SILVERSTAR HOLDINGS LTD - 10-Q
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                       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 March 31, 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                          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 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 [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}

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                        SILVERSTAR HOLDINGS LTD - 10-Q
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                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

      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 [ ]



                      APPLICABLE ONLY TO CORPORATE ISSUERS:

                  Title of Class            Shares Outstanding on May 3, 2006
                  --------------            ---------------------------------
               Class A Common Stock                    8,327,197
               Class B Common Stock                      814,786
                                                       ---------
               Total                                   9,141,983



                                                                               2

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                        SILVERSTAR HOLDINGS LTD - 10-Q
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PART I - FINANCIAL INFORMATION

Item 1      Financial Statements

            Condensed  Consolidated Balance Sheets at March 31, 2006 (Unaudited)
            and June 30, 2005

            Condensed Consolidated  Statements of Operations (Unaudited) for the
            three and nine months ended March 31, 2006 and 2005

            Condensed Consolidated Statements of Cash Flows (Unaudited) for nine
            months ended March 31, 2006 and 2005

            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 4      Submission of Matters to a Vote of Security Holders

Item 6      Exhibits and Reports on Form 8-K



SIGNATURES

                                                                               3

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                        SILVERSTAR HOLDINGS LTD - 10-Q
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                         SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
                           CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                     MARCH 31,       JUNE 30,
                                                                       2006            2005

                                                                    (Unaudited)
                                                                   ------------    -----------

                          ASSETS
<S>                                                               <C>             <C>
Current assets:
   Cash and cash equivalents, includes restricted cash of
     $886,306 and $67,189 respectively (see note 2)               $  7,997,285    $  4,865,291
   Accounts receivable, net                                            893,732          94,378
   Inventory                                                            56,369              --
   Current portion of long-term notes receivable                       157,727
                                                                                       118,272
   Prepaid expenses and other current assets                           458,299         165,593
   Option contract                                                          --         359,171
   Short-term assets from discontinued operations                      105,041          23,575
                                                                  ------------    ------------

      Total current assets                                           9,668,453       5,626,280
                                                                  ------------    ------------

Property, plant and equipment, net                                      85,547         103,946
Investments in non-marketable securities                             1,143,566         843,566
Long-term notes receivable                                           3,416,526       3,135,763
Goodwill, net                                                          807,483
                                                                                       767,329
Intangible assets, net                                               1,389,875       1,231,201
Deferred charges and other assets                                      521,918          20,389
Long-term assets from discontinued operations                        2,963,666       2,971,991
                                                                  ------------    ------------

     Total assets                                                 $ 19,997,034    $ 14,700,465
                                                                  ============    ============


              LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Lines of credit                                                $    637,069    $         --
   Current portion of long term debt                                   233,819         220,845
   Current portion of convertible secured debenture                  1,481,480              --
   Accounts payable                                                    345,223         342,874
   Accrued expenses                                                  1,007,887         354,131

   Short-term liabilities from discontinued operations               1,015,717       1,070,496

     Total current liabilities                                       4,721,195       1,988,346
                                                                  ------------    ------------
Long term debt, net                                                         --         150,047
Convertible secured debenture                                        2,900,464              --
Obligation to issue common stock                                       273,554         273,554
                                                                  ------------    ------------

     Total liabilities                                            $  7,895,213    $  2,411,947
                                                                  ------------    ------------
Stockholders' equity:
   Capital stock:
      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                                       65,466,022      64,602,803
   Accumulated deficit                                             (53,522,540)    (52,411,167)
   Accumulated comprehensive income                                     66,753           5,596
                                                                  ------------    ------------

     Total stockholders' equity                                     12,101,821      12,288,518
                                                                  ------------    ------------

     Total liabilities and stockholders' equity                   $ 19,997,034    $ 14,700,465
                                                                  ============    ============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.


