscal 2005, the Company
recognized gains of $0.42 million from the discontinued operations of Fantasy Sports, Inc.
as compared to $0.05 million in fiscal 2004.

Net Income (Loss)

The Company has recognized net income
of $0.16 million during fiscal 2005 compared to net income of $1 million during 2004. Fiscal
2005 included non-cash foreign currency gains of approximately $0.08 million. During
fiscal 2004, the Company recognized $1.3 million in non-cash foreign currency gains.

# Financial Condition,
Liquidity and Capital Resources

Cash increased by $7.1 million from
$4.9 million at June 30, 2005 to $12 million at June 30, 2006. The cash balances are being
held for acquisitions and working capital purposes. We expect this balance to be
sufficient to fund our operations and the operations of our subsidiaries for the next
twelve months. Included in this amount is $3.6 million which is classified as restricted
cash. This amount relates to cash used to secure borrowings of our subsidiary, Strategy
First, as well as money retained in South Africa to satisfy any potential liability that may
result from our tax dispute with the South African Revenue Service.

Working capital increased by $5.93
million from $3.64 million at June 30, 2005 to $9.57 million at June 30, 2006. This
increase is primarily due to the cash received from the sale of Fantasy Sports, the
repayment of a portion of our notes receivable, and issuance of our $5 million convertible
debenture to DKR Oasis, net of repayments and costs incurred. Accrued interest earned during the year has been classified as
part of the Long Term Notes Receivable.

At June 30, 2006, we had borrowings
of $0.83 million, which consisted of $0.65 million advances against the lines of credit,
secured by the Companys cash, and term loans of $0.18 million. Additionally, we have
$3.6 million face amount outstanding in our convertible debenture issued to DKR Oasis, net of reppayments or costs incurred. We
currently pay monthly interest on this amount at a rate of Prime plus 1.5%. Should there
be no conversions of this debenture; principal payments will start on February 1, 2007
with the loan being amortized monthly through September 2008.

19



---

In the future we expect to meet our
short and long term obligations through its cash on hand.

We expect to repatriate our unrestricted funds
held in South Africa to the United States. We believe that repatriation of the full amount
is allowable under current South African foreign currency regulations. Over the last eight
years, we have, from time to time, repatriated funds from South Africa without
restriction. However, there can be no guarantee that the South African foreign currency
regulations will not change in the future in a manner that might restrict our ability to
repatriate the remaining assets.

In the future we intend to add
additional operating subsidiaries that will produce revenues and net profits. We may
utilize a portion of the working capital in connection with the acquisition or
establishment of those operations. We may also be required to secure additional debt or
equity funding in connection with those future acquisitions. However, there
is no assurance that we will be able to secure additional indebtedness or raise additional
equity to finance future acquisitions on terms acceptable to management.

The following table is a summary of
contractual obligations as of June 30, 2006.

|                             | Payments Due By Period
|---------------------------- | ----------------------
|
|Long-term debt obligations   |                       
|Convertible debt obligations |                       
|Interest Payable             |                       
|Operating lease obligations  |                       
|Purchase obligations         |                       
|Employment contracts         |                       
|                             |                       
|Total                        |                       
|                             |                       

# Future Commitments

Through June 30, 2006, Strategy First
has sustained an operating loss. We anticipate that this situation will be remedied
through a combination of increased revenues through sustained new game releases as well as
a reduction in expenses. Strategy First is projecting an operating profit for the coming
twelve months. There are no assurances that these expectations will be met. In this event,
we may need to continue to support the operations of our subsidiaries.

20



---

# Critical Accounting
Policies

The following is a discussion of the
accounting policies that we believe are critical to our operations:

# Revenue Recognition

Strategy First distributes the
majority of its products through third-party software distributors to mass-merchant and
major retailers and directly to certain PC software retailers, all of which have
traditionally sold consumer entertainment PC software products. Additionally, Strategy may
license its products to distributors in exchange for royalty payments. The distribution of
products is governed by purchase orders, distribution agreements or direct sale
agreements, most of which allow for product returns and price markdowns. For product
shipments to these software distributors or retailers, Strategy records a provision for
product returns and price markdowns as a reduction of gross sales at the time the product
passes to these distributors or retailers. Payment terms generally require 10% at
delivery, with an additional 30% due at 30 days, 60 days, and 180 days. Revenue is
recognized at the time product is shipped by distributors.

The provision for anticipated product
returns and price markdowns is primarily based upon Strategy Firsts analysis of
historical product return and price markdown results. Should product sell-through results
at retail store locations fall significantly below anticipated levels this
allowance may be insufficient. Strategy First reviews the adequacy of its allowance
for product returns and price markdowns and if necessary makes adjustments to this
allowance on a quarterly basis.

In the case of royalty income,
Strategy recognizes revenue when earned based on sales reports from its distributors.
Most agreements require quarterly reporting of sales with payment due within 45 days of
the end of the quarter. In many cases, Strategy receives guaranteed royalty income and
these revenues are recorded upon performance of deliverables per the
royalty agreements.

# Goodwill Valuation

Goodwill represents the excess of the
purchase price over the fair market value of net assets acquired. The process of
determining goodwill requires judgment. Evaluating goodwill for impairment involves the
determination of the fair value of our reporting units. Inherent in such fair
value determinations are certain judgments and estimates, including the
interpretation of current economic indicators and market valuations, and our strategic
plans with regard to our operations. To the extent additional information arises or our
strategies change, it is possible that our conclusion regarding goodwill impairment could
change, which could have a material effect on our financial position and results of
operations. For those reasons, we believe that the accounting estimate related to goodwill
impairment is a critical accounting estimate.

The Company reviews goodwill annually
(or more frequently under certain conditions) for impairment in accordance with SFAS No.
142, goodwill and other intangible assets. The Company performed its annual impairment
test of goodwill as of June 30, 2006 and determined that goodwill was not impaired. While
the Company believes that no impairment existed as of June 30, 2006, there can be no
assurances that future economic or financial developments might not lead to an impairment
of goodwill.

# Intangible Assets

Intangible assets include software
game titles and non-competition agreements. Intangible assets, excluding goodwill, are
stated on the basis of cost and are amortized on a straight-line basis over estimated
lives of three to ten years. Intangible assets with indefinite lives are not amortized but
are evaluated for impairment annually unless circumstances dictate otherwise. Management
periodically reviews intangible assets for impairment based on an assessment of
undiscounted future cash flows, which are compared to the carrying value of the intangible
assets. Should these cash flows not equal or exceed the carrying value of the
intangible, a discounted cash flow model is used to determine the extent of any impairment
charge required.

21



---

# ITEM 7A.     Quantitative
and Qualitative Disclosures about Market Risk

The Company does not ordinarily hold
market risk sensitive instruments for trading purposes. The Company does however recognize
market risk from interest rate and foreign currency exchange exposure.

# Interest Rate Risk

At June 30, 2006, our cash resources
earned interest at variable rates. Accordingly, the Companys return on these funds
is affected by fluctuations in interest rates. The Company also has significant debt that
is tied to interest rates and, therefore, any increase in interest rates will have a
negative effect on the Companys interest payments.

# Foreign Currency Risk

Strategy First, Inc. is incorporated
in Canada and sells products throughout the United States and Europe. Its functional
currency is the Canadian Dollar. This has exposed the Company to market risk with respect
to fluctuations in the relative value of the Euro, British Pound, the Canadian
Dollar, and the US Dollar.

Certain of the Companys cash
balances and the remaining proceeds from the sale of its South African subsidiaries are
denominated in South African Rand. This has exposed the Company to market risk with
respect to fluctuations in the relative value of the South African Rand against the US
Dollar.

On March 9, 2005, the Company
acquired a twelve-month Rand put/US dollar call option, at a strike price of R6.25 to the
US dollar. During its term, this option served as a partial protection against the
depreciation of the SA Rand versus the US dollar. The cost of the option was approximately
$200,000 and it was closed out in March 2006. The Company currently does not hedge its
South African Rand exposure.

At June 30, 2006, we had assets
denominated in South African Rand of R35.1 million ($4.8 million).

22



---

# ITEM 8.      FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA

# SILVERSTAR HOLDINGS,
LTD. AND SUBSIDIARIES

# TABLE OF CONTENTS

|                                                        |           
|------------------------------------------------------- | ----------
|                                                        | PAGE      
|                                                       
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | F-1       
|                                                       
|CONSOLIDATED FINANCIAL STATEMENTS                      
|                                                       
|Balance Sheets                                          | F-2       
|                                                       
|Statements of Operations                                | F-3       
|                                                       
|Statements of Stockholders' Equity                      | F-4       
|                                                       
|Statements of Cash Flows                                | F-5 - F-6 
|                                                       
|Notes to Consolidated Financial Statements              | F-7 - F-27

23



---

# REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
and StockholdersSilverstar Holdings, Ltd.Boca Raton, Florida

We have audited the accompanying
consolidated balance sheets of Silverstar Holdings, Ltd. and Subsidiaries (the Company) as
of June 30, 2006 and 2005, and the related consolidated statements of operations,
stockholders equity and cash flows for each of the three years in the period ended June 30, 2006.
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 the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The company is not
required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the accompanying
consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Silverstar Holdings, Ltd. and
Subsidiaries at June 30, 2006 and 2005, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended June 30, 2006, in conformity with
accounting principles generally accepted in the United States.

RACHLIN COHEN &
HOLTZ LLP

Fort Lauderdale, Florida

September 15, 2006

F-1



---

# SILVERSTAR HOLDINGS,
LTD. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS JUNE 30, 2006 AND 2005

|ASSETS                                                                              | 2006 | 2005
|----------------------------------------------------------------------------------- | ---- | ----
|Current assets:   Cash and cash equivalents                                         |      |     
|(Includes restricted cash of $647,797 and $67,189 in 2006 and 2005 respectively)    |      |     
|Cash restricted for foreign tax estimated liability                                 |      |     
|Accounts receivable, net                                                            |      |     
|Current portion of long term notes receivable                                       |      |     
|Prepaid expenses and other current assets                                           |      |     
|Option contract                                                                     |      |     
|Short term assets from discontinued operations                                      |      |     
|                                                                                    |      |     
|Total current assets                                                                |      |     
|Property, plant and equipment, net                                                  |      |     
|Investments in non-marketable securities                                            |      |     
|Long term notes receivable                                                          |      |     
|Goodwill, net                                                                       |      |     
|Intangible assets, net                                                              |      |     
|Deferred charges and other assets                                                   |      |     
|Long term assets from discontinued operations                                       |      |     
|                                                                                    |      |     
|Total assets                                                                        |      |     
|                                                                                    |      |     
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                |      |     
|Current liabilities:                                                                |      |     
|Lines of credit                                                                     |      |     
|                                                                                    |      |     
|Current portion of long term debt                                                   |      |     
|Current portion of convertible secured debenture                                    |      |     
|Accounts payable                                                                    |      |     
|Accrued expenses                                                                    |      |     
|Estimated liability for foreign tax                                                 |      |     
|Short-term liabilities from discontinued operations                                 |      |     
|                                                                                    |      |     
|Total current liabilities                                                           |      |     
|Long term debt, net                                                                 |      |     
|Convertible secured debenture                                                       |      |     
|                                                                                    |      |     
|Obligation to issue common stock                                                    |      |     
|                                                                                    |      |     
|                                                                                    |      |     
|Total liabilities                                                                   |      |     
|                                                                                    |      |     
|Stockholders' equity:                                                               |      |     
|Preferred stock, $0.01 par value; 5,000,000 shares authorized;                      |      |     
|no shares issued and outstanding                                                    |      |     
|Common stock, Class A, $0.01 par value, 50,000,000 shares authorized; 8,313,774 and |      |     
|8,233,324 shares issued and outstanding, respectively                               |      |     
|Common stock, Class B, $0.01 par value; 2,000,000 shares authorized;                |      |     
|835,260 shares issued and outstanding                                               |      |     
|Common stock, FSAH Class B $0.001 par value; 10,000,000 shares authorized;          |      |     
|2,671,087 shares issued and outstanding                                             |      |     
|Additional paid-in capital                                                          |      |     
|Accumulated deficit                                                                 |      |     
|Other comprehensive income                                                          |      |     
|                                                                                    |      |     
|Total stockholders' equity                                                          |      |     
|                                                                                    |      |     
|Total liabilities and stockholders' equity                                          |      |     
|                                                                                    |      |     

