SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

         [X]      QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE
                  SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
                  DECEMBER 31, 2005

                                       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                                Not Applicable
                 -------                                --------------
     (State or Other Jurisdiction of           (IRS 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: 809-295-1422



      ---------------------------------------------------------------------
               Former Name, Former Address and Former Fiscal Year,
                         if Changed Since Last Report.



         Indicate by check mark whether the registrant (1) has filed all reports
         required to be filed by Section 13 or 15(d) of the Securities  Exchange
         Act of 1934 during the preceding 12 months (or for such shorter  period
         that the  registrant  was required to file such  reports),  and (2) has
         been subject to such filing requirements for the past 90 days.
         Yes   X    No
              ---       ---

         Indicate by check mark whether the  registrant  has filed all documents
         and  reports  required  to be filed by  Section  12, 13 or 15(d) of the
         Securities  Exchange  Act of 1934  subsequent  to the  distribution  of
         securities under a plan confirmed by a court. Yes       No
                                                           ---      ---

         Indicate by check mark whether the Registrant is an  accelerated  filer
         (as defined in Rule 12b-2 of the Exchange Act). Yes       No  X
                                                             ---      ---

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


The number of shares of common  stock  outstanding  as of  February  3, 2006 was
9,091,533


<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1   Condensed  Consolidated Balance Sheets at December 31, 2005 (Unaudited)
         and June 30, 2005

         Condensed  Consolidated  Statements of Operations  (Unaudited)  for the
         three and six months ended December 31, 2005 and 2004

         Condensed  Consolidated  Statements of Cash Flows  (Unaudited)  for six
         months ended December 31, 2005 and 2004

         Notes to the Condensed Consolidated Financial Statements (Unaudited)

ITEM 2   Management's Discussion and Analysis of Financial Condition and Results
         of Operations

ITEM 3   Quantitative and Qualitative Disclosures About Market Risk

ITEM 4   Controls and Procedures

PART II - OTHER INFORMATION

ITEM 6    Exhibits and Reports on Form 8-K


SIGNATURES


<PAGE>

                   SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,        JUNE 30,
                                         ASSETS                                               2005           2005
                                        -------                                           ------------     ------------
Current Assets:
<S>                                                                                       <C>             <C>
   Cash and cash equivalents, includes restricted cash of
       $973,465 and $67,189 respectively (see note 4)                                     $  7,626,857     $  4,870,486
   Cash deposits held in escrow                                                              1,184,450                -
   Accounts receivable, net                                                                    793,588           95,130
   Inventory                                                                                    76,278              534
   Current portion of long-term notes receivable                                               147,350          118,272
   Prepaid expenses and other current assets                                                   410,561          182,687
      Option Contract                                                                          109,253          359,171
                                                                                          ------------     ------------
      Total current assets                                                                  10,348,337        5,626,280
                                                                                          ------------     ------------

Property, Plant and Equipment, net                                                             101,674          114,628
Investments in Non-Marketable Securities                                                       843,566          843,566
Long-Term Notes Receivable                                                                   3,354,168        3,135,763
Goodwill, net                                                                                3,756,415        3,715,153
Intangible Assets, net                                                                       1,236,868        1,241,701
Deferred Charges and Other Assets                                                              605,013           23,374
                                                                                          ------------     ------------
    Total assets                                                                          $ 20,246,041     $ 14,700,465
                                                                                          ============     ============

                          LIABILITIES AND STOCKHOLDERS' EQUITY
                          ------------------------------------

Current Liabilities:
   Bank overdraft                                                                         $     65,865                -
   Line of credit                                                                              973,465     $     67,189
   Current portion of long-term debt                                                           234,173          220,845
   Current portion of convertible secured debenture                                            925,925
   Accounts payable                                                                            490,536          395,383
   Accrued expenses                                                                          1,046,773          675,681
   Deferred revenue                                                                            143,237          629,248
                                                                                          ------------     ------------
       Total current liabilities                                                             3,879,974        1,988,346
                                                                                          ------------     ------------

Long-Term Debt                                                                                  41,532          150,047
Convertible Secured Debenture                                                                3,353,010                -
Obligation to Issue Common Stock                                                               273,554          273,554
                                                                                          ------------     ------------
    Total liabilities                                                                        7,548,070        2,411,947
                                                                                          ------------     ------------

Commitments, Contingencies and Other Matters                                                         -                -

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; 8,263,324 and
     8,233,324 shares issued and outstanding, respectively                                      82,633           82,333
   Common stock, Class B, $0.01 par value; 2,000,000 shares authorized; 835,260
     shares issued and outstanding                                                               8,353            8,353
   Common stock, FSAH Class B $0.001 par value; 10,000,000 shares authorized;
     2,671,087 shares issued and outstanding                                                       600              600
   Additional paid-in capital                                                               65,448,928       64,602,803
   Accumulated deficit                                                                     (52,914,428)     (52,411,167)
   Accumulated comprehensive income                                                             71,885            5,596
                                                                                          ------------     ------------
    Total stockholders' equity                                                              12,697,971       12,288,518
                                                                                          ------------     ------------
   Total liabilities and stockholders' equity                                             $ 20,246,041     $ 14,700,465
                                                                                          ============     ============
</TABLE>

            See notes to condensed consolidated financial statements.


                                                                               2
<PAGE>

                   SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED DECEMBER 31,
                                                                     2005            2004
                                                                 -----------     -----------

<S>                                                              <C>             <C>
Revenues                                                         $ 1,536,814     $   505,300
                                                                 -----------     -----------
Operating Expenses:
  Cost of sales                                                      815,927         285,030
  Selling, general and administrative                                815,541         358,642
  Amortization of intangibles                                         35,284             500
  Depreciation                                                         9,648           4,283
                                                                 -----------     -----------
                                                                   1,676,400         648,455
Operating Loss                                                      (139,586)       (143,155)


Other Income                                                          17,514             741
Foreign Currency Gain (Loss)                                         (15,697)        769,543
Acquisition Costs Incurred                                          (209,342)              -
Amortization of Convertible Debt Discounts and Issuance Costs       (123,169)              -
Interest Expense                                                     (89,862)         (5,315)
Interest Income                                                      105,179         165,393
                                                                 -----------     -----------

Income (Loss) before Income Taxes                                   (454,963)        787,207

Provision for Income Taxes                                                 -               -
                                                                 -----------     -----------

Net Income (Loss)                                                $  (454,963)    $   787,207
                                                                 ===========     ===========

Net Income (Loss) Per Share:

  Basic                                                          $     (0.05)    $      0.09
                                                                 ===========     ===========
  Diluted                                                        $     (0.05)    $      0.09
                                                                 ===========     ===========

Weighted Average Common Stock Outstanding:

  Basic                                                            9,076,518       8,695,513
                                                                 ===========     ===========
  Diluted                                                          9,076,518       9,037,886
                                                                 ===========     ===========
</TABLE>


           See notes to condensed consolidated financial statements.