                                                                               4
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                        SILVERSTAR HOLDINGS LTD - 10-Q
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                          SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                        (UNAUDITED)


                                                   Three Months Ended March 31,
                                                       2006           2005
                                                   -----------    -----------
Net Revenues                                       $ 1,494,991    $        --
                                                   -----------    -----------
Operating expenses:
   Cost of sales                                       694,303             --
   Selling, general and administrative                 744,786        319,065
   Amortization of intangible assets                    35,350             --
   Depreciation                                          8,295          2,107
                                                    -----------    -----------
                                                     1,482,734        321,172
                                                    -----------    -----------
Operating income (loss)                                 12,257       (321,172)

Other income (expense)                                      37         (5,911)
Foreign currency losses                               (165,070)      (318,702)
Costs incurred with abandoned acquisition              (75,436)            --
Amortization of convertible debt discounts and
  issuance costs                                      (184,753)            --
Interest income                                        135,209        124,632
Interest expense                                      (123,544)          (760)
                                                    -----------    -----------

Loss from continuing operations, before income
  taxes                                               (401,300)      (521,913)
 Provision for income taxes                                 --             --
                                                   -----------    -----------

Loss from continuing operations                       (401,300)      (521,913)

Loss from discontinued operations, net of income
  taxes of $0 and $0, respectively                    (206,812)      (124,936)
                                                   -----------    -----------

    Net loss                                          (608,112)      (646,849)
                                                   -----------    -----------

Net loss per share - basic and diluted
   Continuing operations                           $      (.05)   $      (.06)
   Discontinued operations                                (.02)          (.01)
                                                   -----------    -----------
    Net loss per share                             $      (.07)   $      (.07)
                                                   ===========    ===========

 Weighted average common stock outstanding:
   Basic and diluted                                 9,098,584      8,703,081
                                                   ===========    ===========

     See accompanying notes to condensed consolidated financial statements.


                                                                               5
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                        SILVERSTAR HOLDINGS LTD - 10-Q
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                   SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                   Nine Months Ended March 31,
                                                       2006          2005
                                                   -----------    ------------
Net Revenues                                       $ 2,849,134    $        --
                                                   -----------    ------------


Operating expenses:
   Cost of sales                                     1,329,899             --
   Selling, general and administrative               2,060,112        775,008
   Amortization of intangible assets                   104,052             --
   Depreciation                                         24,522          6,324
                                                   -----------    -----------
                                                     3,518,585       (781,332)

Operating loss                                        (669,451)      (781,332)

Other income                                            41,375        158,389
Foreign currency gains (losses)                       (147,530)       221,628
Costs incurred with abandoned acquisition             (284,778)            --
Amortization of convertible debt discounts and
  issuance costs                                      (307,922)            --
Interest income                                        324,502        447,429
Interest expense                                      (218,380)        (2,309)
                                                   -----------    -----------

Income (loss) from continuing operations, before
  income taxes                                      (1,262,184)        43,805

Provision for income taxes                                  --             --
                                                   -----------    -----------

Income (loss) from continuing operations           $(1,262,184)   $    43,805

Income from discontinued operations, net
  of income taxes of $0 and $0, respectively           150,811        221,836
                                                   -----------    -----------

Net income (loss)                                  $(1,111,373)   $   265,641
                                                   -----------    -----------

Net income (loss) per share - basic:
   Continuing operations                           $      (.14)   $        --
   Discontinued operations                                 .02            .03
                                                   -----------    -----------
    Net income (loss) per share                    $      (.12)   $       .03
                                                   ===========    ===========


Net income (loss) per share - diluted:
   Continuing operations                           $      (.14)   $        --
   Discontinued operations                                 .02            .03
                                                   -----------    -----------
   Net income per share                            $       .12    $       .03
                                                   ===========    ===========


Weighted average common stock outstanding:
     Basic                                           9,081,229      8,698,036
                                                   ===========    ===========

     Diluted                                         9,081,229      9,046,257
                                                   ===========    ===========


     See accompanying notes to condensed consolidated financial statements.


                                                                               6
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                        SILVERSTAR HOLDINGS LTD - 10-Q
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                            SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                                        (UNAUDITED)
<TABLE>
<CAPTION>

                                                              Nine Months Ended March 31,
                                                                  2006          2005
                                                               -----------    -----------
Cash flow from operating activities:
<S>                                                           <C>            <C>
   Net income (loss)                                          $(1,111,373)   $   265,641
   Net income (loss) discontinued operation                       158,111        221,836
   Net income (loss) from continuing operations                (1,262,184)        43,805
   Adjustments to reconcile net income to net cash
     used in operating activities:
   Depreciation and amortization                                  436,493          6,324
   Stock-based compensation                                        51,282             --
   Unrealized foreign currency gains                              (12,647)      (396,490)
   Warrants issued for services                                        --         28,800
   Accrued interest income on notes receivable                   (183,175)      (372,109)
                                                              -----------    -----------