See notes to
consolidated financial statements

F-2



---

# SILVERSTAR HOLDINGS,
LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 2006,
2005 AND 2004

|                                                                                  | 2006 | 2005 | 2004
|--------------------------------------------------------------------------------- | ---- | ---- | ----
|Revenues                                                                          |      |      | $   
|Operating expenses:                                                               |      |     
|Cost of sales                                                                     |      |      |     
|Selling, general and administrative                                               |      |      |     
|Amortization of intangibles                                                       |      |      |     
|Depreciation                                                                      |      |      |     
|                                                                                  |      |      |     
|Total operating expenses                                                          |      |      |     
|                                                                                  |      |      |     
|Operating loss                                                                    |      |      |     
|Other income                                                                      |      |      |     
|Foreign currency gain (loss)                                                      |      |      |     
|Costs incurred with abandoned acquisition                                         |      |      |     
|Foreign tax expense                                                               |      |      |     
|Amortization of convertible debt discounts and issuance costs                     |      |      |     
|Interest income                                                                   |      |      |     
|Interest expense                                                                  |      |      |     
|                                                                                  |      |      |     
|Income (Loss) from continuing operations                                          |      |      |     
|Discontinued operations:                                                          |      |     
|Income from operations, net of income taxes of $0.0, $0.0, and $0.0, respectively |      |      |     
|Gain (Loss) on disposition, net of income taxes of $0.0, $0.0, $0.0, respectively |      |      |     
|                                                                                  |      |      |     
|Net income (loss)                                                                 |      |      |     
|                                                                                  |      |      |     
|Income (Loss) per share:                                                          |      |     
|Basic:                                                                            |      |     
|Continuing operations                                                             |      |      |     
|Discontinued operations                                                           |      |      |     
|                                                                                  |      |      |     
|Net income (loss)                                                                 |      |      |     
|                                                                                  |      |      |     
|Diluted:                                                                          |      |     
|Continuing operations                                                             |      |      |     
|Discontinued operations                                                           |      |      |     
|                                                                                  |      |      |     
|Net income (loss)                                                                 |      |      |     
|                                                                                  |      |      |     
|Weighted average common stock outstanding:                                        |      |     
|Basic                                                                             |      |      |     
|                                                                                  |      |      |     
|Diluted                                                                           |      |      |     
|                                                                                  |      |      |     

See notes to
consolidated financial statements

F-3

---

# SILVERSTAR HOLDINGS,
LTD. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITYAND COMPREHENSIVE LOSS YEARS ENDED JUNE 30,
2006, 2005 AND 2004

|                              | Silverstar Holdings
Ltd. | Silverstar
Holdings Ltd. | First South African Holdings |           |   |  
|----------------------------- | ------------------------ | ------------------------ | ---------------------------- | --------- | - | -
|
|
|Balance June 30, 2003         |                          |                          |                              | 7,503,924 |   | $
|Year Ended June 30, 2004:     |                          |                         
|Stock issued                  |                          |                          |                              | 245,000   |   |  
|Conversion of shares          |                          |                          |                              | 50,000    |   |  
|Net Income                    |                          |                          |                              | -         |   |  
|                              |                          |                          |                              |           |   |  
|Balance June 30, 2004         |                          |                          |                              | 7,798,924 |   | $
|                              |                          |                          |                              |           |   |  
|Year ended June 30, 2005:     |                          |                         
|Stock issued/acquisition      |                          |                          |                              | 377,371   |   | $
|Conversion of shares          |                          |                          |                              | 61,329    |   |  
|Exercise of stock options     |                          |                          |                              | 15,000    |   |  
|Stock-based compensation      |                          |                          |                              | -         |   |  
|Warrants issued -             |                          |                          |                              | -         |   |  
|acquisition                   |                          |                         
|Purchase and retirement       |                          |                         
|of treasury stock             |                          |                          |                              | (19,300   | ) |  
|Net income                    |                          |                          |                              | -         |   |  
|Other comprehensive           |                          |                         
|Income  foreign currency      |                          |                         
|translation adjustment,       |                          |                         
|net of taxes                  |                          |                          |                              | -         |   |  
|                              |                          |                          |                              |           |   |  
|Balance, June 30, 2005        |                          |                          |                              | 8,233,324 |   | $
|                              |                          |                          |                              |           |   |  
|Year ended June 30, 2006:     |                          |                         
|Stock issued prior obligation |                          |                          |                              | 45,450    |   | $
|Discounts on convertible debt |                          |                          |                              | -         |   |  
|Exercise of stock options     |                          |                          |                              | 30,000    |   |  
|Stock-based compensation      |                          |                          |                              | -         |   |  
|Shares issued  for services   |                          |                          |                              | 20,000    |   |  
|Purchase and retirement       |                          |                         
|of treasury stock             |                          |                          |                              | (15,000   | ) |  
|Net loss                      |                          |                          |                              | -         |   |  
|Other comprehensive           |                          |                         
|income  foreign  currency     |                          |                         
|translation adjustment,       |                          |                          |                              | -         |  
|net of taxes                  |                          |                          |                              | -         |   |  
|                              |                          |                          |                              |           |   |  
|Balance, June 30, 2006        |                          |                          |                              | 8,313,774 |   | $
|                              |                          |                          |                              |           |   |  

See notes to
consolidated financial statements.

F-4



---

# SILVERSTAR HOLDINGS,
LTD. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2006,
2005 AND 2004

|                                                                | 2006 |  | 2005 |             | 2004 |  
|--------------------------------------------------------------- | ---- |  | ---- | ----------- | ---- | -
|Cash flows from operating activities:                           |      |  |      |             |      |  
|Net income (loss)                                               |      |  |      | ($1,979,190 | )    | $
|Depreciation and amortization                                   |      |  |      | 950,049     |      |  
|Loss on disposal of fixed assets                                |      |  |      | 1,466       |      |  
|Stock-based compensation                                        |      |  |      | 104,634     |      |  
|Common stock issued for services                                |      |  |      | 27,200      |      |  
|Common stock warrants issued for services                       |      |  |      | -           |      |  
|Unrealized foreign currency gains                               |      |  |      | (97,691     | )    |  
|Non-cash interest income on notes receivable                    |      |  |      | (399,343    | )    |  
|Changes in operating assets and liabilities, net                |      |  |      | (133,092    | )    |  
|Increase in estimated liability for foreign tax                 |      |  |      | 600,000     |      |  
|Increase in other assets                                        |      |  |      | (102,446    | )    |  
|Increase in other liabilities                                   |      |  |      | 8,333       |      |  
|Gain on sale of discontinued operations                         |      |  |      | (1,480,710  | )    |  
|Net change in assets and liabilities of discontinued operations |      |  |      | (220,409    | )    |  
|                                                                |      |  |      |             |      |  
|                                                                |      | 
|Net cash used in operating activities                           |      |  |      | ($2,721,199 | )    |  
|                                                                |      |  |      |             |      |  
|Cash flows from investing activities:                           |      | 
|Acquisition costs capitalized                                   |      |  |      | (41,264     | )    |  
|Acquisition of property, plant and equipment                    |      |  |      | (12,451     | )    |  
|Acquisition of intangible assets                                |      |  |      | (208,928    | )    |  
|Investment in non-marketable securities                         |      |  |      | (300,000    | )    |  
|Purchase of option premium                                      |      |  |      | -           |      |  
|Proceeds from repayment of long-term note receivable            |      |  |      | 3,219,417   |      |  
|Increase in cash restricted for foreign tax estimated liability |      |  |      | (2,933,342  | )    |  
|Net proceeds on disposal of discontinued operations             |      |  |      | 3,693,378   |      |  
|Cash paid for acquisition of subsidiary                         |      |  |      | -           |      |  
|                                                                |      |  |      |             |      |  
|Net cash provided by continuing operations                      |      |  |      | 3,416,810   |      |  
|Net cash provided by discontinued operations                    |      |  |      | -           |      |  
|                                                                |      |  |      |             |      |  
|Net cash provided by investing activities                       |      |  | $    | 3,416,810   |      | $
|                                                                |      |  |      |             |      |  

See notes to
consolidated financial statements.

Continued on next page

F-5

---

# SILVERSTAR HOLDINGS,
LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) YEARS ENDED JUNE
30, 2006, 2005 AND 2004

|                                                       | 2006 |  | 2005 |            | 2004 |  
|------------------------------------------------------ | ---- |  | ---- | ---------- | ---- | -
|Cash flows from financing activities:                  |      |  |      |            |      |  
|Short term borrowings, net                             |      |  | $    | 580,608    |      | $
|Repayment of long term debt                            |      |  |      | (159,139   | )    |  
|Net proceeds from convertible debt                     |      |  |      | 4,373,301  |      |  
|Repayments on convertible debt                         |      |  |      | (1,400,000 | )    |  
|Proceeds from the exercise of stock options            |      |  |      | 22,500     |      |  
|Purchase of treasury stock                             |      |  |      | (22,678    | )    |  
|Net cash provided by (used in) continuing operations   |      |  |      | 3,394,592  |      |  
|                                                       |      |  |      |            |      |  
|Net cash provided by (used in) discontinued operations |      |  |      | -          |      |  
|Net cash provided by (used in) financing activities    |      |  | $    | 3,394,592  |      |  
|                                                       |      |  |      |            |      |  
|Effect of exchange rates in cash                       |      |  |      | 119,765    |      |  
|                                                       |      |  |      |            |      |  
|Net increase (decrease) in cash and cash equivalents   |      |  |      | 4,209,968  |      |  
|Cash and cash equivalents, beginning                   |      |  |      | 4,865,291  |      |  
|                                                       |      |  |      |            |      |  
|Cash and cash equivalents, ending                      |      |  | $    | 9,075,259  |      | $
|                                                       |      |  |      |            |      |  
|Supplemental disclosure of cash flow information:      |      | 
|Cash paid during the year for interest                 |      |  | $    | 539,155    |      | $
|                                                       |      |  |      |            |      |  

See notes to
consolidated financial statements.

F-6



---

# SILVERSTAR HOLDINGS,
LTD. AND SUBSIDIARIES

# NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

# JUNE 30, 2006, 2005 AND
2004

# NOTE 1.   ORGANIZATION AND
PRINCIPAL ACTIVITIES OF THE GROUP

Silverstar Holdings, Ltd. (formerly
Leisureplanet Holdings Ltd.) (the Company), was founded on September 6, 1995.
The purpose of the Company has changed from acquiring and operating South African
Companies to investing in companies that fit a predefined investment strategy.

On November 17, 2000, the Company
acquired Fantasy Sports, Inc. (Fantasy). Fantasy specializes in Internet-based
subscriptions for NASCAR, college football and basketball and other fantasy sports games.
On April 7, 2006, the Company sold substantially all the assets and transferred certain
liabilities of Fantasy Sports, Inc which is reflected as discontinued operations in the
accompanying financial statements. (See Note 12)

In April 2005, the Company acquired
Strategy First Inc. (www.strategyfirst.com), a leading developer and worldwide publisher
of entertainment software for the PC. Founded in 1990, the company publishes software
games primarily for the PC platform.

The Company currently has both Class
A and Class B common shares outstanding. Holders of Class A Common Stock have one vote per
share on each matter submitted to a vote of the shareholders and a ratable right to the
net assets of the Company upon liquidation. Holders of the common stock do not have
preemptive rights to purchase additional shares of Common Stock or other subscription
rights. The Class A common stock carries no conversion rights and is not subject to
redemption or to any sinking fund provisions. All shares of common stock are entitled to
share equally in dividends from legally available resources as determined by the board of
directors. Upon dissolution or liquidation of the Company, whether voluntary or
involuntary, holders of the common stock are entitled to receive assets of the Company
available for distribution to the shareholders.

Class B and Class A Common Stock are
substantially identical except that the holders of Class B Common Stock have 5 votes per
share on each matter considered by shareholders. Each share of Class B Common Stock is
automatically converted into one share of Class A Common Stock upon sale of the Classs B Common Stock or death of the
shareholder.

# NOTE 2.   SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the
United States and incorporate the following significant accounting policies:

# Consolidation

The consolidated financial statements
include the accounts of the Company and all of its subsidiaries in which it has a majority
voting interest. Investments in affiliates are accounted for under the cost method of
accounting, where appropriate. All significant inter-company accounts and transactions
have been eliminated in the consolidated financial statements. The entities included in
these consolidated financial statements are as follows:

F-7



---

| | Silverstar
Holdings, Ltd. (Parent Company)
| | ------------------------------------------

| | Silverstar
Holdings, Inc.
| | -------------------------

| | First
South Africa Management Corp.
| | -----------------------------------

| | First
South African Holdings, Ltd. (FSAH)
| | -----------------------------------------

| | Fantasy
Sports, Inc.
| | --------------------

| | Strategy
First, Inc.
| | --------------------

# Use of Estimates

The preparation of financial
statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

# Cash and Cash Equivalents

Cash and cash equivalents consist of
cash and all highly liquid investments with original maturities of three months or less.

# Concentrations of Credit
and Market Risks

Financial instruments that
potentially subject the Company to concentrations of credit and market risk are comprised
of cash and cash equivalents, accounts receivable and notes receivable. Strategy First conducts a major portion
of its business with four customers, each of which accounted for more than 10% of total
revenues in 2006. Combined sales to these customers amounted to approximately $1,998,000
(60% of net sales) during the year ended June 30, 2006. Accounts receivable from these
customers amounted to $414,000 (65%) of total accounts receivable at June 30, 2006. The
Company did not have a major concentration of customers as of or for the year ended June 30, 2005

# Cash

The Company currently maintains a
substantial amount of cash and cash equivalents with financial institutions in South
Africa denominated in South African Rand. Changes in the value of the Rand compared to the
U.S. dollar may still have an unfavorable impact on the value of the cash and cash
equivalents. In addition, these financial instruments are not subject to credit insurance.

The Company maintains deposit
balances at U.S. financial institutions that, from time to time, may exceed federally
insured limits. The Company maintains its cash with high quality financial institutions,
which the Company believes limits risk. As of June 30, 2006, amounts in excess of
federally insured amounts totaled approximately $7,638,000.