                                                                               3
<PAGE>

                   SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED DECEMBER 31,
                                                                     2005            2004
                                                                 -----------     -----------
<S>                                                              <C>             <C>
Revenues                                                         $ 2,503,251     $ 1,115,635
                                                                 -----------     -----------
Operating Expenses:
   Cost of sales                                                   1,255,812         565,850
   Selling, general and administrative                             1,479,237         645,886
   Amortization of intangibles                                        69,702           1,000
   Depreciation                                                       19,083           8,557
                                                                 -----------     -----------
                                                                   2,823,834       1,221,293

Operating Loss                                                      (320,583)       (105,658)

Other Income                                                          41,426         165,896
Foreign Currency Gains                                                17,540         540,330
Acquisition Costs Incurred                                          (209,342)              -
Amortization of Convertible Debt Discounts and Issuance Costs       (123,169)              -
Interest Expense                                                     (98,426)        (10,875)
Interest Income                                                      189,293         332,797
                                                                 -----------     -----------
Income (Loss) Before Income Taxes                                   (503,261)        912,490
                                                                 -----------     -----------

Provision for Income Taxes                                                 -               -
                                                                 -----------     -----------
Income (Loss) from  Operations                                      (503,261)        912,490

Net Income (Loss)                                                $  (503,261)    $   912,490
                                                                 ===========     ===========

Income (Loss) Per Share:

   Basic                                                         $     (0.06)    $      0.10
                                                                 ===========     ===========
   Diluted                                                       $     (0.06)    $      0.10
                                                                 ===========     ===========

Weighted Average Common Stock Outstanding:

   Basic                                                           9,072,551       8,695,513
                                                                 ===========     ===========
   Diluted                                                         9,072,551       9,019,116
                                                                 ===========     ===========
</TABLE>


                 See notes to consolidated financial statements.

                                                                               4
<PAGE>

                   SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           SIX MONTHS ENDED DECEMBER 31,
                                                               2005            2004
                                                           -----------     -----------
Cash Flows from Operating Activities:
<S>                                                        <C>             <C>
   Net income (loss) from operations                       $  (503,261)    $   912,490
   Depreciation and amortization                               211,953           9,557
      Stock-based compensation                                  34,188               -
      Warrants issued for services                                   -          19,200
   Unrealized foreign currency gains                           (71,657)       (700,077)
   Accrued interest income on notes receivable                (120,031)       (306,540)
   Changes in operating assets and liabilities, net           (998,245)       (468,537)
                                                           -----------     -----------

Net cash used in operating activities                       (1,447,053)       (533,907)
                                                           -----------     -----------

Cash Flows from Investing Activities:

   Acquisition expenses capitalized                             (3,322)              -
   Purchase of fixed assets                                     (1,896)              -
   Proceeds from repayment of long-term note receivable         48,164       5,356,868
                                                           -----------     -----------

Net cash provided by investing activities                       42,946       5,356,868
                                                           -----------     -----------

Cash flows from financing activities:

       Short term borrowings, net                              906,276         119,200
       Increase in deposits held in escrow                  (1,184,450)
       Increase in bank overdraft                               65,865               -
       Net proceeds from convertible debenture               4,373,301               -
       Repayment of long term debt                             (89,303)        (11,166)
       Issuance of common stock                                 22,500               -
                                                           -----------     -----------
Net cash provided by financing activities                    4,094,189         108,034
                                                           -----------     -----------

Effect of exchange rates on cash                                66,289               -

Net increase in cash and cash equivalents                    2,765,371       4,930,995
Cash and cash equivalents, beginning of period               4,870,486       1,235,310
                                                           -----------     -----------
Cash and cash equivalents, end of period                   $ 7,626,857     $ 6,166,305
                                                           ===========     ===========

Supplemental cash flow information:

       Cash paid for interest                              $    54,445     $    10,875
                                                           ===========     ===========
</TABLE>


           See notes to condensed consolidated financial statements.


                                                                               5
<PAGE>


                   SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1.    FINANCIAL INFORMATION

We are a holding company that seeks to acquire  businesses  fitting a predefined
investment  strategy.  We are the parent company of Fantasy Sports,  Inc., which
operates the  Fantasycup.com  website,  and  specializes in  subscription  based
NASCAR,  college  football and  basketball  and other  fantasy  sports games and
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.

NOTE 2.    BASIS OF PREPARATION

The  unaudited  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 equity or cost method of
accounting.  All significant  intercompany  accounts and transactions  have been
eliminated in the consolidated financial statements.

Pursuant to the rules and regulations of the Securities and Exchange  Commission
for  Form  10-Q,  the  financial  statements,  footnote  disclosures  and  other
information  normally  included in financial  statements  prepared in accordance
with generally accepted accounting principles have been condensed. The financial
statements  contained  in this report are  unaudited  but, in the opinion of the
Company,   reflect  all   adjustments,   consisting  of  only  normal  recurring
adjustments  necessary to fairly  present the financial  position as of December
31, 2005 and the results of operations and cash flows for the interim periods of
the fiscal year ending June 30, 2006  ("fiscal  2006") and the fiscal year ended
June 30, 2005 ("fiscal 2005")  presented  herein.  The results of operations for
any interim period are not necessarily  indicative of results for the full year.
These financial statements, footnote disclosures and other information should be
read in conjunction with the financial statements and the notes thereto included
in the Company's annual report on Form 10-K for the year ended June 30, 2005.