     Operating cash flows provided by continuing operations      (970,231)   $  (689,670)
   Changes in operating assets and liabilities                   (468,421)       (56,547)
   Operating cash flows provided by
    discontinued operations                                      (159,157)       368,062
                                                              -----------    -----------

Net cash used in operating activities                         $(1,597,809)   $  (378,155)
                                                              -----------    -----------

Cash flows from investing activities:
   Acquisition expenses capitalized                                (4,140)      (124,307)
   Purchase of property, plant and equipment                       (1,896)            --
   Purchase of intangible assets                                 (200,000)            --
   Investment in non-marketable securities                       (300,000)            --
   Proceeds from repayment of long-term notes receivable           88,691      5,391,639
   FNB option premium                                                  --       (190,257)

Net cash (used in) provided by investing activities           $  (417,345)   $ 5,077,075
                                                              -----------    -----------

Cash flows from financing activities:
   Short term borrowings, net                                     637,069             --
   Financing cash flows provided by
    discontinued operations                                       182,048       (305,160)
   Net proceeds from convertible debenture                      4,373,301             --
   Repayment of long-term debt                                   (128,927)       (23,439)
   Repurchase of treasury shares                                       --        (21,450)
   Issuance of common stock                                        22,500          6,650
                                                              -----------    -----------

Net cash provided by (used in) financing activities           $ 5,085,991    $  (343,399)
                                                              -----------    -----------

Effect of exchange rates on cash                                   61,157             --

Net increase in cash and cash equivalents                       3,131,994      4,355,521
Cash and cash equivalents, beginning of period                  4,865,291      1,235,310
                                                              -----------    -----------

Cash and cash equivalents, end of period                      $ 7,997,285    $ 5,590,831
                                                              -----------    -----------

Supplemental cash flow information:

   Cash paid for interest                                     $   182,963    $     2,309
                                                              ===========    ===========
</TABLE>

      See accompanying notes to condensed consolidated financial statements.


                                                                               7
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                        SILVERSTAR HOLDINGS LTD - 10-Q
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                   SILVERSTAR HOLDINGS, LTD. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1.    FINANCIAL INFORMATION

The  Company is a holding  company  that seeks to acquire  businesses  fitting a
predefined  investment  strategy.  The Company is the parent company of Strategy
First Inc.  ("Strategy  First"), a leading developer and worldwide  publisher of
entertainment  software for the Personal  Computer  (PC).  The Company is 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 March 31,
2006 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  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.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and all highly liquid investments with
original  maturities  of three  months or less.  The vast  majority  of 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 March 31, 2006 totaled $886,306,  which is used as collateral on the
Company's line of credit.

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

                                                                               8
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                        SILVERSTAR HOLDINGS LTD - 10-Q
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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 will
recognize  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 $17,094 and $51,282 for the three and nine month
periods ended March 31, 2006, respectively, for employee stock options that vest
during fiscal 2006. These options were valued using a risk-free interest rate of
3.72%,  volatility  of 132%,  zero  dividend  yield and an option  term of three
years.

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 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, loss per share from  continuing  operations  for the
three and nine month  periods ended March 31, 2006 would have changed to the pro
forma  amounts set forth in the table  below.

                                               Three Months     Nine Months
                                                  ended            ended
                                                March 31,        March 31,

                                                  2005             2005
                                               ----------        --------
Income (loss) from continuing operations as    $ (521,913)       $ 43,805
reported
Less: total stock based employee
compensation expense
  determined by the fair-value based method      (465,205)       (533,642)
                                                 --------        --------

Pro forma net loss from continuing
operations                                     $ (987,118)      $(489,837)
                                               ==========       =========
Basic:
   As reported                                 $     (.06)      $     .01
   Pro forma                                   $     (.11)      $    (.06)

Assuming full dilution:
   As reported                                 $     (.06)             --
   Proforma                                    $     (.11)      $    (.06)

As of March 31, 2006, the Company had 1,305,000  stock options  outstanding,  of
which  1,105,000  are fully  vested.  A summary of the activity in the Company's
stock option plans is as follows for the nine months ended March 31, 2006:

                                                             Share
                                                            Subject    Weighted
                                                            Options    Average
                                                          Outstanding  Exercise

      Outstanding, beginning of year                       1,545,000     2.49

      Granted                                                     --       --

      Forfeited                                             (210,000)      --

      Exercised                                              (30,000)     .75
      Outstanding March 31, 2006                           1,105.000     2.52
      Weighted average fair value of options granted
       during the year                                          0.00     0.00

For the three months  ended March 31, 2006,  the Company did not grant any stock
options.