# Accounts Receivable

We extend credit to various companies
in the retail and mass merchandising industries. Collection of trade receivables may be
affected by changes in economic or other industry conditions and may, accordingly, impact
our overall credit risk. Although we generally do not require collateral, we perform

F-8



---

ongoing credit evaluations of our
customers and maintain reserves for potential credit losses. Significant judgment is
required to estimate our allowance for doubtful accounts in any accounting period. We
analyze customer concentrations, customer credit worthiness and current economic trends
when evaluating the adequacy of the allowance for doubtful accounts.

# Notes Receivable

The Companys notes receivable
are to be settled in South African Rand by South African companies. The Companys
ability to collect on these notes may be affected by the financial condition of the
debtors economic conditions in South Africa and the value of the South African Rand,
as compared to the U.S. dollar. In addition, the Companys ability to withdraw these
funds from South Africa after collection may be subject to
approval by the South African government.

# Fair Value of Financial
Instruments

The carrying value of cash and cash
equivalents, accounts receivable, and accounts payable approximate fair value due to the
short-term nature of these instruments. The carrying value of long-term notes receivable
approximates fair values since interest rates are keyed to the South African prime lending
rate. The gross carrying value of the Companys convertible debenture approximates
fair value since interest rates are keyed to the US prime lending rate. The carrying value
of the Companys other debt approximates fair value since there terms are consistent
with prevailing market rates.

# Property, Plant and
Equipment

Property, plant and equipment are
recorded at cost. Depreciation is provided using the straight-line method over the
estimated useful lives of the assets. Equipment is depreciated over three to five years.

# Goodwill

The Company adopted Statement of
Financial Accounting Standards No. 142 (SFAS 142), Goodwill and Other Intangible Assets.
Goodwill and other intangible assets with indefinite lives must be tested for impairment
on an annual basis. The Company performs this annual impairment test at fiscal year end
for goodwill.

SFAS 142 requires the Company to
compare the fair value of the reporting unit to its carrying amount on an annual basis to
determine if there is potential goodwill impairment. If the fair value of the reporting
unit is less than its carrying value, an impairment loss is recorded to the extent that
the fair value of the goodwill within the reporting unit is less than its carrying value.
SFAS 142 also requires the Company to compare the fair value of an intangible asset to its
carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an
impairment loss is recognized. Fair values for goodwill and other indefinite-lived
intangible assets are determined based on discounted cash flows or market multiples as
appropriate.

The Companys goodwill
represents the excess acquisition cost over the fair value of the tangible and identified
intangible net assets of Strategy First acquired in 2005. For the years ended June 30,
2006 and 2005, the Company applied what it believes to be the most appropriate valuation
methodology for the reporting unit. If the Company had utilized different valuation
methodologies, the impairment test results could differ. There was no impairment of
goodwill for the years ended June 30, 2006 and 2005.

# Intangible Assets

Intangible assets include software
game titles and non-competition agreements, are
stated on the basis of cost and are amortized on a straight-line basis over estimated
lives of three to ten years. Intangible assets with indefinite lives are not amortized but
are

F-9



---

evaluated for impairment annually
unless circumstances dictate otherwise. Management periodically reviews intangible assets
for impairment based on an assessment of undiscounted future cash flows, which are
compared to the carrying value of the intangible assets. Should these cash flows not
equate to or exceed the carrying value of the intangible, a discounted cash flow model is
used to determine the extent of any impairment charge required.

# Foreign Currency
Translation

The functional currency of the
Company is the United States Dollar; the functional currency of FSAH is the South African
Rand; the functional currency of Strategy First, Inc. is the Canadian Dollar. Accordingly,
the following rates of exchange have been used for translation purposes:

Assets and liabilities are translated
into United States Dollars using exchange rates at the balance sheet date. Common stock
and additional paid-in capital are translated into United States Dollars using historical
rates at date of issuance. Revenue, if any, and expenses are translated into United States
Dollars using the weighted average exchange rates for each year. The resultant translation
adjustments for FSAH are reported in the statement of operations since FSAH has sold all
its operating subsidiaries. The resultant translation adjustments for Strategy First, Inc.
are reported as other comprehensive income.

# Revenue Recognition

Strategy distributes the majority of
its products through third-party software distributors to mass-merchants and major
retailers and directly to certain PC software retailers, all of which have traditionally
sold consumer entertainment PC software products. Additionally, Strategy may license its
products to distributors in exchange for royalty payments. The distribution of products is
governed by purchase orders, distribution agreements or direct sale agreements, most of
which allow for product returns and price markdowns. For product shipments to these
software distributors or retailers, Strategy records a provision for product returns
and price markdowns as a reduction of gross sales at the time the product passes to these
distributors or retailers.

The provision for anticipated product
returns and price markdowns is primarily based upon Strategys analysis of historical
product return and price markdown results. Should product sell-through results at retail
store locations fall significantly below anticipated levels this allowance
may be insufficient. Strategy will review the adequacy of its allowance for product
returns and price markdowns and if necessary will make adjustments to this allowance on a
quarterly basis.

In the case of royalty income,
Strategy will record this income when earned based on sales reports from its distributors.
In many cases, Strategy receives guaranteed royalty income and these revenues are recorded
upon performance of deliverables per the royalty agreements.

Revenues from Fantasy Sports are
presented in Discontinued Operations. Revenues generated by Fantasy are seasonal from
mid-February to the end of November. Fantasy collects its revenue at the beginning and
mid-point of the season and recognizes this deferred revenue pro rata over the season.

F-10



---

# Advertising Costs

Advertising costs are expensed as
incurred. Advertising costs incurred for continuing operations for the year ended June 30,
2006 were $182,295. For the years ended June 30, 2005 and 2004 advertising expenses
incurred for continuing operations were $10,691, and $0.0 respectively.

# Income Taxes

The Company accounts for its income
taxes using SFAS No. 109, Accounting for Income Taxes, which requires
the recognition of deferred tax liabilities and assets for expected future tax
consequences of events that have been included in the financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected to reverse.

# Stock-Based Compensation

In December 2004, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 123R, Share-Based Payment. This standard
replaced SFAS No. 123, Accounting for Stock-Based Compensation and supersedes
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees. The standard requires companies to recognize all share-based
payments to employees, including grants of employee stock options, in the financial
statements based on their fair values on the grant date and is effective for annual
periods beginning after June 15, 2005. In accordance with the revised statement, the
Company recognized the expenses attributable to stock options granted or vested subsequent
to July 1, 2005, during the fiscal year ending June 30, 2006. The Company recognized
expense of $104,634 for the year ended June 30, 2006 for employee stock options that
vested during fiscal 2006.

SFAS No. 123, Accounting for
Stock-Based Compensation (SFAS No. 123), encouraged but did not require
companies to record stock-based compensation plans using a fair value based method. The
Company chose to account for stock-based compensation using the intrinsic value based
method described in APB Opinion No. 25, Accounting for Stock Issued to
Employees for accounting periods ending before July 1, 2005. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the quoted
market price of the Companys common stock at the date of the grant over the amount
an employee must pay to acquire the stock.

If the Company used the fair
value-based method of accounting to measure compensation expense for options granted at
the date they were granted as prescribed by SFAS No. 123 earnings (loss) per share from
continuing operations for the years ended June 30, 2005 and 2004 would have changed to the
pro forma amounts set forth in the table below.

|                                                     |                 |         
|---------------------------------------------------- | --------------- | --------
|                                                     | 2005            | 2004    
|Income (Loss) from continuing operations as reported | ($  263,798)    | $977,231
|Less compensation expense for options               
|awards determined by the fair-value- based method    | (677,245)       | (88,888)
|                                                     |                 |         
|Income (Loss) from continuing operations, pro forma  | ($  941,043)    | $888,343
|                                                     |                 |         
|Basic:                                              
|As reported                                          | ($        0.03) | $0.12   
|Pro forma                                            | ($        0.10) | $0.10   
|Assuming full dilution:                             
|As reported                                          | ($        0.03) | $0.11   
|Pro forma                                            | ($        0.10) | $0.09   

F-11



---

The weighted average grant date fair
value of options granted in 2006, 2005 and 2004 and the significant assumptions used in
determining the underlying fair value of each option grant on the date of the grant
utilizing the Black Scholes option pricing model are noted in the following table.
Expected volatility is based on historical volatility data of the Companys stock.
The expected term of stock options granted is based on historical data and represents the
period of time that stock options are expected to be outstanding. The risk-free rate of
the stock options is based on the United States Treasury rate in effect at the time of
grant.

|                                                          | 2006    | 2005       | 2004   
|--------------------------------------------------------- | ------- | ---------- | -------
|Weighted average grant-date fair value of options granted | $ 1.33  | $     0.94 | $ 1.44 
|Assumptions:                                             
|Risk free interest rate                                   | 4.82%   | 3.19-4.01% | 3.17 % 
|Expected life                                             | 5 years | 3-5 years  | 5 years
|Expected volatility                                       | 111%    | 126-142%   | 142%   
|Expected dividend yield                                   | 0.00%   | 0.00       | 0.0%   

Based on existing unvested option
agreements the Company anticipates an additional expense of approximately $42,735 in
fiscal 2007 which could increase if additional options are granted during the fiscal year.
As of June 30, 2006, $78,348 of total unrecognized compensation costs related to
non-vested options are scheduled to be recognized over a weighted average period of 1.8
years.

# Net Income (Loss) Per Share

Basic net income or loss per share is
computed by dividing net income or loss by the weighted average number of common shares
outstanding. Diluted net income or loss per share is computed by dividing net income or
loss by the weighted average number of common shares outstanding and dilutive potential
common shares reflecting the dilutive effect of stock options, warrants, convertible
debentures and shares to be issued in connection with prior acquisitions. Dilutive
potential common shares, stock options, warrants and convertible debentures for all
periods presented are computed utilizing the treasury stock method. The dilutive effect of
shares to be issued in connection with the obligations related to prior acquisitions is
computed using the average market price for the quarter.

# Recently Issued
Accounting Standards

In June 2005, the FASB issued
Statement of Financial Accounting Standard No. 154, Accounting Changes and Error
Corrections, (SFAS 154). SFAS 154 replaces Accounting Principle Bulletin
No. 20 (APB 20), and Statement of Financial Accounting Standard No. 3,
Reporting Accounting Changes in Interim Financial Statements (SFAS 3),
and applies to all voluntary changes in accounting principle, and changes the requirements
for accounting for and reporting of a change in accounting principle. APB 20 previously
required that most voluntary changes in accounting principle be recognized by including in
net income of the period of change a cumulative effect of changing to the new accounting
principle, whereas SFAS 154 requires retrospective application to prior periods
financial statements of a voluntary change in accounting principle unless it is
impracticable. SFAS 154 enhances the consistency of financial information between periods.
SFAS 154 is effective for fiscal years beginning after December 15, 2005. Our adoption of
SFAS 154 is not expected to have a material impact on our results of operations or
financial position.

In July 2006, the FASB issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), which,
among other things, requires applying a more likely than not threshold to the
recognition and derecognition of tax positions. The provisions of FIN 48 will be effective
for us on July 1, 2007. We are currently evaluating the impact of adopting FIN 48 on the
financial statements, but we do not expect its adoption to have a significant transition
effect.

F-12



---

# Reclassifications

Certain amounts from prior years have
been reclassified to conform to the 2006 presentation.

# NOTE 3.   ACQUISITIONS

On April 21, 2005, the Company
acquired Strategy First Inc. (www.strategyfirst.com.), a leading developer and worldwide
publisher of entertainment software for the PC. We acquired the company through the
jurisdiction of the Montreal bankruptcy court. As per the approved plan of arrangement, we
paid consideration to creditors of approximately $609,000 in cash; we issued approximately
377,000 shares of common stock; and warrants to purchase 200,000 shares of common stock;
assumed approximately $400,000 in existing bank debt, as well as agreed on consideration
based on the future profitability of Strategy First.

The costs of the acquisition were
allocated on the basis of the estimated fair values of the assets acquired and liabilities
assumed. Whereby the acquisition was accounted for using the purchase method whereby intangible
assets identified in connection with the acquisition were recorded (and amortized where
applicable) in accordance with the provisions of SFAS No. 142.

|                     |            
|-------------------- | -----------
|Acquisition cost     | $1,370,544 
|                     |            
|Net assets acquired:
|Current assets       | $   297,244
|Fixed assets         | 82,664     
|Goodwill             | 764,089    
|Intangible assets    | 1,245,157  
|                     |            
|Total assets         | 2,389,154  
|                     |            
|Current liabilities  | 624,183    
|Long term debt       | 394,397    
|                     |            
|Total liabilities    | 1,018,580  
|                     |            
|                     | $1,370,574 
|                     |            
|                     |            

# NOTE 4.   ACCOUNTS
RECEIVABLE

|                                       |           |           
|-------------------------------------- | --------- | ----------
|                                       | 2006      | 2005      
|Accounts receivable                    | $ 794,353 | $ 253,082 
|Less:  allowance for returns           | (139,362) | (122,080) 
|Less:  allowance for doubtful accounts | (17,856)  | (36,624)  
|                                       |           |           
|                                       | $ 637,135 | $   94,378
|                                       |           |           

# NOTE 5.   PROPERTY, PLANT
AND EQUIPMENT

|                              |            |          
|----------------------------- | ---------- | ---------
|                              | 2006       | 2005     
|Plant and equipment           | $ 140,044  | $ 129,236
|Motor vehicles                | -          | 34,912   
|                              |            |          
|                              | 140,044    | 164,148  
|Less accumulated depreciation | (62,059)   | (60,202) 
|                              |            |          
|                              | $   77,985 | $ 103,946
|                              |            |          

Depreciation expense was $31,687,
$12,216 and $8,370 for the years ended June 30, 2006, 2005 and 2004, respectively.