NET INCOME OR 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 the acquisition of Student
Sports.   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  acquisition  of Student  Sports is computed  using the average  market
price for the quarter.

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
expense the fair value of stock  options on the grant date and is effective  for
annual  periods  beginning  after June 15, 2005. In accordance  with the revised
statement, the Company will recognize the expenses
                                                                               6

<PAGE>

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
$17,094 and $34,188 for the three and six month periods ended December 31, 2005,
respectively, for employee stock options that vest 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  prescribed 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 was  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 for the three and six month periods ended  December 31,
2004, respectively.

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, loss per share from  continuing  operations  for the
three and six month  periods  ended  December  31, 2004 would have  changed,  as
indicated by the pro forma amounts set forth in the table below.

<TABLE>
<CAPTION>
                                                               THREE MONTHS        SIX MONTHS
                                                            ENDED DECEMBER 31,   ENDED DECEMBER 31,
                                                                 2004                 2004
                                                             -----------          -----------
<S>                                                          <C>                  <C>
          Income from continuing operations as reported      $   787,207          $   912,490
          Less: Compensation expense for options
               Awards determined by the fair-value-based
               Method                                            (68,437)             (68,437)
                                                             -----------          -----------
          Proforma net income from continuing
          Operations                                         $   718,770          $   844,053
                                                             ===========          ===========

          Basic:

               As reported                                   $      0.09          $      0.10
               Pro forma                                     $      0.08          $      0.10

          Assuming Full dilution:

               As reported                                   $      0.09          $      0.10
               Pro forma                                     $      0.08          $      0.09
</TABLE>

In July 2004,  warrant to purchase 180,000 shares of our 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.  These
warrants vest ratably over the three-year  period of the  agreement.  An expense
has been  recognized  for the  fair  value of  these  warrants  granted  to such
non-employee  in the  amounts of $19,200 for the first six months of fiscal year
2005.  Effective  May 1,  2005 the  consultant  was  appointed  to the  Board 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.


                                                                               7
<PAGE>

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,  the Company  paid  consideration  to  creditors  of  approximately
$609,000 in cash;  the Company  issued  approximately  377,000  shares of Common
Stock and  warrants  to purchase  200,000  shares of Common  Stock;  the Company
assumed  approximately  $400,000 in existing  bank debt,  as well as  contingent
consideration based on the future profitability of Strategy First.

The purchase  price was allocated on the basis of the  estimated  fair values of
the assets acquired and liabilities  assumed.  The acquisition was accounted for
as  a  purchase.  The  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                     $1,370,574
                                             ==========
        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.    CASH, CASH EQUIVALENTS AND ESCROW DEPOSIT

Cash and cash equivalents consist of cash and all highly liquid investments with
original maturities of three months or less. The vast majority our cash balances
are held in liquid  accounts at two highly rated financial  institutions.  While
these deposits are not insured,  the quality of such financial  institutions  is
such that the risks of loss on these funds are minimal. Restricted cash balances
at December  31,  2005  totaled  $973,465,  which is used as  collateral  on the
Company's line of credit.

The Company has classified  $1,184,450  (one million Euro) as an escrow deposit.
This amount has been deposited with the Commercial Court in Vienna,  in order to
secure a claim for  fulfillment  of an  investment  agreement.  The  Company has
subsequently  applied for repayment of this deposit.  The claim for  fulfillment
was  structured so as to ensure the maximum  likelihood of full repayment of the
deposit should we so request. We therefore  anticipate that substantially all of
this deposit will be refunded during the current  quarter.  However,  should the
repayment  request be opposed by the  defending  party,  we may require  further
legal  proceedings  to  redeem  this  deposit.  In this  event,  there can be no
assurance  as to the  final  amount,  if any,  that we will  recover  from  such
deposit.  To date there has been no filing to  prevent  full  repayment  of this
deposit.

                                                                               8

<PAGE>

NOTE 5.    INTANGIBLE ASSETS

 The  components of  amortizable  intangible  assets as of December 31, 2005 and
June 30, 2005 are as follows:

<TABLE>
<CAPTION>
Balance at December 31, 2005            GROSS CARRYING  ACCUMULATED
                                            AMOUNT      AMORTIZATION      TOTAL
                                          ----------    ----------     ----------

<S>                                       <C>           <C>            <C>
          Customer lists                  $  215,000    ($ 205,500)    $    9,500
          Game titles                      1,286,450       (85,786)     1,200,664

          Covenant not to compete             34,305        (7,601)        26,704
                                          ----------    ----------     ----------


          Balance at December 31, 2005    $1,535,755    ($ 298,887)    $1,236,868
                                          ==========    ==========     ==========


  Balance at June 30, 2005              GROSS CARRYING  ACCUMULATED
                                            AMOUNT      AMORTIZATION     TOTAL
                                          ----------    ----------     ----------

          Customer lists                 $  215,000     ($ 204,500)    $   10,500
          Game titles                     1,220,802        (20,347)     1,200,455

          Covenant not to compete            32,555        (1,809)         30,746
                                         ----------    ----------      ----------


          Balance at June 30, 2005       $1,468,357    ($ 226,656)     $1,241,701
                                         ==========    ==========      =========
</TABLE>

Intangible  assets that are subject to  amortization  are reviewed for potential
impairment  whenever events or circumstances  indicate that carrying amounts may
not be recoverable. Assets not subject to amortization are tested for impairment
at least annually.

Amortization  expense for intangible  assets for the three and six month periods
ended  December  31, 2005 were  $35,284  and  $69,702,  respectively.  Estimated
amortization  expense  for the rest of fiscal 2006 and for the  succeeding  four
fiscal years is as follows:

         2006          71,041
         2007         142,080
          2008        140,196
         2009         130,645
         2010         130,645

Thereafter            622,261
                      -------

                  $  1,236,868
                  ============

                                                                               9
<PAGE>

The balance in goodwill is as follows:

                            INTERNET FANTASY ENTERTAINMENT
                               SPORTS GAMES     SOFTWARE       TOTAL
                                ----------    ----------    ----------
Balance at December 31, 2005    $2,947,824    $  808,591    $3,756,415
                                ==========    ==========    ==========
Balance at June 30, 2005        $2,947,824    $  767,329    $3,715,153
                                ==========    ==========    ==========


NOTE 6.    CASH FLOWS

The changes in operating assets and liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                    SIX MONTHS ENDED DECEMBER 31,
                                                                        2005            2004
                                                                    -----------     -----------
<S>                                                                 <C>             <C>
Increase in accounts receivable                                     $  (654,680)    $    (1,273)
(Increase) decrease in inventories                                      (72,249)         10,565
Increase (decrease) in prepaid expenses and other current assets       (221,750)          2,970
Increase (decrease) in accounts payable                                  88,562         (74,185)
Decrease in other provisions and accruals                              (138,128)       (406,614)
                                                                    -----------     -----------
                                                                    $  (998,245)    $  (468,537)
                                                                    ===========     ===========
</TABLE>


NOTE 7.    BUSINESS SEGMENTS

As a result of the  acquisition of Strategy First on April 21, 2005, the Company
now operates in two  segments -  entertainment  software  and  internet  fantasy
sports games.  The operations of the  entertainment  software  specialize in the
publishing of software games for the PC platform. The operations of the Internet
fantasy  sports games segment  specialize in  Internet-based  subscriptions  for
NASCAR,  college  football  and  basketball  and  other  fantasy  sports  games.
Management  has chosen to organize  the  enterprise  around  differences  in the
products and services it provides.

Information concerning  identifiable assets as of December 31, 2005 and June 30,
2005 for the segments in which the Company  operated are shown in the  following
table. Corporate assets are principally cash and notes receivable.


                                                                              10
<PAGE>
                                           AS OF            AS OF
                                     DECEMBER 31, 2005   JUNE 30, 2005
                                        -----------      -----------
Identifiable Assets:

Segments:
     Entertainment software             $ 3,321,875      $ 2,345,845
     Internet fantasy sports games        3,247,336        3,195,566
                                        -----------      -----------
                                          6,569,211        5,541,411
      Corporate                          13,676,830        9,159,054
                                        -----------      -----------

Consolidated Totals                     $20,246,041      $14,700,465
                                        ===========      ===========

Information  concerning the results of operations for three and six months ended
December 31, 2005 and 2004 for the segments in which the company operates are as
follows:

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED DECEMBER 31,
                                                            2005              2004
                                                        -----------       -----------
Segments:
<S>                                                     <C>                <C>
     Entertainment software                             $   983,434        $        -
     Internet Fantasy Sports games                          553,380           505,300
                                                        -----------       -----------
Consolidated Totals                                     $ 1,536,814       $   505,300
                                                        ===========       ===========
 Income (loss) from operations:

Segments:

     Entertainment software                             $    (9,259)          $     -
     Internet Fantasy Sports games                          121,508           104,858
                                                        -----------       -----------
                                                            112,249           104,858
Corporate:

     Corporate general and administrative expenses         (251,835)         (248,013)
     Other income                                            17,514               741
     Foreign currency gain (loss)                           (15,697)          769,543
     Acquisition costs incurred                            (209,342)                -
     Amortization of convertible debt discounts
     and issuance costs                                    (123,169)
     Interest  expense                                      (89,862)           (5,315)
     Interest  income                                       105,579           165,393
                                                        -----------       -----------
Consolidated Totals                                     $  (454,963)      $   787,207
                                                        ===========       ===========
</TABLE>

                                                                              11

<PAGE>
<TABLE>
<CAPTION>
                                                        SIX MONTHS ENDED DECEMBER 31,
                                                            2005             2004
                                                        -----------       -----------
Segments:
<S>                                                     <C>             <C>
     Entertainment software                             $ 1,354,143     $           -
     Internet Fantasy Sports games                        1,149,108         1,115,635
                                                        -----------       -----------
Consolidated Totals                                     $ 2,503,251       $ 1,115,635
                                                        ===========       ===========
 Income (loss) from operations:

Segments:

     Entertainment software                             $  (200,235)    $           -
     Internet Fantasy Sports games                          361,125           354,502
                                                        -----------       -----------
                                                            160,890           354,502
Corporate:

     Corporate general and administrative expenses         (481,473)         (460,160)
     Other income                                            41,426           165,896
     Foreign currency gain                                   17,540           540,330
     Acquisition costs incurred                            (209,342)                -
      Amortization of convertible debt discounts
     and issuance costs                                    (123,169)                -
     Interest  expense                                      (98,426)                -
     Interest  income                                       189,293           332,797
                                                        -----------       -----------
Consolidated Totals                                     $  (503,261)      $   912,490
                                                        ===========       ===========
</TABLE>


NOTE 8.    DEBT

LINES OF CREDIT

In June 2002,  Fantasy  Sports  obtained a secured  line of credit  facility for
borrowings up to $1.0  million,  which is fully secured by cash balances held in
the  Company's  account.  This  facility  is due on  demand  and has a  floating
interest rate that is based on the prime rate minus 1.75%. On December 31, 2005,
this rate was at 5.75%.  The  balance  outstanding  under this line of credit at
December 31, 2005, was $973,465.

LONG TERM DEBT

                                          DECEMBER 31,      JUNE 30,
                                              2005            2005
                                           ---------       ---------
          Vehicle and equipment loans      $   9,281       $  10,633
          Term loan                          266,424         360,259
                                           ---------       ---------
                                             275,705         370,892
          Less current portion              (234,173)       (220,845)
                                           ---------       ---------
          Long-term debt, net              $  41,532       $ 150,047
                                           =========       =========


                                                                              12
<PAGE>
Scheduled debt maturities as of December 31, 2005 are as follows:

          1 Year or less:      $234,173
          1-2 Years              41,532
                               --------
          Total                $275,705
                               ========


NOTE 9.    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 December 31, 2005 the interest rate was 8.75%.  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 is to be redeemed at the rate of $185,185
per month, plus accrued and unpaid interest and liquidated  damages,  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. 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")  (provided,
however,  that 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).

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.