F-13



---

# NOTE 6.   INVESTMENTS IN
NON-MARKETABLE SECURITIES

A summary of the investments in
non-marketable securities on the consolidated balance sheet is presented below:

|                                          | Effective
Percentage | As of and for the Year Ended
|----------------------------------------- | -------------------- | ----------------------------
|
|Investments in unconsolidated affiliates: |                      |                             
|Magnolia Broadband, Inc.                  | 2.5% and 2.9%        | $1,131,066                  
|Other                                     |                      | 12,500                      
|                                          |                      |                             
|                                          |                      | $1,143,566                  
|                                          |                      |                             

# Magnolia Broadband, Inc

On April 14, 2000, the Company
purchased 3,447,774 shares of Series A Preferred Stock in Magnolia Broadband
(Magnolia), for consideration of $2,500,000, $1,300,000 of which was recorded
as goodwill. The goodwill relating to the Companys investment in Magnolia was being
amortized over a three-year period. Effective July 1, 2001, the Company adopted SFAS 142
(see Note 2) at which time the unamortized balance was $831,066. Such goodwill was no
longer being amortized and at June 30, 2002, such goodwill was not considered impaired.

On March 9, 2001, the Company loaned
Magnolia $250,000. In October 2001, the Company loaned Magnolia $200,000. These notes were
converted into new Series A Preferred Stock in March 2002.

On January 13, 2006, the Company
purchased a further $300,000 of Magnolias Series D Preferred Stock.

Magnolia has successfully raised over
$40 million since its inception from investors. Despite its technical
achievements, Magnolia will need to obtain additional funding to fund its future
operations until it achieves revenues and profitability. There is no assurance that it
will be able to do so in the future.

Magnolia Broadband is a development
stage company established to develop and market wireless based chips primarily for the
mobile handset market.

The Company initially invested in
Magnolia based on the track record of Magnolias founder, positive industry feedback
together with the results of an independent study commissioned by the Company to evaluate
Magnolias basic technological premise and its market applications.

In assessing the fair value of our
investment in Magnolia, we monitor their progress through monthly board meetings and
additional formal and informal communications. Magnolia, since inception, has set
technical goals and timelines, which were invariably met or surpassed. Furthermore, the
company excelled in hiring high level technical staff with advanced degrees and experience
in management of corporations such as Nokia, Bell Labs, Motorola, and Anadigics. The
willingness of highly qualified individuals to leave established corporations for a
start-up opportunity provided validation for our belief in Magnolias potential. This
promise was further validated by the significant investments made by leading venture
capital funds in various tranches from 2002 through August 2006, and by positive field
trials and responses from potential customers, most notably Sprint PCS.

Based on Magnolias
achievements, some of which are summarized above, the Company concluded that these
positive accomplishments support the variables considered in developing the valuations for
the

F-14



---

private placement transactions which
the Company used as a basis for concluding that its investment in Magnolia was
not carried at a value in excess of fair value on its financial statements.

The Companys ongoing monitoring
and evaluation described above continues. Over the next twelve months, among other goals,
Magnolia anticipates commercial sales of its Chipsets thereby generating sales revenue for
the first time. The Company will continue to monitor Magnolias progress and will
evaluate the carrying value of its investment based upon these milestones being met.

In performing our analysis of the
possible impairment of our investment in Magnolia as of June 30, 2004, 2005 and 2006, we
considered our investment in Magnolia in total in accordance with paragraph 19(h) of APB
No. 18.

In performing our analysis for 2004,
we looked to the $6 million in financing Magnolia received in July 2003 from a Series C
Preferred Stock Purchase Agreement with existing investors, as well as the convertible
notes received by Magnolia in April 2004. The Company determined that based on the $6
million funding received from Magnolia in July 2003 and the terms of the notes, as well as
the progress Magnolia had made in developing its technology and meeting milestones, as
described above, the Companys investment in Magnolia was not considered impaired at
June 30, 2004. We again computed the fair value of our holdings in Magnolia Broadband by
multiplying the number of shares we owned by the July 2003 private placement price, as
well as the conversion price of the April 2004 Convertible Note, which resulted in a fair
value that was greater than the carrying value of our investment.

In performing our analysis for 2005,
we looked to the $13.5 million in financing Magnolia received during the fiscal year from
existing and major outside investors as well as the progress Magnolia had made in
developing its technology and meeting milestones, as described above. The Companys
investment in Magnolia is not considered impaired at June 30, 2005. We again computed the
fair value of our holdings in Magnolia Broadband by multiplying the number of shares we
owned by the price for shares paid by investors in the last placement round, which
resulted in a fair value that was greater than the carrying value of our investment.
Additionally, we looked to an independent analysis of Magnolias value performed by a
leading investment bank and concluded from this, as well, that the fair value of our
holdings was greater than the carrying value of our investment.

In performing our analysis for 2006,
we looked to the $13 million in financing Magnolia received during the fiscal year from
existing investors as well as the $5 million in financing they received from existing and
outside investors in July 2006. The Companys investment in Magnolia is not
considered impaired at June 30, 2006. We again computed the fair value of our holdings in
Magnolia Broadband by multiplying the number of shares we owned by the price for shares
paid by investors in the last placement round, which resulted in a fair value that was
greater than the carrying value of our investment.

# NOTE 7.   LONG-TERM NOTES
RECEIVABLE

In connection with the sale of our
South African subsidiary in November 2000, as well as the earlier sale of two other
subsidiaries, the Company received as partial consideration three notes receivable
denominated in South African Rand. These notes are subject to foreign currency risk and a
portion of one is subject to certain performance requirements of the debtor. Two of the
notes require monthly payments ranging from R50,000 ($8,000) to R5,000 ($1,000). The
Company has received all scheduled payments with respect to the first of these notes,
including interest in a timely fashion. The third note was for R52 million ($8 million) of which R20 million
($3.1 million) (plus accrued interest) was treated as contingent consideration to be
recorded when collected as it was secured only by the debtors stock in Lifestyle and
therefore collection was not assured. R31.4 million ($4.8 million) of the third note, was
payable as the borrower collected on junior debt. In December 2004, the Company received
a payment in the amount of R31.4 million ($4.31 million) in partial payment of the outstanding principal and interest. The Company received R20.07 million
($2.8 million) on June 30, 2006 in payment of the notes remaining principal balance and accrued interest
in full.

F-15



---

The two notes remaining outstanding
at June 30, 2006 bear interest at 5%. Balances on these notes at June 30, 2006 and 2005
were as follows:

|                     | June 30 |         
|-------------------- | ------- | --------
|
|Balance              |         | $623,218
|Less current portion |         | 164,548 
|                     |         |         
|Long-term portion    |         | $458,670
|                     |         |         

# NOTE 8.   INTANGIBLE ASSETS

The components of amortized
intangible assets as of June 30, 2006 and 2005 are as follows:

|                         | Gross Carrying
Amount |              | Accumulated
Amortization |            | Total |             
|------------------------ | --------------------- | ------------ | ------------------------ | ---------- | ----- | ------------
|Covenant not to compete  |                       | $     44,638 |                          | ($  17,356 | )     | $     27,282
|Game titles              |                       | 1,546,773    |                          | (161,201   | )     | 1,385,572   
|                         |                       |              |                          |            |       |             
|Balance at June 30, 2006 |                       | $1,591,411   |                          | ($ 178,557 | )     | $1,412,854  
|                         |                       |              |                          |            |       |             
|Covenant not to compete  |                       | $     32,555 |                          | ($   1,809 | )     | $     30,746
|Game titles              |                       | 1,220,802    |                          | (20,347    | )     | 1,200,455   
|                         |                       |              |                          |            |       |             
|Balance at June 30, 2005 |                       | $1,253,357   |                          | ($  22,156 | )     | $1,231,201  
|                         |                       |              |                          |            |       |             

Amortization expense for intangible
assets was $148,797, $21,809, and $0.0 for the years ended June 30, 2006, 2005 and 2004,
respectively

Estimated amortization expense for
the five succeeding fiscal years is as follows:

|           |           
|---------- | ----------
|2007       | $169,558  
|2008       | $167,081  
|2009       | $154,678  
|2010       | $154,678  
|2011       | $154,678  
|Thereafter | $612,181  
|Total      | $1,412,854

# NOTE 9.   DEBT

# Lines of Credit

In June 2002, the Company obtained a
secured line of credit facility from UBS for borrowings up to $1.0 million as working capital for Fantasy, which is fully
secured against cash balances held in the Companys account. This facility is due on
demand and has an interest rate of 5.3%. The balance outstanding under this line of credit
at June 30, 2006 was $647,797. The balance as of June 30, 2005 was $67,189 and is included
in short-term liabilities from discontinued operations. The Company retained the
obligations of the line of credit subsequent to the sale of the operations of Fantasy.

F-16



---

# Long Term Debt

|                     | 2006 | 2005          
|-------------------- | ---- | --------------
|Vehicle loans**      |      | $            -
|Term loan***         |      | 180,323       
|                     |      |               
|                     |      | $ 180,323     
|Less current portion |      | (180,323      
|                     |      |               
|Long-term debt, net  |      | $            -
|                     |      |               

|** |  | Equipment
 loan collateralized by a Company vehicle that was exchanged during 2006 for
consideration in the form of capitalized reduction payments pursuant to an operating
lease for another vehicle.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*** |  | Term
 loan assumed pursuant to the plan of arrangement related to the Companys
acquisition of Strategy First, payable in monthly principal installments of $22,000 plus
interest at an annual rate of prime plus 3.25% (11.50% as of June 30, 2006). The loan
matures in April 2007.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# NOTE 10.   CONVERTIBLE
SECURED DEBENTURE

On October 31, 2005, the Company
consummated a transaction pursuant to a Securities Purchase Agreement, dated October 21,
2005 (the Purchase Agreement), with DKR SoundShore Oasis Holding Fund Ltd.
(the Purchaser).Pursuant to the Purchase Agreement, the Company issued to the
Purchaser a $5,000,000 principal amount Variable Rate Secured Convertible Debenture due
October 31, 2008 (the Debenture) and a warrant to purchase 791,139 shares of
the Companys Common Stock at an exercise price of $1.896 per share (the
Warrant).

Interest accrues on the principal
balance of the note at an annual interest rate equal to prime plus 1.5%. On June 30, 2006
the interest rate was 9.75%. The note is convertible into common stock of the Company at
an initial conversion rate of $1.738 per share up to a maximum of 2,876,860 shares. The
agreement allows for an additional 1,100,403 shares to be issued upon the conversion of
the debentures or exercise of the warrants as a result of either conversion price
adjustments or exercise price adjustments. Based upon the closing price per share of the
Companys Common Stock on the date of issuance, there was an intrinsic value
associated with the beneficial conversion feature of $124,443, which is presented as a
discount on the convertible note and amortized over the term of the note.

The principal amount of the Debenture
was to be redeemed at the rate of $185,185 per month, plus accrued and unpaid interest,
commencing on July 6, 2006 and may be paid, at the Companys option (i) in cash or
(ii) in shares of the Companys Common Stock in an amount not to exceed 10% of the
total dollar trading volume of the Common Stock during the 10 trading days immediately
prior to the applicable monthly redemption date based on a conversion price equal to 85%
of the average of the lowest three volume weighted average price during the 10 trading
days immediately prior to the applicable monthly redemption date. In June 2006, the terms
of the debenture were amended to require redemption at the rate of $180,000 per month
commencing on February 1, 2007. The Company has the option, at any time, to redeem some or
all of the outstanding Debenture, in cash, in an amount equal to the sum of (i) 115% of
the principal amount of the Debenture outstanding, plus accrued and unpaid interest and
liquidated damages (the Optional Redemption Amount). However, the Company may
pay up to 15% of the principal amount comprising of a portion of the Optional Redemption
Amount in shares of the Companys Common Stock if certain conditions are satisfied.
In May 2006, the Company repaid $1,400,000 of the outstanding principal balance along with
an early payment penalty of approximately $210,000.

The Companys obligations under
the Debenture are secured by a lien on all assets of the Company in favor of the Purchaser
pursuant to a Security Agreement, dated October 31, 2005, among the Company, all of the
subsidiaries of the Company and the Purchaser, and guaranteed by all the subsidiaries of
the Company pursuant to a Subsidiary Guarantee, dated October 31, 2005, made by the
Companys subsidiaries in favor of the Purchaser. In addition, the obligations of the
Company under the Debenture are personally guaranteed by Mr. George Karfunkel pursuant to
a Personal Guarantee, dated October 31, 2005, between Mr. Karfunkel and the Purchaser. Mr.
Karfunkel is compensated in the amount of 5% of the current principal outstanding per
annum.

F-17



---

In connection with the convertible
note, the Company issued to the holder of the note a five-year warrant to purchase up to
791,139 shares of the Companys common stock at an exercise price of $1.896 per
share. The fair value for these warrants was estimated at the grant date using the
Black-Scholes option pricing model using the following weighted average assumptions:
risk-free interest rate of 4.50%, dividend yields of 0% and a volatility factor of the
expected market price of the Common Stock of 114.80%. Based upon the closing price per
share of the Companys common stock on the date of issuance, the Company estimated
the fair value of the warrant and allocated $665,295 of the proceeds from the note to the
warrant, which is presented as a discount on the convertible note, net of amortization to
be taken over the three-year term of the note using the effective interest method.