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


                                                                              13
<PAGE>
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 December 31, 2005, net of unamortized discounts is
as follows:

Principal amount of note                                           $ 5,000,000

Discount for beneficial conversion features                           (113,622)
Discount for fair value of warrants and options                       (607,443)
                                                                   -----------

Balance as of December 31, 2005, net of unamortized discounts      $ 4,278,935
                                                                   -----------

Scheduled maturities of the convertible  debenture as of December 31, 2005 were
as follows:

          1 Year or less:      $  925,925
          1-2 Years             4,074,075
                               ----------
          Total                $5,000,000
                               ==========

Interest  expense  related to the note amounted to $70,833  during the period of
October 31, 2005 through December 31, 2005.

Amortization  of discounts for the  beneficial  conversion  features and warrant
resulted in charges to Amortization  of Convertible  Debt Discounts and Issuance
Costs  totaling  $68,673  during the three months  ended  December 31, 2005 .The
Company also  incurred  expenses of $626,699  directly  related to securing this
note.  These expenses are being  amortized over the term of the note and $54,496
of these costs were included in Amortization  of Convertible  Debt Discounts and
Issuance Costs during the quarter ended December 31, 2005.

Estimated  amortization expense related to the warrants,  beneficial  conversion
feature,  and costs  related to  securing  this note for the rest of fiscal 2006
through debt maturity is as follows:

           2006        369,505
           2007        613,561
           2008        287,393
           2009         22,809
                     ---------

          Total      1,293,968
                     ---------


NOTE 10.   GUARANTEES

During the first quarter of fiscal 2006,  the Company  entered into an agreement
with one of Strategy  First's  game  developers  to  guarantee  certain of their
royalty payments. The guarantee is limited to $100,000. The royalties subject to
these  guarantees  are  expected to be earned from games  released in the second
quarter of fiscal 2006.  As of December 31, 2005,  $42,000 has been earned under
these agreements which are payable in February 2006.

The Company  anticipates  that Strategy  First will pay the royalties due to its
developers when earned and does not anticipate having to make any payments under
these guarantees.


                                                                              14

<PAGE>
ITEM 2     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

BACKGROUND AND 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 connection with the shift in our business
plan, we changed our name to Leisure Planet Holdings,  Ltd. In 2000, we disposed
of all our  operations in South Africa,  closed  Leisureplanet.com  and acquired
100% of Fantasy Sports,  Inc. In 2001, we acquired 100% of Student Sports,  Inc,
which we sold in 2003.  In 2005,  we acquired  100% of Strategy  First Inc. As a
result of these changes and developments,  we have  reestablished our investment
criteria. Currently, our strategy focuses on the following:

a) Acquiring controlling stakes in high quality game related media and marketing
businesses  with strong  management  teams that are positioned to use technology
and Internet related platforms to fuel above average growth.

b) Our  investments  must show an ability to contribute,  in the short to medium
term, to earnings per share through operating profit or capital appreciation.

c) We aim to add value to our  investments  by  operating  in  partnership  with
committed,  incentivised,  entrepreneurial  management  who show the  vision and
ability to grow their businesses into industry or niche leaders.

RESULTS OF OPERATIONS

Fantasy  Sports has seasonal  trends that affect the revenues and results of its
businesses.  Fantasy Sports earns its revenues and recognizes most of its income
during the June and September quarters.  Therefore, the results for the December
and March quarters are negatively affected by this seasonality.

QUARTER ENDED DECEMBER 31, 2005  AS COMPARED TO QUARTER ENDED DECEMBER 31, 2004

Since the  Company  has owned  Strategy  First  since  April  2005,  prior  year
comparisons  for this  operation  are not included in the MD&A.  During the last
fiscal year, Strategy First operated under bankruptcy protection.  Therefore its
prior  numbers do not  provide an accurate  or valid  comparison  to its current
operations.

REVENUES

Revenues  were  $1,537,000  in the second  quarter of fiscal 2006 as compared to
$505,000 in the same period in the prior year. Fantasy Sports revenues increased
$48,000 to $553,000.  Revenues  from the College  Football  Challenge  increased
$33,000 due to a substantial increase in the number of subscribers to this game.
Revenues for Strategy First totaled  $983,000  during the quarter ended December
31, 2005,  which was an increase of $612,000 from the quarter,  ended  September
30, 2005.  The increase in revenue over the previous  quarter was  primarily the
result of releasing three new game titles in North America.

COST OF SALES

Cost of sales was $816,000 or 53.1% of total  revenues in the second  quarter of
fiscal 2006, as compared to $285,000,  or 56.4%, of total revenues,  in the same
period of the prior year.  Cost of sales for Fantasy  Sports were  $342,000,  or
61.8 %, of related  revenues as  compared  to 56.4 % of related  revenues in the
same period in the prior year. The increase is primarily the result of increases
in merchandise prize fulfillment  expenses to winning participants in our Nextel
Cup and  College  Football  Challenges.  Cost of


                                                                              15
<PAGE>

sales for Strategy First were $474,000 or 48.2% of related  revenues  during the
quarter  ended  December  31,  2005 as compared to $164,000 or $46.4% of related
revenues during the quarter ended September 30, 2005.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling,  general and  administrative  expenses for the second quarter of fiscal
2006 were $816,000,  an increase of approximately  $457,000 over the same period
in the prior year.  Selling,  general and  administrative  expenses for Strategy
first totaled $478,000. Selling, general and administrative expenses for Fantasy
sports  decreased by $25,000 from $113,000 during the quarter ended December 31,
2004 to $88,000 during the comparable  quarter this fiscal year primarily as the
result of  reductions  in  advertising  expenses.  Corporate  overhead  expenses
increased  $4,000 to $250,000 from $246,000  during the same period in the prior
year.

AMORTIZATION AND DEPRECIATION

Amortization of intangible assets increased $35,000 in the second fiscal quarter
of fiscal 2006 from the same period in the  previous  fiscal year as a result of
the  acquisition  of  Strategy  First in April  2005.  Depreciation  expense was
approximately  $10,000 in the second  quarter of fiscal  2006,  an  increase  of
approximately  $5,000 to the comparative prior period and incurred  primarily as
the result of the acquisition of Strategy First in April 2005.

OTHER INCOME

Other income for the second  quarter of fiscal 2006  increased  $17,000 over the
same period in the prior year and  consisted  primarily of gains  recognized  by
short term investments held in the Company's managed fund cash account.