The balance of the note as of June
30, 2006, net of unamortized discounts is as follows:

|                                                          |            
|--------------------------------------------------------- | -----------
|Principal amount of note                                  | $ 3,600,000
|Discount for beneficial conversion features               | (60,122)   
|Discount for fair value of warrants and options           | (321,423)  
|                                                          |            
|Balance as of June 30, 2006, net of unamortized discounts | $ 3,218,455
|Less current portion                                      | (900,000)  
|                                                          |            
|Long term portion                                         | $ 2,318,455
|                                                          |            

Scheduled maturities of the
convertible debenture as of June 30, 2006 were as follows:

|                | Year ended June 30, 2006
|--------------- | ------------------------
|1 Year or less: | $   900,000             
|1-2 Years       | 2,700,000               
|                |                         
|Total           | $3,600,000              
|                |                         

Interest expense related to the note
amounted to $492,381 during the period of October 31, 2005 through June 30, 2006 and
includes a $210,000 prepayment penalty that was applied when the Company paid $1,400,000
toward principal in May 2006.

Amortization of discounts for the
beneficial conversion features and warrant resulted in charges to Amortization of
Convertible Debt Discounts and Issuance Costs totaling $408,193 during the year ended June
30, 2006. The Company also incurred expenses of $626,699 directly related to securing this
note, which included $250,000, paid for a personal guarantee on the outstanding balance.
Expenses totaling $376,699 are being amortized over the term of the note while the
guarantee fee of $250,000 is being amortized over twelve months. Amortization expenses of
$361,423 were included in Amortization of Convertible Debt Discounts and Issuance Costs
during the year ended June 30, 2006.

Estimated amortization expense
related to the warrants, beneficial conversion feature, and costs related to securing this
note through debt maturity is as follows:

|      |         
|----- | --------
|2007  | $449,697
|2008  | 222,894 
|2009  | 11,729  
|      |         
|Total | $684,320
|      |         

# NOTE 11.   INCOME TAXES

The components of the
Companys provision for income taxes were as follows:

|          | 2006     | 2005    | 2004    
|--------- | -------- | ------- | --------
|Current:  |          |         |         
|Federal   | $      - | $     - | $      -
|Foreign   | -        | -       | -       
|State     | -        | -       | -       
|          |          |         |         
|Deferred:
|Federal   | -        | -       | -       
|Foreign   | -        | -       | -       
|State     | -        | -       | -       
|          |          |         |         

F-18



---

A reconciliation of income tax
computed at the statutory rates to income tax expense (benefit) is as follows:

|                                                             | 2006        | 2005       | 2004     
|------------------------------------------------------------ | ----------- | ---------- | ---------
|Tax expense at the statutory rate                            | $ (707,528) | $   49,432 | $ 340,858
|Tax effect on income (loss) of non-US operations             | 1,254,175   | 61,768     | (324,908)
|State and provincial income taxes, net of federal income tax | 88,872      | 15,669     | 1,446    
|Change in effective tax rate                                 | -           | (128,330)  | -        
|Permanent differences                                        | 6,641       | 3,851      | 447      
|Adjustment for prior years' R&D Expense                      | (1,150,304) | -          | -        
|Valuation allowance                                          | 508,144     | (2,390)    | (17,843) 
|                                                             |             |            |          
|                                                             | -           | -          | -        
|                                                             |             |            |          

At June 30, 2006, the Company has
available U.S. net operating loss carrying forwards of approximately $3,080,700  which expire through
2024 and Canadian net operating loss carrying forward of approximately $6,847,000 which expire
through 2016.

In addition to the net operating loss
carrying forward, the Company had deferred tax assets which relate primarily to
amortization of goodwill and fixed assets recorded at different rates for tax and book
purposes, deferred revenue that is deferred for book purposes but is recognized when
received for tax purposes,  and accrued prize winnings which is accrued for book purposes
but deductible when paid for tax purposes, and certain research and development costs incurred in Canada expensed
for book purposes, not deducted for tax purposes, and available to offset future income taxable in Canada.  As of June 30, 2006 and 2005, a valuation
allowance has been established against the deferred tax asset since the Company believes
it is more likely than not that that the amounts will not be realized.

The components of the deferred tax
assets (liabilities) were as follows at June 30, 2005 and 2005:

|Current:                  |  |  |   | 2006       |   |   | 2005       |  
|------------------------- |  |  | - | ---------- | - | - | ---------- | -
|                          |  |  |   |           
|Net operating losses      |  |  | $ | 2,087,040  |   | $ | 2,763,820  |  
|Accrued prize winnings    |  |  |   | -          |   |   | 91,530     |  
|Accrued postage           |  |  |   | -          |   |   | -          |  
|Deferred revenue          |  |  |   | -          |   |   | 251,699    |  
|R&D Expenses              |  |  |   | 1,264,300  |   |   | -          |  
|                          |  |  |   |           
|                          |  |  |   | 3,351,340  |   |   | 3,107,049  |  
|Long term:                |  | 
|Amortization of goodwill  |  |  |   | -          |   |   | (269,526   | )
|Depreciation              |  |  |   | 47,887     |   |   | 53,559     |  
|                          |  |  |   |           
|                          |  |  |   | 47,887     |   |   | (215,967   | )
|                          |  |  |   |           
|                          |  |  |   | 3,399,227  |   |   | 2,891,082  |  
|Total valuation allowance |  |  |   | (3,399,227 | ) |   | (2,891,082 | )
|                          |  |  |   |           
|Deferred tax asset        |  |  | $ | -          |   | $ | -          |  
|                          |  |  |   |           

The Silverstar Holdings Limited is a
Bermuda registered corporation where there are no income tax laws applicable. FSAH, a
South African registered corporation, incurred no income tax charges in fiscal year 2006
and 2005.

F-19



---

First South Africa Management Corp.
Fantasy Sports, Inc. and Student Sports,  Inc. are U.S.  registered  corporations and did
not incur any income tax provision for 2006, 2005 and 2004.

# NOTE 12.   DISCONTINUED
OPERATIONS

# Fantasy Sports, Inc.

On April 7, 2006, the Company sold
substantially all the assets and transferred certain liabilities of Fantasy Sports, Inc.
for total cash consideration of $3.85 million.  The purchaser assumed liabilities in the amount of $.79 million

A summary of the calculation of the
gain on disposition is as follows:

|                           |              
|-------------------------- | -------------
|Cash received              | $ 3,850,000  
|Expenses of sale           | (156,622)    
|                           |              
|Net proceeds of sale       | 3,693,378    
|Net book value transferred | (2,212,668)  
|                           |              
|Gain on disposition        | ($ 1,480,710)
|                           |              

In accordance with accounting
principles generally accepted in the United States of America, the net income and net
assets related to Fantasy Sports, Inc. have been included in discontinued operations in
the Companys consolidated statements of operations and consolidated balance sheets.

F-20



---

The following summarizes the results
of Fantasy Sports, discontinued operations:

|                         | Nine Months EndedApril 7, 2006 | Year EndedJune 30, 2005 | Year EndedJune 30, 2004
|------------------------ | ------------------------------ | ----------------------- | -----------------------
|Revenues                 | $ 1,490,855                    | $ 1,945,911             | $ 2,367,463            
|Total operating expenses | (1,318,155)                    | (1,502,298)             | (2,294,526)            
|                         |                                |                         |                        
|Operating income         | 172,700                        | 436,613                 | 729,370                
|Other expense            | (10,947)                       | (13,977)                | (20,153)               
|                         |                                |                         |                        
|Net income               | $    161,753                   | $    422,636            | $      52,784          
|                         |                                |                         |                        

# NOTE 13.   CASH FLOWS

Changes in operating assets and
liabilities consist of the following:

|                                                                    | 2006 | 2005 | 2004
|------------------------------------------------------------------- | ---- | ---- | ----
|(Increase) Decrease in accounts receivable                          |      |      |     
|Increase in prepaid expenses and current assets                     |      |      |     
|Decrease in overdraft                                               |      |      |     
|Increase (Decrease) in accounts payable                             |      |      |     
|Increase (Decrease) in accrued expenses                             |      |      |     
|                                                                    |      |      |     
|                                                                    |      |      |     
|                                                                    |      |      |     
|Changes in net assets and liabilities of discontinued operations    |      |     
|Depreciation and amortization                                       |      |      |     
|Changes in operating accounts                                       |      |      |     
|Loss on disposal of fixed assets                                    |      |      |     
|Decrease in other assets                                            |      |      |     
|Changes in cash (included in) from net assets and from              |      |     
|discontinued operations                                             |      |      |     
|                                                                    |      |      |     
|Changes in net assets and liabilities of discontinued operations    |      |      |     
|                                                                    |      |      |     
|Cash flows from investing activities - discontinued operations:     |      |     
|Acquisition of fixed assets                                         |      |      |     
|Proceeds from sale of fixed assets                                  |      |      |     
|Net cash provided by investing activities --discontinued operations |      |      |     
|                                                                    |      |      |     
|Cash flows from financing activities - discontinued operations:     |      |     
|Short-term borrowings (repayments), net                             |      |      |     
|                                                                    |      |      |     
|Non cash investing and financing activities:                        |      |     
|Conversion of class B shares to common shares                       |      |      |     
|                                                                    |      |      |     
|Issuance of shares of common stock                                  |      |      | $   
|                                                                    |      |      |     
|Warrants issued for acquisition                                     |      |      | $   
|                                                                    |      |      |     
|Stock issued for acquisition                                        |      |      |     
|                                                                    |      |      |     
|Issuance of debt for acquisition                                    |      |      | $   
|                                                                    |      |      |     

# NOTE 14.    BUSINESS
SEGMENT INFORMATION

As a result of the sale of all the
assets and  transfer  of certain  liabilities  of Fantasy  Sports on April 7, 2006,  the
 Company no longer operates in the Internet fantasy sports games segment and now only
operates in one segment -- entertainment software.

F-21



---

# NOTE 15.   STOCK OPTION
PLAN

1995 Stock Option Plan

The Board of Directors  has adopted
the Company's  1995 Stock Option Plan.  The Stock Option Plan provides for the grant of
(i) options that are intended to qualify as incentive stock options  ("Incentive  Stock
Options") within the meaning of Section 422 of the Internal Revenue Code to key employees
and (ii) options not so intended to qualify  ("Nonqualified  Stock Options") to key
employees  (including directors and officers who are employees of the Company and to
directors).

The Stock Option Plan is
 administered  by the  Compensation  Committee of the Board of Directors.  The committee
 shall  determine the terms of the options  exercised,  including the exercise price, the
number of shares subject to the option and the terms and conditions of exercise.  No
options  granted under the Stock Option Plan are  transferable  by the optionee  other
than by the will or the laws of descent and distribution.

The exercise  price of Incentive
 Stock  Options  granted under the plan must be at least equal to the fair market value
of such shares on the date of the  grant  (110% of fair  market  value in the case of an
 optionee  who owns or is  deemed to own more than 10% of the voting rights of the
outstanding  capital stock of the Company or any of its  subsidiaries).  The maximum term
for each Incentive Stock Option  granted is ten years (five years in the case of an
optionee who owns or is deemed to own more than 10% of the voting  rights of the
 outstanding  capital  stock of the Company or any of its  subsidiaries).  Options shall
be  exercisable  at such times and in such installments  as the committee  shall provide
in the terms of each  individual  option.  The maximum number of shares for which options
may be granted to any individual in any fiscal year is 210,000.

The Stock Option Plan also  contains
an automatic  option grant program for the  Directors.  Each person who is director of
the Company following an annual meeting of shareholders  will  automatically be granted
an option for an additional  15,000 shares of common stock. Each grant will have an
exercise  price per share equal to the fair market  value of the common stock on the
grant date and will have a term of five years  measured  from the grant  date,  subject
to  earlier  termination  if an  optionee's  service as a board  member is terminated for
cause.

# 2004 Stock Incentive Plan

The Company's  board of directors
has adopted and the Company's  shareholders  approved the Company's  2004 Stock
 Incentive  Plan (the "2004  Plan").  The 2004 Plan is intended to provide an incentive
to employees  (including  executive  officers),  and directors of and consultants  to the
 Company  and its  affiliates,  and is  intended  to be the  successor  plan to the 1995
Stock  Option  Plan (which terminated in November  2005).  The 2004 Plan  authorizes the
issuance of a maximum of 1,000,000  shares of the Company's  common stock (subject to
 adjustment  as  described  in the 2004 Plan)  pursuant to stock  grants or options to
purchase  common  stock to employees (including officers and directors who are employees)
and non-employee directors of, and consultants to the Company.

The 2004 Plan provides for the grant
of (i.)  "incentive  stock options"  ("ISOs") within the meaning of Section 422(b) of the
Internal Revenue Code of 1986,  as amended (the  "Code"),  (ii.)  non-qualified  stock
 options  (which are stock options that do not qualify as ISOs), and (iii.) stock awards.

The 2004 Plan will be  administered
 by our board of directors  or a committee of the  Company's  board of directors
 consisting  of at least two members of the  Company's  board,  each of whom is a
 "non-employee  director"  within the meaning of Rule 16b-3  promulgated under the
Securities  Exchange Act of 1934. It is also intended that each member of any such
 committee  will be an "outside  director" within the meaning of Section 162(m) of the
Code.

F-22



---

Options granted under the 2004 Plan
will be subject to, among other things, the following terms and conditions:

| |  |  | The
exercise price of each option will be determined by the administrator;  provided,
 however,  that the exercise price of an                   ISO may not be less than the
fair  market  value of our common  stock on the date of grant  (110% of such fair market
                  value if the optionee owns (or is deemed to own) more than 10% of our
voting power).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Options
may be granted for terms determined by the administrator;  provided,  however,  that the
term of an ISO may not exceed                   10 years (5 years if the optionee owns
(or is deemed to own) more than 10% of our voting power).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The
maximum  number of shares of the  Company's  common stock for which  options may be
granted to an employee in any calendar                   year is 230,000.  In addition,
 the  aggregate  fair market value of shares with respect to which ISOs may be granted
                  to an employee which are exercisable for the first time during any
calendar year may not exceed $100,000.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The
exercise price of each option is payable in full upon exercise or, if the applicable
 stock option  contract  entered into                   by us with an optionee permits,
in installments.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Options
may not be  transferred  other than by will or by the laws of descent and  distribution,
 and may be exercised  during                   the optionee's lifetime only by the
optionee or his or her legal representatives.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Except
as may otherwise be provided in the applicable option contract,  if the optionee's
 relationship with the Company as an                   employee or consultant is
terminated for any reason (other than the death or disability of the optionee),  the
option                   may be exercised,  to the extent  exercisable at the time of
termination  of such  relationship,  within three months                   thereafter,
but in no event after the expiration of the term of the option.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The
Company may withhold  cash and/or  shares of the  Company's  common  stock  having an
aggregate  value equal to the amount                   which we determine is necessary to
meet its  obligations  to withhold any federal,  state and/or local taxes or other
                  amounts  incurred by reason of the grant or exercise  of an option,
 its  disposition  or the  disposition  of shares                   acquired  upon the
 exercise of the  option.  Alternatively,  the  Company  may  require the  optionee to
pay us such                   amount, in cash, promptly upon demand.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The  Company,  through June 30,
 2006,  has granted  options to purchase  1,429,071  shares of common  stock under the
Plans,  of which 190,000 options have been exercised and 100,000 options expired
unexercised.

The following table represents stock
option activity for the years ended June 30, 2004, 2005, and 2006:

|                             | Shares Subject to
Options Outstanding | Weighted Average
Exercise Price Per Option
|---------------------------- | ------------------------------------- | ------------------------------------------
|Balance at June 30, 2003     | 1,463,333                             | 3.39                                      
|Granted plan options         | 60,000                                | 1.61                                      
|Expired plan options         | (145,000)                             | 0.79                                      
|Expired non-plan options     | (35,000)                              | 0.35                                      
|Terminated non- plan options | (130,000)                             | 3.77                                      
|Terminated plan options      | (20,000)                              | 2.19                                      
|                             |                                       |                                           
|Balance at June 30, 2004     | 1,193,333                             | 3.68                                      

F-23



---

|                           | Shares Subject to
Options Outstanding | Weighted Average
Exercise Price Per Option
|-------------------------- | ------------------------------------- | ------------------------------------------
|Granted options:          
|Granted non-plan options   | 450,000                               | 2.00                                      
|Granted-plan options       | 390,000                               | 1.37                                      
|Exercised options:         | (15,000)                              | 0.43                                      
|Expired - plan options     | (40,000)                              | 5.13                                      
|Expired - non-plan options | (433,333)                             | 4.08                                      
|                           |                                       |                                           
|Balance at June 30, 2005   | 1,545,000                             | 2.49                                      
|                           |                                       |                                           
|Granted options:          
|Granted-plan options       | 57,405                                | 1.33                                      
|Exercised options:         | (30,000)                              | 0.75                                      
|Expired plan options       | (10,000)                              | 0.75                                      
|Expired non-plan options   | (200,000)                             | 5.00                                      
|Terminated plan options    | (75,000)                              | 1.35                                      
|                           |                                       |                                           
|Balance at June 30, 2006   | 1,287,405                             | 2.17                                      

450,000 options granted during the
year end June 30, 2005 are subject to a lock-up agreement and therefore cannot be
exercised until such lock-up agreement is released.  The lock-up agreement will be released when granting of these options is
approved by a vote of the Companys stockholders, which is required by the terms and
conditions of the Companys NASDAQ listing agreement.

The following summarizes information
related to options outstanding and exercisable as of June 30, 2006.

|                |           | Options Outstanding |      | Options Exercisable
|--------------- | --------- | ------------------- | ---- | -------------------
|
|Less than $1.00 | 85,000    | $0.33               | 0.85 | 85,000             
|$1.00 to 2.19   | 952,405   | $1.57               | 2.66 | 427,405            
|$3.75 to 4.88   | 250,000   | $4.75               | 1.00 | 250,000            
|                |           |                     |      |                    
|                | 1,287,405 |                     |      | 762,405            
|                |           |                     |      |                    

867,405 shares were available for
future stock option grants to employees and directors under the existing plans as of June
30, 2006. As of June 30, 2006 the aggregate intrinsic value of shares outstanding and
exercisable was $117,250. Total intrinsic value of options exercised was $10,900 and
$16,500 for the years ended June 30, 2005 and 2006, respectively.

The following table summarizes our
nonvested stock option activity for the year ended June 30, 2006.

|                              | Shares    | Weighted Average FairValue on the Grant Date
|----------------------------- | --------- | --------------------------------------------
|
|Nonvested as of June 30, 2005 | 200,000   | $1.03                                       
|Granted during 2006           | 57,405    | $1.08                                       
|Vested during 2006            | (107,405) | $1.05                                       
|Forfeited                     | (75,000)  | $1.03                                       
|                              |           |                                             
|Nonvested as of June 30, 2006 | 75,000    | $1.03                                       
|                              |           |                                             

# NOTE 16.   WARRANTS
OUTSTANDING

In consideration for the capital
raising activities undertaken during 2000, the Company issued warrants to purchase 150,000
shares of common stock at an exercise price of $6.00 per share.

In July 2004, 180,000 warrants to
purchase one share of Class A common stock at an exercise price of $0.81 per share were
granted to a consultant for services to be rendered. These warrants were valued at
$115,210 using a Black-Scholes pricing model with the following assumptions: expected
volatility of 142%; a risk-free interest rate of 3.19% and an expected life of three
years. An expense has been recognized for the fair value of these warrants granted to such
non-employees in the amount of $32,000 for fiscal year 2005. Effective May 1, 2005, the
consultant was appointed to the Board of Directors at Strategy First and the remainder of
his options valued at $83,210 vested immediately. These options were included in
compensation expense deducted from income from continuing operations as prescribed by
Accounting Principles Board Opinion #25.

F-24



---

In April 2005, 200,000 warrants to
purchase one share of Class A common stock at an exercise price of $2.50 per share were
granted to former shareholders of Strategy First as part of the consideration paid in
connection with the acquisition of that company. These warrants were valued at $167,400
using a Black-Scholes pricing model with the following assumptions: expected volatility of
126%; a risk-free interest rate of 3.77% and an expected life of three years. These
warrants vest immediately.

In October 31, 2005, the Company
issued warrants to purchase 791,139 shares of Class A common stock at an exercise price of
$1.896 per share to DKR SoundShore Oasis Holding Fund Ltd. in connection with the
Companys sale of a $5 million convertible debenture. These warrants were valued at
$665,295 using a Black-Scholes pricing model with the following assumptions: expected
volatility of 114.80%; a risk-free interest rate of 4.50% and an expected life of five
years. These warrants vest immediately.

Warrants outstanding at June 30, 2006
were as follows:

|Warrant                                   | Number ofWarrants | ExercisePrice | Expiration Date  | Entitlement              
|----------------------------------------- | ----------------- | ------------- | ---------------- | -------------------------
|
|Debenture warrants 2001                   | 52,189            | $6.00         | July 31, 2007    | One share of common stock
|Capital raising warrants                  | 150,000           | $6.00         | July 31, 2007    | One share of common stock
|Warrants issued for consulting services   | 180,000           | $0.81         | July 31, 2007    | One share of common stock
|Warrants issued for acquisition           | 200,000           | $2.50         | April 21, 2008   | One share of common stock
|Warrants issued for convertible debenture | 791,139           | $1.89         | October 31, 2010 | One share of common stock

# NOTE 17.   COMMITMENTS,
CONTINGENCIES AND OTHER MATTERS

# Leases

The Company leases office facilities
and various equipment under non-cancelable operating leases, expiring through January
2006. Office facility and equipment rent expense included in continuing operations for the
years ended June 30, 2006, 2005 and 2004 was approximately $109,000, $60,000 and $23,000,
respectively.

Approximate future minimum lease
payments under non-cancelable office and equipment lease agreements are as follows:

|Year Ending June 30: |          
|-------------------- | ---------
|2007                 | $  72,740
|2008                 | 42,600   
|2009                 | 28,125   
|2010                 | 8,355    
|                     |          
|                     | $151,820 
|                     |          

F-25



---

# Litigation

In April 2006, our First South
African subsidiary received a letter from the South African Revenue Service
(SARS) challenging certain tax treatment of dividends and operating loss carry
forwards for the years 2002 through 2004. Subsequently SARS issued a tax assessment for
approximately $2.7 million. The Company believes that its South African tax filings are in
full compliance with all applicable laws and is vigorously defending its position in this
regard. However, until such time as these issues are resolved, the Company will retain an
amount of cash equal to the assessment in South Africa to satisfy any potential liability that may
arise. The Company has recorded an estimated liability of $600,000 in this regard but may be forced
to increase this amount should it receive adverse information as it continues its
appeal of the SARS assessment.

In January 2006, we brought an action
against JoWood Software Productions AG seeking damages in the amount of approximately
$850,000 for expenses incurred in connection with our unsuccessful acquisition of shares
of JoWood. The case is being heard in the Vienna Commercial Court in Austria. JoWood has
been unsuccessful in having the case dismissed. Further hearings and a judgment are
anticipated toward the end of 2006.

The Company, from time to time, is
involved in various litigations arising in the ordinary course of business. Based on
currently available information, management believes that there are no pending claims that
will have a material adverse effect on the Companys operating results or financial
position.

# Employment Agreements

# Silverstar Holdings Ltd.

On January 29, 2005, the
Companys Board of Directors approved an Employment Agreement with Clive Kabatznik
(the Employment Agreement). Pursuant to the Employment Agreement, Mr.
Kabatznik will serve as the Chief Executive Officer, President and Chief Financial Officer
of the Company beginning as of January 1, 2005 and continuing through and until December
31, 2009. As compensation for his services, Mr. Kabatznik will received an annual base
salary of $325,000 which increased by $10,000 in 2006 and increasing to $350,000 per annum
from the beginning of 2007 to the end of 2009. During the term of the agreement, the
employee shall be entitled to an annual bonus in an amount to be determined by the
Companys Board of Directors and Compensation Committee based on results of
operations of the Company for each fiscal year starting in the fiscal year ended June 30,
2006. Such bonus will be dependent on the Companys  income from operations
achieving a rate of return on equity of not less than 20% annually.

The employee also received options
to purchase 500,000 shares of Company Class A Common Stock at 2.00 per share for a term of five years.
 450,000 of these options are subject to a lock-up agreement.

# Strategy First, Inc.

On April 21, 2005, Strategy First,
Inc. entered into employment agreements with Don McFatridge, Brian Clarke and Richard
Therrien. The employment agreements are on an at-will basis and call for salaries of
Canadian $180,000, 160,000 and 75,000, respectively. Each employee is entitled to a bonus
of up to 30% of their salary at the discretion of Silverstar Holdings. Mr. McFatridge
serves as Chief Executive Officer of Strategy First and received options to acquire 75,000
shares of Silverstar Holdings Common Stock. These options vest annually over a three-year
period. Mr. Clarke, who passed way in June 2006, served as Chief Operating Officer of
Strategy First and received options to acquire 75,000 shares of Silverstar Holdings Common
Stock which terminated upon his death. Mr. Therrien serves as Chief Technology Officer of
Strategy First and received options to acquire 25,000 shares of Silverstar Holdings Common
Stock. These options vest annually over a three-year period.

On October 3, 2005, the Company
entered into an employment agreement with Sheldon Reinhardt to serve as Vice President of
Finance. The employment agreement is on an at-will basis and calls for an annual salary of
Canadian $120,000.00 and entitles the employee to a bonus of up to 30% of his salary at
the discretion of Silverstar Holdings. Mr. Reinhardt will also receive stock options to
acquire 20,000 shares of the Companys common stock at the completion of fiscal year
2006 which will vest annually over a three-year period.

F-26

---

# NOTE 18.   QUARTERLY
INFORMATION (UNAUDITED)

|                                           | Quarter Ended
|------------------------------------------ | -------------
|
|Revenues                                   |              
|Loss from continuing operations            |              
|Net loss                                   |              
|Net (loss) per share:                      |              
|Basic                                      |              
|Weighted average common stock outstanding: |              
|Basic                                      |              
|                                           |              

F-27



---

# ITEM 9.   Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure

None.