FOREIGN  CURRENCY GAINS AND LOSSES

The  foreign  currency  losses  during  the second  quarter of fiscal  2006 were
approximately $16,000, as compared to gains of $770,000 in the second quarter of
fiscal  2005.  Foreign  currency  gains of  $44,000  were  related to the assets
remaining from the sale of discontinued South African operations. Strategy first
recognized  $2,000 in gains and $28,000 in unrealized  losses were recognized by
the parent company on the 1 million Euro deposited with the Commercial  Court in
Vienna.  The functional  Currency of Strategy  First is the Canadian  dollar and
it's products are sold  throughout the United States and Europe.  Gains (losses)
from  the  discontinued   South  African   operations  are  the  result  of  the
fluctuations  of the South African Rand against the US dollar.  During the three
months ended December 31, 2005 the Rand appreciated approximately 5% against the
US dollar,  while it appreciated 12% in the  corresponding  period last year. In
fiscal 2006,  the decrease in the market value of Rand put/US dollar call option
offset these foreign  currency  gains,  which resulted in a smaller net gain for
the period. 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  three  months  ended  December  31,  2004,  the  Company   received
approximately  R31 million (South African Rand) as partial payment of notes owed
by Salwin Pty, Ltd. As a result of this payment the Company converted unrealized
gains into cash.

ACQUISITION COSTS INCURRED

During fiscal year 2006 the Company incurred  approximately $209,000 of expenses
pursuing the  unsuccessful  acquisition of a European  Company that develops and
publishes entertainment  software.  These costs consisted primarily of legal and
travel expenses. During the quarter ended December 31, 2005 the Company expensed
these previously  capitalized costs when it became apparent that the acquisition
would not occur.  At December 31, 2005 the company had  $1,185,000 in restricted
cash  that is  currently  being  held in escrow  as a result  of  litigation  in
connection with this unsuccessful acquisition.


                                                                              16
<PAGE>
AMORTIZATION OF CONVERTIBLE DEBT  DISCOUNTS AND ISSUANCE COSTS

On October 31, 2005, the Company issued a $5,000,000  principal  amount Variable
Rate Secured Convertible Note and a warrant to purchase additional shares of the
Company's Common Stock.  Based upon the closing price per share of the Company's
Common Stock on the date of issuance,  and the effective  conversion rate, there
was a beneficial conversion feature. Approximately $665,000 of the proceeds were
allocated  to the  warrants.  The  Company  also  incurred  expenses of $627,000
directly related to securing this note. Amortization of the warrants issued, the
beneficial conversion feature of the note and the costs associated with securing
this note totaled $123,000 for the quarter ended December 31, 2005.

INTEREST EXPENSE

Interest  expense of $90,000 was  recorded  during the second  quarter of fiscal
2006 as  compared  to $5,000 in the same  period  of the  prior  year.  Interest
expense  increased  primarily  as a result of interest  charges  incurred in the
second quarter fiscal 2006 on the convertible debenture security,  which totaled
$71,000 during the quarter, ended December 31, 2005.

INTEREST INCOME

Interest  income of $105,000 was earned during the second quarter of fiscal 2006
as compared to $165,000 in the same  quarter of the prior year.  The decrease in
interest income in the second quarter of fiscal 2006 was primarily the result of
the lower principal  balances on the notes receivable from the sale of the South
African operations.

PROVISION FOR INCOME TAXES

The Company is registered in Bermuda, where no tax laws are applicable. Three of
the Company's  subsidiaries are subject to US income taxes and one is subject to
Canadian  income taxes.  Prior to this date,  they have incurred  losses for tax
purposes.  The  deferred  tax asset  generated  by the tax losses and  temporary
differences has been fully reserved.

NET INCOME (LOSS)

The  Company  recognized  a net loss of  $454,000  during the second  quarter of
fiscal 2006 as compared to net income of $787,000  during the same period in the
prior year for an overall  decrease in net income of  $1,241,000.  The operating
loss for the three months ended  December  31, 2005  decreased to $140,000  from
$143,000 in the same period of the prior  fiscal year.  The  reduction in income
over the prior year is  primarily  the result of a $754,000  decrease in foreign
currency  gains in the second fiscal quarter of fiscal 2006 from the same period
in the previous  fiscal year. The Company also incurred  $209,000 of acquisition
expenses, $123,000 of amortizable convertible debt discounts and issuance costs,
and $71,000 of interest  charges as a result of the issuance of the  convertible
secured  debenture  during the  second  quarter  of fiscal  2006.  None of these
expenses were incurred during the second fiscal quarter of 2005

SIX MONTHS ENDED  DECEMBER 31, 2005 AS COMPARED TO SIX MONTHS ENDED DECEMBER 31,
2004

REVENUES

Revenues  were  $2,503,000 in the first six months of fiscal 2006 as compared to
$1,116,000  in the same  period  in the  prior  year.  Fantasy  Sports  revenues
increased  $33,000 to $1,149,000  primarily as a result of increases in revenues
from the College Football Challenge due to a substantial  increase in the number
of subscribers to this game. Revenues for Strategy First totaled  $1,354,000,000
during the six months ended  December 31, 2005.  Revenues for the Quarter  ended
December 31. 2005 increased  $612,000 from the quarter ended September 30, 2005.
The increase in revenue over the previous  quarter was  primarily  the result of
releasing  three new game titles in North America and a substantial  increase in
the recognition of revenue on guaranteed contracts.


                                                                              17
<PAGE>
COST OF SALES

Cost of sales  were  $1,256,000  or 50.2% of total  revenues  in the for the six
months  ending  December  31, 2005 as  compared  to $566,000 or 50.7%,  of total
revenues, in the same period of the prior year. Cost of sales for Fantasy Sports
were $620,000,  or 54.0 %, of related  revenues as compared to 50.7 % of related
revenues in the same period in the prior year.  The  increase is  primarily  the
result of increases in merchandise prize fulfillment expenses. Cost of sales for
Strategy First was $638,000 or 47.1% of related  revenues  during the six months
ended December 31, 2005.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling,  general  and  administrative  expenses  for the first two  quarters of
fiscal 2006 were $1,479,000 an increase of approximately  $832,000 over the same
period in the prior year.  Selling,  general  and  administrative  expenses  for
Strategy first totaled $836,000.  Selling,  general and administrative  expenses
for Fantasy  sports  decreased  by $26,000 from  $190,000  during the six months
ended December 31, 2004 to $164,000  during the  comparable  quarter this fiscal
year  primarily as the result of reductions in advertising  expenses.  Corporate
overhead  expenses  increased  $21,000 to $477,000 from $456,000 during the same
period in the prior year.