# ITEM 9A.   Controls and
Procedures

We maintain disclosure controls and
procedures that are designed to ensure (i) that information required to be disclosed by us
in the reports we file or submit under the Securities Exchange Act of 1934, as amended
(the Exchange Act), is recorded, processed, summarized, and reported within
the time periods specified in the Securities and Exchange Commissions
(SEC) rules and forms, and (ii). that this information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management recognizes
that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost benefit relationship
of possible controls and procedures.

Prior to the filing date of this
annual report, under the supervision and review of our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the period covered by
this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial
Officer have concluded that our disclosure controls and procedures are effective in
alerting them in a timely manner to material information regarding us (including our
consolidated subsidiaries) that is required to be included in our periodic reports to the
SEC.

In addition, there have been no
significant changes in our internal controls or in other factors that could significantly
affect those controls since our evaluation. We cannot assure you, however, that our system
of disclosure controls and procedures will always achieve its stated goals under all
future conditions, no matter how remote.

# ITEM 9B.   Other
Information

None.



24



---

# PART III

# ITEM 10.   Directors and
Executive Officers

# Directors and Executive
Officers

Our directors and our executive
officers and the executive officers of our subsidiaries, their ages and present position
are as follows:

|Name               | Age | Positions                                                                                 
|------------------ | --- | ------------------------------------------------------------------------------------------
|Michael Levy       | 60  | Chairman of the Board                                                                     
|Clive Kabatznik    | 49  | Vice Chairman of the Board, Chief Executive Officer, President and Chief Financial Officer
|Cornelius J. Roodt | 47  | Director                                                                                  
|John Grippo        | 50  | Director                                                                                  
|Douglas Brisotti   | 37  | Director                                                                                  

Michael Levy is our  co-founder  and
has served as Chairman of Board of Directors  since our  inception in 1995.  Since 1987,
 Mr. Levy has been the Chief  Executive  Officer and  Chairman of the Board of Arpac
L.P.,  a  Chicago-based  manufacturer  of plastic  packaging machinery.

Clive P. Kabatznik is our
co-founder and has served as a director and our President since inception in 1995 and as
our Vice Chairman, Chief Executive Officer and Chief Financial Officer since October 1995.
Mr. Kabatznik has served as President of Colonial Capital, Inc. a Miami-based investment
banking company that specializes in advising middle market companies in areas concerning
mergers, acquisitions, private and public agency funding and debt placements.

Cornelius J. Roodt has served
as a member of our Board of Directors since December 1996 and was appointed Managing
Director and Chief Financial Officer of one of our subsidiaries, First South African
Holdings (Pty) Ltd., in July 1996. Mr. Roodt was responsible for overseeing all of the
South African operations of First South African Holdings (Pty.), Ltd. Mr. Roodt led the
buyout of First Lifestyle Holdings and he is currently Chief Executive of the successor
company, First Lifestyle Holdings, (Pty), Ltd. He is no longer an executive officer of any
of our subsidiaries. From February 1994 to June 1996, Mr. Roodt was a senior partner at
Price Waterhouse Corporate Finance, South Africa. From January 1991 to January 1994, he
was an audit partner at Price Waterhouse, South Africa.

John T. Grippo has served as a
member of our Board of Directors since 2004 and has been the president of his own
financial management practice, John Grippo, Inc. since 2000. His firm provides services as
Chief Financial Officer to small to mid-sized public and private companies and also
provides other related accounting and consulting services. Prior to that, Mr. Grippo
served for ten years as a Chief Financial Officer to companies in house wares, electric
vehicles and financial services industries. He worked for five years as an auditor with
Arthur Andersen, LLP, followed by seven years in various accounting positions in the
financial services industry. He is a member of the New York Society of Certified Public
Accountants and the American Institute of Certified Public Accountants.

Douglas A. Brisottihas most
recently served as president of the games/media division at theglobe.com, an Internet
communications corporation, and its subsidiaries including Chips & Bits, a game
distribution business; Computer Games Magazine, a consumer print publication for PC games;
Now Playing Magazine a pop culture entertainment print publication; and Computer Games
Online (www.cgonline.com) and Now Playing Online (www.nowplayingmag.com), the
magazines online counterparts.  Prior to theglobe.com, Mr. Brisotti served as
group director for Yahoo! Inc.s Southeast United States and Caribbean regions. At
Yahoo! he was primarily responsible for strategic client revenue relationships, including
content integration, merchant integration, sponsorships and advertising, as well as
expanding relationship internationally.

25

---

All of our directors hold office
until their respective successors are elected, or until death, resignation or removal.
Officers hold office until the meeting of the Board of Directors following each Annual
Meeting of Stockholders and until their successors have been chosen and qualified.

# Audit Committee of the
Board of Directors

Our Board of Directors has a separate
audit committee. The audit committee is composed of Michael Levy, John Grippo and
Cornelius J. Roodt, each of whom are independent directors as defined in Rule 10A-3 of the
Securities Exchange Act of 1934. The Board of Directors has determined that Messrs. Grippo
and Roodt meet the standards of an audit committee financial expert as defined
by the Sarbanes Oxley Act of 2002.

# Compliance with Section
16(a) of the Exchange Act.

Section 16(a) of the Securities
Exchange Act of 1934 requires our executive officers and directors, and persons who
beneficially own more than 10% of our common stock, to file initial reports of ownership
and reports of changes of ownership with the Securities and Exchange Commission and
furnish copies of those reports to us. Based solely on a review of the copies of the
reports furnished to us to date, or written representations that no reports were required,
we believe that all reports required to be filed by such persons with respect to our
fiscal year ended June 30, 2006 were timely made.

# Code of Ethics

Our Board of Directors
adopted a Code of Ethics which applies to all of our directors, executive
officers and employees. A copy of the Code of Ethics is available upon request to
our counsel at Troutman Sanders, LLP, Chrysler Building, 405 Lexington Avenue,
9th Floor, New York, NY 10174.

# ITEM 11.    Executive
Compensation

The following summary compensation
table sets forth the aggregate compensation we paid or accrued to our Chief Executive
Officer during the fiscal years ended June 30, 2004, June 30, 2005 and June 30, 2006.
Apart from our Chief Executive Officer, whose annual salary is $335,000, Don McFatridge,
Chief Executive of Strategy First, earns approximately $160,000 per annum and Sheldon
Reinhardt, CFO of Strategy First earns approximately $110,000 per annum. No other
executive officers received compensation in excess of $100,000 during the fiscal year
ended June 30, 2006

Summary Compensation
Table

|                    | Annual Compensation |          | Long Term Compensation
|------------------- | ------------------- | -------- | ----------------------
|
|Clive Kabatznik,    | 2006                | $330,000 | $0                    
|President and Chief | 2005                | 320,000  | 0                     
|Executive Officer   | 2004                | 315,000  | 0                     

26



---

The options granted to Mr. Kabatznik
during fiscal year ended June 30, 2006 represent:

| |  | an
option granted under our 2005 Stock Option Plan to purchase 7,481 shares of our common
stock, which is currently exercisable at an exercise price of $1.33 per share;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The options granted to Mr. Kabatznik
during fiscal year ended June 30, 2005 represent:

| |  | an
option granted under our 2005 Stock Option Plan to purchase 15,000 shares of our common
stock, which is currently exercisable at an exercise price of $1.06 per share;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | an
option granted under our 1995 Stock Option Plan to purchase 50,000 shares of our common
stock, which is currently exercisable at an exercise price of $2.00 per share;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | a
non-qualified option granted to purchase 450,000 shares of our common stock, which is
currently exercisable at an exercise price of $2.00 per share; such options are subject
to a lockup pending stockholder approval.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The options granted to Mr. Kabatznik
during fiscal year ended June 30, 2004 represent:

| |  | an
option granted under our 1995 Stock Option Plan to purchase 5,000 shares of our common
stock, which is currently exercisable at an exercise price of $1.61 per share.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Options Granted in
Fiscal 2006

The following table sets forth the
details of options to purchase common stock we granted to our executive officers during
fiscal year ended June 30, 2006, including the potential realized value over the five year
term of the option based on assumed rates of stock appreciation of 5% and 10%, compounded
annually. These assumed rates of appreciation comply with the rules of the Securities and
Exchange Commission and do not represent our estimate of future stock price. Actual gains,
if any, on stock option exercises will be dependent on the future performance of our
common stock. Each option is immediately exercisable.

|Options Granted
|---------------
|
|
|Clive Kabatznik

# Aggregated Option
Exercises in Last Fiscal Year and Fiscal Year-End Option Values

During the fiscal year ended June 30,
2006 no options were exercised by our executive officers. The following table sets forth
the number of shares of our common stock underlying unexercised stock options granted by
us to our executive officers and the value of those options at June 30, 2006. The value of
each option is based on the positive difference, if any, of the closing bid price for our
common stock on the NASDAQ Capital Market on June 30, 2006, or $1.27 over the exercise
price of the option.

|                | Number of Securities Underlying
Unexercised Options at
Fiscal Year-End | Value of Unexercised In the Money
Options at Fiscal Year-End
|--------------- | ---------------------------------------------------------------------- | ------------------------------------------------------------
|
|Clive Kabatznik |                                                                        | 335,000                                                     

27

---

# Director Compensation

Except for Mr. Levy, our directors do
not receive fixed compensation for their services as directors other than restricted
shares equal to $10,000 as well as options to purchase 15,000 shares of our common stock
granted to each director and options to purchase 25,000 shares of our common stock granted
to the Chairman of our Board of Directors, and options to purchase 20,000 shares of our
common stock granted to the Chairman of our audit committee, in each case under our 1995
Stock Option Plan. Mr. Levy receives an annual consulting fee of $60,000 and options to
purchase 25,000 shares of our common stock per year, solely in connection with his service
as Chairman of our Board of Directors. Directors are reimbursed for their reasonable
out-of-pocket expenses incurred in connection with their duties.

# Employment Agreements

On January 29, 2005, the
Companys Board of Directors approved an Employment Agreement with Clive Kabatznik
(the Employment Agreement). Pursuant to the Employment Agreement, Mr.
Kabatznik will serve as the Chief Executive Officer, President and Chief Financial Officer
of the Company beginning as of January 1, 2005 and continuing through and until December
31, 2009. As compensation for his services, Mr. Kabatznik will receive an annual base
salary of $325,000 increasing by $10,000 in 2006 and increasing to $350,000 per annum from
the beginning of 2007 to the end of 2009. During the term of the agreement, the employee
shall be entitled to an annual bonus in an amount to be determined by the Companys
Board of Directors and Compensation Committee based on results of operations of the
Company for each fiscal year starting in the fiscal year ending June 30, 2006. Such bonus
will be dependant on the Companys net income from operations achieving a rate of
return on equity of not less than 20% annually.

On April 21, 2004, Strategy First,
Inc., entered into employment agreements with Don McFatridge, Brian Clarke and Richard
Therrien. Mr. Clarke died during the past year and his contract, therefore, ended. On
October 3, 2005, Strategy First, Inc., entered into employment agreements with Sheldon
Reinhardt.

The employment agreements are on an
at-will basis and call for salaries of Canadian $180,000, $160,000, $75,000, and $120,000
respectively.

Each employee is entitled to a bonus
of up to 30% of their salary at the discretion of the board of directors.

Mr. McFatridge serves as Chief Executive Officer and received 75,000 options to
          acquire Silverstar Holdings Ltd. Common Stock. These options vest annually over a
          three-year period.

Mr. Therrien serves as Chief Technology Officer and received 25,000 options to
          acquire Silverstar Holdings Ltd. Common Stock. These options vest annually over a
          three-year period.

Mr. Reinhardt serves as Vice President of Finance and will be eligible to receive
          20,000 options to acquire Silverstar Holdings Ltd. Common Stock at the end of fiscal
          year 2006. These options will vest annually over a three-year period.

28



---

# 1995 Stock Option

Our Board of Directors has adopted
and our shareholders, prior to our initial public offering, approved our 1995 Stock
Option Plan. Our 1995 Stock Option Plan provides for the grant of:

| |  | options
that are intended to qualify as incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986 to key employees; and
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | options
not intended to so qualify to key employees,  including our directors and officers,  and
to directors and  consultants        who are not employees.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

The total number of shares of our
common stock for which options may be granted under our 1995 Stock Option Plan is 850,000
shares.

Our 1995 Stock Option Plan is
administered by the compensation committee of our Board of Directors. The compensation
committee will determine the terms of options exercised, including the exercise price, the
number of shares subject to the option and the terms and conditions of exercise. No option
granted under our 1995 Stock Option Plan is transferable by the optionee other than by
will or the laws of descent and distribution and each option is exercisable during the
lifetime of the optionee only by such optionee or his legal representatives.

The exercise price of incentive stock
under our 1995 Stock Option Plan must be at least equal to 100% of the fair market value
of such shares on the date of grant, or 110% of fair market value in the case of an
optionee who owns or is deemed to own stock possessing more than 10% of the voting rights
of our outstanding capital stock. The term of each option will be established by the
compensation committee, in its sole discretion. However, the maximum term for each
incentive stock option granted under our 1995 Stock Option Plan is ten years, or five
years in the case of an optionee who owns or is deemed to own stock possessing more than
10% of the total combined voting power of our outstanding capital stock. Options will
become exercisable at such times and in such installments as the compensation committee
will provide in the terms of each individual option. The maximum number of shares for
which options may be granted to any individual in any fiscal year is 210,000.