AMORTIZATION AND DEPRECIATION

Amortization of intangible assets increased $69,000 in the first two quarters of
fiscal 2006 from the same period in the previous  fiscal year as a result of the
acquisition  of  Strategy  First  in  April  2005.   Depreciation   expense  was
approximately  $19,000 for the six months ending  December 31, 2005, an increase
of  approximately  $10,000  from  the  comparative  prior  period  and  incurred
primarily as the result of the acquisition of Strategy First in April 2005.

OTHER INCOME

Other  income for the first two  quarters of fiscal 2006  decreased  $124,000 to
$41,000 as compared to the same period in the prior year.  During the six months
ending December 31, 2004 the Company  received  $164,000  relating to a one-time
recovery from a bankruptcy proceeding.

FOREIGN CURRENCY GAINS AND LOSSES

Foreign  currency  gains  during  the first  two  quarters  of fiscal  2006 were
$18,000,  as compared to gains of $540,000 in the  Comparable  period for fiscal
2005.  Foreign  currency  gains of $16,000 were related to the assets  remaining
from  the  sale  of  discontinued  South  African  operations.   Strategy  First
recognized  $4,000 in losses and $28,000 in losses were recognized by the parent
company.

ACQUISITION COSTS INCURRED

During  fiscal  year the  Company  incurred  approximately  $209,000 of expenses
pursuing the  unsuccessful  acquisition of a European  Company that develops and
publishes entertainment  software.  These costs consisted primarily of legal and
travel  expenses.  During the six months  ended  December  31,  2005 the Company
expensed these  previously  capitalized  costs when it became  apparent that the
acquisition  would not occur. At December 31, 2005 the company had $1,185,000 in
restricted cash that is currently being held in escrow as a result of litigation
in connection with unsuccessful acquisition.

AMORTIZATION OF CONVERTIBLE DEBT  DISCOUNTS AND ISSUANCE COSTS

On October 31, 2005, the Company issued a $5,000,000  principal  amount Variable
Rate Secured  Convertible that included a warrant to purchase  additional shares
of the  Company's  Common  Stock.  Based upon the closing price per share of the
Company's  common stock on the date of  issuance,  there were  intrinsic  values
associated with the beneficial  conversion feature of the note and the warrants,
which were  issued.  The Company  also  incurred  expenses of $627,000  directly
related  to  securing  this  note.  Amortization  of the  warrants  issued,  the
beneficial conversion feature of the note and the costs associated with securing
this note totaled $123,000 for the six months ended December 31, 2005.

                                                                              18
<PAGE>
INTEREST EXPENSE

Interest expense of $98,000 was recorded during the first two quarters of fiscal
2006 as  compared  to $11,000  in the same  period of the prior  year.  Interest
expense  increased  primarily  as a result of interest  charges  incurred in the
first six months of fiscal 2006 on the  convertible  debenture  security,  which
totaled $71,000 during the six months ended December 31, 2005.

INTEREST INCOME

Interest  income of $189,000 was earned  during the first two quarters of fiscal
2006 as compared to $333,000 in the same period of the prior year.  The decrease
in interest  income in the first two quarters of fiscal 2006 was  primarily  the
result of the lower principal  balances on the notes receivable from the sale of
the South African operations.

NET INCOME (LOSS)

The Company  recognized a net loss of $503,000  during the first two quarters of
fiscal 2006 as compared to net income of $912,000  during the same period in the
prior year for an overall  decrease in net income of  $1,415,000.  The operating
loss for the six months  end  December  31,  2005  increased  to  $321,000  from
$106,000  in the same  period of the prior  fiscal  year.  Operating  income for
Fantasy Sports  improved  $6,000 and totaled  $361,000.  Strategy First incurred
operating losses of $200,000.  Other factors that contributed to the decrease in
income  over the prior year  included a $522,000  decrease  in foreign  currency
gains,  a $122,000  decrease  in other  income,  and a $221,000  decrease in net
interest  income.  The Company also incurred  $209,000 of acquisition  expenses,
$123,000 of  amortizable  convertible  debt  discounts and issuance  costs,  and
$71,000 of  interest  charges  as a result of the  issuance  of the  convertible
secured  debenture during the six months ending December 31, 2005. None of these
expenses were incurred during the first six months of fiscal 2005.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Cash increased by $2,757,000  from  $4,870,000 at June 30, 2005 to $7,627,000 at
December 31, 2005.  The increase in cash is primarily the result of net proceeds
received from the issuance of the convertible  secured  debenture offset by cash
used in operations.

Working  capital  increased  $2,830,000  from  $3,638,000  at June 30, 2005,  to
$6,468,000  at December 31, 2005.  This  increase is primarily the result of our
increased cash balances offset by the cash used in operations.

At December 31, 2005, the Company had borrowings of $6,249,000  which  consisted
of a $5,000,000  principal  obligation due on a convertible  secured  debenture,
$973,000 of advances  against  lines of credit  secured by like amounts of cash,
term loans of $267,00, and $9,000 of equipment and vehicle loans.

The Company expects to meet its short and long term  obligations in part through
cash  balances  and  the  collection  of  amounts  due  from  outstanding  notes
receivable.  Currently,  the Company carries approximately $3.5 million in notes
receivable  denominated in South African Rand. The largest of these Notes,  is a
Note from Salwin  Investments  Pty.  Ltd.  After a partial  prepayment  of R31.5
million received in December 2004, the Salwin note has a remaining face value of
R19 million (approximately $3 million).

This note is supported  by  approximately  18% of the shares in First  Lifestyle
Holdings,  it has no fixed  repayment terms and if not paid by November 2020, it
will be cancelled. The Company monitors the financial results of First Lifestyle
Holdings on a quarterly and annual basis. It is the Company's opinion,  based on
reviews of audited financial statements, interim management accounts, reviews of
budgets and projections and inquiries of management of First Lifestyle Holdings,
that the 18%  shareholding of First Lifestyle  Holdings has sufficient  value to
justify the carrying value of the Salwin note.