Our 1995 Stock Option Plan also
contains an automatic option grant program for our directors. Each of our non-employee
directors is automatically granted an option to purchase 10,000 shares of our common stock
following each annual meeting of shareholders. In addition, each of our employee directors
is automatically granted an option to purchase 5,000 shares of our common stock following
each annual meeting of shareholders. Each grant has an exercise price per share equal to
the fair market value of the our common stock on the grant date, is immediately
exercisable and has a term of five years measured from the grant date, subject to earlier
termination if an optionees service as a Board member is terminated for cause.

# 2004 Stock Incentive Plan

Our board of directors has adopted
and our shareholders approved our 2004 Stock Incentive Plan (the 2004 Plan).
The 2004 Plan is intended to provide an incentive to employees (including executive
officers), and directors of and consultants to the Company and its affiliates, and is
intended to be the successor plan to the 1995 Stock Option Plan (which terminates in
November 2005). The 2004 Plan authorizes the issuance of a maximum of 1,000,000 shares of
our common stock (subject to adjustment as described in the 2004 Plan) pursuant to stock
grants or options to purchase common stock to employees (including officers and directors
who are employees) and non-employee directors of, and consultants to, us.

The 2004 Plan provides for the grant
of (i) incentive stock options (ISOs) within the meaning of
Section 422(b) of the Internal Revenue Code of 1986, as amended (the Code),
(ii) non-qualified stock options (which are stock options that do not qualify as ISOs),
and (iii) stock awards.

The 2004 Plan will be administered by
our board of directors or a committee of our board of directors consisting of at least two
members of our board, each of whom is a non-employee director within the
meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934. It is also
intended that each member of any such committee will be an outside director
within the meaning of Section 162(m) of the Code.

29



---

Options granted under the 2004 Plan
will be subject to, among other things, the following terms and conditions:

| |  | The
exercise price of each option will be determined by the administrator; provided, however,
that the exercise price of an ISO may not be less than the fair market value of our
common stock on the date of grant (110% of such fair market value if the optionee owns
(or is deemed to own) more than 10% of our voting power).
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Options
may be granted for terms determined by the administrator; provided, however, that the
term of an ISO may not exceed 10 years (5 years if the optionee owns (or is deemed to
own) more than 10% of our voting power).
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The
maximum number of shares of our common stock for which options may be granted to an
employee in any calendar year is 230,000. In addition, the aggregate fair market value of
shares with respect to which ISOs may be granted to an employee which are exercisable for
the first time during any calendar year may not exceed $100,000.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The
exercise price of each option is payable in full upon exercise or, if the applicable
stock option contract entered into by us with an optionee permits, in installments.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Options
may not be transferred other than by will or by the laws of descent and distribution, and
may be exercised during the optionees lifetime only by the optionee or his or her
legal representatives.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Except
as may otherwise be provided in the applicable option contract, if the optionees
relationship with us as an employee or consultant is terminated for any reason (other
than the death or disability of the optionee), the option may be exercised, to the extent
exercisable at the time of termination of such relationship, within three months
thereafter, but in no event after the expiration of the term of the option.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We
may withhold cash and/or shares of our common stock having an aggregate value equal to
the amount which we determine is necessary to meet its obligations to withhold any
federal, state and/or local taxes or other amounts incurred by reason of the grant or
exercise of an option, its disposition or the disposition of shares acquired upon the
exercise of the option. Alternatively, we may require the optionee to pay us such amount,
in cash, promptly upon demand.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Through September 28, 2005, we have
granted options to purchase 255,000 shares of our common stock under our 1995 Stock Option
Plan, 165,000 of which have been exercised

Through September 28, 2006, we have
granted options to purchase 95,000 shares of our common stock under our 2004 Stock Option
Plan, 95,000 of which none has been exercised.

# Non-Plan Stock Options

At various times since 1996, we have
granted non-plan stock options to purchase 1,205,000 shares of our common stock at a
weighted exercise price of $2.97 per share.

30



---

# Compensation Committee
Interlocks and Insider Participation

None of the members of our
compensation committee of our Board of Directors is now or ever has been one of our
officers or employees. None of our executive officers serves as a member of the board of
directors or compensation committee of any entity that has one or more executive officers
serving on our Board of Directors or our compensation committee.

# ITEM 12.   Security
Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of
September 14, 2006, certain information as to the beneficial ownership of the common stock
by:

| |  | each
person known by us to own more than five percent (5%) of our outstanding shares; each of
our directors;
|- |  | ------------------------------------------------------------------------------------------------------------

| |  | each
of our executive officers named in the Summary Compensation Table under "Executive
Compensation;"
|- |  | ------------------------------------------------------------------------------------------------------

| |  | each
of our directors; and
|- |  | --------------------------

| |  | all
of our executive officers and directors as a group.
|- |  | -------------------------------------------------------

Unless otherwise specified, the
address of each of the persons set forth below is in care of Silverstar Holdings, Ltd,
Clarendon House, Church Street, Hamilton HM CX, Bermuda

|                                                            | Amount and Nature of Beneficial
Ownership (1) | 
|----------------------------------------------------------- | --------------------------------------------- | 
|
|Michael Levy                                                |                                               | 
|Clive P. Kabatznik                                          |                                               | 
|Cornelius J. Roodt                                          |                                               | 
|Douglas A. Brisotti                                         |                                               | 
|John T. Grippo                                              |                                               | 
|All executive officers and
directors as a group (5 persons) |                                               | 

| | *
Less than 1%
| | --------------

|(1) |  | Beneficial
 ownership is calculated in accordance  with Rule 13d-3 under the Securities  Exchange
Act of 1934.  Shares subject          to stock options,  for purposes of this table, are
considered  beneficially owned only to the extent currently  exercisable or
         exercisable within 60 days after August 31, 2002.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Except
as otherwise  indicated,  each of the parties listed has sole voting and investment power
with respect to all shares of          Class B common stock indicated above.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | For
the  purposes of this  calculation,  our common stock and our Class B common stock are
treated as a single class of common          stock.  Our Class B common  stock is
 entitled to five votes per share,  whereas our common  stock is entitled to one vote per
         share.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

31



---

|(4) |  | Includes
 80,000  shares of our common stock  issuable  upon exercise of options that are
 immediately  exercisable  and 7,519          shares of restricted stock.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Includes
 785,000  shares of our common  stock  issuable  upon  exercise  of options of which
 650,000 are subject to a lockup          pending stockholder approval and 7,519 shares
of restricted stock.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) |  | Includes
 130,000  shares of our common stock  issuable upon exercise of options that are
 immediately  exercisable  and 7,519          shares of restricted stock.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Includes
 30,000 shares of our common stock issuable upon the exercise of options that are
 immediately  exercisable and 7,519          shares of restricted stock.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) |  | Includes
 70,000  shares  issuable upon exercise of options that are  immediately  exercisable
 and 7,519 shares of restricted          stock.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

|(9) |  | Includes
 1,095,000 shares issuable upon exercise of options of which
 650,000 are subject to a lockup          pending stockholder approval and
37,595 shares of restricted          stock.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# ITEM 13.     Certain
Relationships and Related Transactions

Not applicable.

# ITEM 14.   Principal
Accountant Fees and Services

Audit Fees

Audit fees billed to the Company by
Rachlin Cohen & Holtz LLP for its audit of the Company's  financial  statements  and for
its review of the  financial  statements  included  in the  Company's  Quarterly  Reports
 on Form 10-Q  filed with the  Securities  and  Exchange Commission for 2006 and 2005
totaled $80,000 and $70,207, respectively.

Tax Fees

Tax fees  billed to the  Company by
Rachlin  Cohen & Holtz LLP for its tax  returns  for the fiscal  year 2006 and 2005 were
$0.0,  and $0.0, respectively.

Other Fees

No other fees were billed to the
Company by Rachlin Cohen & Holtz LLP for all other  non-audit or tax services  rendered
to the Company for the fiscal year 2006 and 2005, respectively.

Audit Committee
Pre-Approval Policies

The Audit  Committee  has adopted a
procedure  under which all fees charged by Rachlin  Cohen & Holtz LLP must be
 pre-approved  by the Audit Committee, subject to certain permitted statutory de minimus
exceptions.

32



---

# Part IV

# ITEM 15.   Exhibits,
Financial Statement Schedules and Reports on Form 8-K

# EXHIBIT INDEX

|Exhibit Number | Description
|-------------- | -----------
|
|               | 3          
|               | 3          
|               | 4          
|               | 4          
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 21         
|               | 23         
|               | 31         
|               | 32         

_________________

|(1) |  | Incorporated
by reference to the Registrants Current Report on Form 8-K                filed
September 10, 1997.
|--- |  | -----------------------------------------------------------------------------------------------------------------

|(2) |  | Incorporated
by reference to the Registrants Registration Statement on                Form S-1
(No. 33-99180) filed on November 9, 1995, as amended on                Form
S-1/A No. 1, Form S-1/A No. 2, Form S-1/A No. 3 filed on December 27, 1995,
               January 16, 1996 and January 24, 1996, respectively and Form 10-Q
for                the fiscal quarter ended March 31, 2000.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Incorporated
by reference is the Registrants Registration Statement on                Form S-1
(No. 333-33561) filed on August 13, 1997 as amended on Form                S-1/A
No. 1, Form S-1/A No. 2 and For S-1/A No. 3 filed on December 9, 1997,
               January 22, 1998 and February 11, 1998, respectively.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Incorporated
by reference to the Companys Current Report on Form 8-K                filed on
October 12, 2000.
|--- |  | ---------------------------------------------------------------------------------------------------------------

33



---

|(5) |  | Incorporated
by reference to the Companys Current Report on Form 8-K           filed on December
1, 2000.
|--- |  | ----------------------------------------------------------------------------------------------------------

|(6) |  | Incorporated
by reference to the           Registrants Annual Report on Form 10-K for the fiscal
year ended June 30,           2004.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Incorporated
by reference to the Registrants Current           Report on Form 8-K filed on April
26, 2005.
|--- |  | -----------------------------------------------------------------------------------------------------------

|(8) |  | Incorporated
by reference           to the Registrants Current Report on Form 8-K filed on March
1, 2005.
|--- |  | ----------------------------------------------------------------------------------------------------------

|(9) |  | Filed
herewith.
|--- |  | ---------------

(a)    
          none

1.    
          Financial Statements

The following financial statementsare included as required to be filed by Item 8:

# Silverstar Holdings, Ltd.

Report of independent
Certified Public AccountantConsolidated Balance Sheets at June 30, 2005 and 2004

Consolidated Statements of Operations
for the years ended June 30, 2005, 2004 and 2003 Consolidated Statements of Cash Flows for
the years ended June 30, 2005, 2004 and 2003 Consolidated Statement of Consolidated
statements of stockholders equity and Comprehensive loss for the years ended June
30, 2003, 2004 and 2005 Notes to the Consolidated Financial Statements for the years ended
June 30, 2005, 2004, and 2003

2.     Financial
Statement Schedules:

All schedules have been omitted since
the required information is included in the consolidated financial statements or notes
thereto.

34



---

SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized in
the City of Boca Raton, State of Florida, on the 5th day of October, 2006.

| | SILVERSTAR HOLDINGS, LTD.
| | -------------------------
| |                          
| | BY: /s/ Clive Kabatznik  
| |                          
| | Clive Kabatznik          
| | President                



---

# EXHIBIT INDEX

|Exhibit Number | Description
|-------------- | -----------
|
|               | 3          
|               | 3          
|               | 4          
|               | 4          
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 10         
|               | 21         
|               | 23         
|               | 31         
|               | 32         

_________________

|(1) |  | Incorporated
by reference to the Registrants Current Report on Form 8-K                filed
September 10, 1997.
|--- |  | -----------------------------------------------------------------------------------------------------------------

|(2) |  | Incorporated
by reference to the Registrants Registration Statement on                Form S-1
(No. 33-99180) filed on November 9, 1995, as amended on                Form
S-1/A No. 1, Form S-1/A No. 2, Form S-1/A No. 3 filed on December 27, 1995,
               January 16, 1996 and January 24, 1996, respectively and Form 10-Q
for                the fiscal quarter ended March 31, 2000.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Incorporated
by reference is the Registrants Registration Statement on                Form S-1
(No. 333-33561) filed on August 13, 1997 as amended on Form                S-1/A
No. 1, Form S-1/A No. 2 and For S-1/A No. 3 filed on December 9, 1997,
               January 22, 1998 and February 11, 1998, respectively.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Incorporated
by reference to the Companys Current Report on Form 8-K                filed on
October 12, 2000.
|--- |  | ---------------------------------------------------------------------------------------------------------------

|(5) |  | Incorporated
by reference to the Companys Current Report on Form 8-K           filed on December
1, 2000.
|--- |  | ----------------------------------------------------------------------------------------------------------

|(6) |  | Incorporated
by reference to the           Registrants Annual Report on Form 10-K for the fiscal
year ended June 30,           2004.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------

|(7) |  | Incorporated
by reference to the Registrants Current           Report on Form 8-K filed on April
26, 2005.
|--- |  | -----------------------------------------------------------------------------------------------------------

|(8) |  | Incorporated
by reference           to the Registrants Current Report on Form 8-K filed on March
1, 2005.
|--- |  | ----------------------------------------------------------------------------------------------------------

|(9) |  | Filed
herewith.
|--- |  | ---------------