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<PAGE>
To the extent that note  payments  are  collected  in South  African  Rand,  the
Company  expects to  repatriate  those funds to the United  States.  The Company
believes that  repatriation  of the full amount is allowable under current South
African foreign currency regulations.  Over the last six years, the Company has,
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  the
Company's ability to repatriate the remaining assets.

CRITICAL ACCOUNTING POLICIES

The  following  is a  discussion  of the  accounting  policies  that the Company
believes are critical to its operations:

REVENUES

Strategy  First  distributes  the majority of its products  through  third-party
software  distributors  to  mass-merchant  and major  retailers  and directly to
certain  Personal  Computer  ("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 provide for
product  returns and price  markdowns.  For product  shipments to these software
distributors  or  retailers,  Strategy  First  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.  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. If product sell-through results at retail store locations fall
significantly  below  anticipated  levels the adequacy of this  allowance may be
insufficient. Strategy First's 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 First will recognize 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 First receives guaranteed royalty income and these revenues
are recorded upon performance of deliverables per the royalty agreements.

Revenues  generated by Fantasy Sports are seasonal from  mid-February to the end
of November. Fantasy Sports' collects the majority of its revenue from customers
at the  beginning  and  mid-point of a season and defers  recognition  of income
until the season  starts.  Once a season begins  revenue is  recognized  prorata
until the season ends.

CASH, CASH EQUIVALENTS AND ESCROW DEPOSIT

Cash and cash equivalents consist of cash and all highly liquid investments with
original maturities of three months or less. The vast majority our cash balances
are held in liquid  accounts at two highly rated financial  institutions.  While
these deposits are not insured,  the quality of such financial  institutions  is
such that the risks of loss on these funds are minimal. Restricted cash balances
at December  31,  2005  totaled  $973,465,  which is used as  collateral  on the
Company's line of credit.

The Company has classified  $1,184,450  (one million Euro) as an escrow deposit.
This amount has been deposited with the Commercial Court in Vienna,  in order to
secure a claim for  fulfillment  of an  investment  agreement.  The  Company has
subsequently  applied for repayment of this deposit.  The claim for  fulfillment
was  structured so as to ensure the maximum  likelihood of full repayment of the
deposit should we so request. We therefore  anticipate that substantially all of
this deposit will be refunded during the current  quarter.  However,  should the
repayment  request be opposed by the  defending  party,  we may

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<PAGE>
require further legal proceedings to redeem this deposit.  In this event,  there
can be no assurance as to the final  amount,  if any,  that we will recover from
such deposit. To date there has been no filing to prevent full repayment of this
deposit.

GOODWILL

Goodwill  represents the excess of the purchase price over the fair market value
of  net  assets  acquired.  Evaluating  goodwill  for  impairment  involves  the
determination of the fair market value of our reporting units.  Inherent in such
fair market value determinations are certain judgments and estimates,  including
the interpretation of current economic indicators and market valuations, and the
Company's  strategic  plans  with  regard  to  its  operations.  To  the  extent
additional information arises or the Company's strategies change, it is possible
that our conclusion regarding goodwill impairment could change, which could have
a material effect on the Company's 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, 2005 and  determined  that goodwill was not  impaired.  While the
Company  believes that no  impairment  exists,  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,  trademarks,  customer lists and
other intellectual property 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  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.

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.  Any movements of interest rates as
they relate to outstanding debt would be immaterial to the financial  results of
the Company.

INTEREST RATE RISK

At December 31, 2005, our cash resources and notes receivable earned interest at
variable  rates.  The Company also pays interest at variable  rates on long term
debt.  Accordingly,  any  change in  interest  rates will  affect the  Company's
earnings.

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 U.S.
Dollar.  At  December  31,  2005  Strategy  First  had net  assets  of  $694,000
originating in Canadian Dollars and net assets of $278,000 originating in Euros.

At December 31, 2005 the Company had Cash deposits  denominated  in Euros with a
U.S.  Dollar  value of  $1,184,450.  This has exposed the Company to market risk
with respect to  fluctuations  in the relative  value of the Euro against the US
Dollar.

                                                                              21
<PAGE>
Certain of the  Company's  cash  balances  and the  remaining  notes  receivable
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 U.S.
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 serves 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 its
price was marked to market at the close of business on December  31,  2005.  The
Company will continue to adjust the market value of this option as of the end of
subsequent reporting periods.

At December 31, 2005, we had assets  denominated in South African Rand of R 33.8
million.

ITEM 4.  CONTROLS AND PROCEDURES

We maintain  disclosure  controls and procedures that are designed to ensure (1)
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 (2)
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 quarterly  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 addition, there have been no significant changes in our internal controls and
procedures or in other factors that could  significantly  affect those  controls
since our evaluation.

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<PAGE>

                           PART II - OTHER INFORMATION

ITEM 6:  EXHIBITS

(a) Exhibits:

31.1     Certification  pursuant  to Section  302 of the  Sarbanes  Oxley Act of
         2002.

32.1     Certification  pursuant to 18 U.S.C.  1350 adopted  pursuant to Section
         906 of the Sarbanes-Oxley Act of 2002.

(b)      Reports on Form 8-K:

         (1)      Current  Report on Form 8-K,  filed  with the  Securities  and
                  Exchange Commission on October 18, 2005.

         (2)      Current  Report on Form 8-K,  filed  with the  Securities  and
                  Exchange Commission on October 26, 2005.

         (3)      Current  Report on Form 8-K,  filed  with the  Securities  and
                  Exchange Commission on October 27, 2005.

         (4)      Current  Report on Form 8-K,  filed  with the  Securities  and
                  Exchange Commission on November 4, 2005.

         (5)      Current  Report on Form 8-K,  filed  with the  Securities  and
                  Exchange Commission on November 17, 2005.


                                                                              23
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned duly authorized.

Date: February 14, 2006

                                           SILVERSTAR HOLDINGS, LTD.


                                           /s/ Clive Kabatznik
                                           -------------------------------------
                                           Clive Kabatznik
                                           Chief Executive Officer,
                                           President and Chief Financial Officer


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