                                                                               9
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                        SILVERSTAR HOLDINGS LTD - 10-Q
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The following table summarizes  information  about vested and exercisable  stock
options outstanding at March 31, 2006:

                                                          Weighted
                                                          Average
                                         Number          Remaining
                                      Outstanding       Contractual
              Exercise Prices       March 31, 2006         Life
              ---------------       --------------      -----------
              Less than $1.00               85,000           1.05
              $1.00 to $2.19               770,000           3.04
              $3.75 To $4.875
                                           250,000            1.3
                                         ---------
                        Total            1,105,000
                                         =========

NOTE 3.    ACQUISITIONS

On April 21, 2005, the Company acquired  Strategy First, a leading developer and
worldwide  publisher of entertainment  software for the PC. The Company acquired
Strategy First 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
                                       ==========


                                                                              10
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NOTE 4.    INTANGIBLE ASSETS

The  components of amortizable  intangible  assets as of March 31, 2006 and June
30, 2005 are as follows:

  Balance at March 31, 2006        Gross Carrying   Accumulated
                                       Amount       Amortization       Total
                                   --------------   ------------     ----------

        Game titles                   $1,483,848     $(117,775)      $1,366,073
        Covenant not to compete           34,258       (10,456)          23,802
                                     ----------      ---------       ----------

        Balance at March 31, 2006     $1,518,106     $(128,231)     $1,389,875
                                      ==========     =========      ==========

  Balance at June 30, 2005         Gross Carrying   Accumulated
                                       Amount       Amortization        Total
                                   --------------   ------------     ----------


        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      $1,253,357      $(22,156)      $1,231,201
                                      ==========      ========       ==========

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 nine month periods
ended  March  31,  2006  were  $35,350  and  $104,052,  respectively.  Estimated
amortization  expense  for the rest of fiscal 2006 and for the  succeeding  four
fiscal years is as follows:

          2006       $   39,951
          2007          159,804
          2008          157,913
          2009          148,385
          2010          148,385

     Thereafter      $  735,437
                     $1,389,875


NOTE 5.   DISCONTINUED OPERATIONS

On April 7, 2006,  the Company  sold all the assets and certain  liabilities  of
Fantasy  Sports,   Inc.  ("Fantasy   Sports")  to  FUN  Technologies,   LLC  for
approximately $4.4 million, including $3.85 million paid in cash at closing. The
gain on disposal of this  business  segment will be reported  during the quarter
ended June 30, 2006.

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

                                                                              11
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The following summarizes the operating results of the discontinued operations.

                                                Nine Months Ended March 31,
                                                    2006            2005

   Revenue                                      $1,447,722       $1,365,486

   Net income                                     $150,811         $221,836


Net  assets  related  to  discontinued  operations  of  Fantasy  Sports  totaled
$2,052,990  and  $1,925,070  at March 31, 2006 and June 30,  2005.  These assets
consist of the following:


                                              March 31, 2006   June 30, 2005

   Property plant and equipment, net            $    3,857       $   10,682
   Intangible assets, net                        2,956,824        2,958,324
   Other assets                                      2,985            2,985
                                                ----------       ----------
   Total long term assets
        from discontinued operations            $2,963,666       $2,971,991
                                                ==========       ==========
   Cash                                            $88,115       $    5,195
   Accounts receivable, net                             --              752
   Inventory                                         5,071              534
   Prepaid assets and other current assets          11,855           17,094
                                                ----------       ----------
   Total short term assets
       from discontinued operations               $105,041       $   23,575
                                                ==========       ==========
   Lines of credit                                (249,237)         (67,189)
   Accounts payable                                 (3,137)         (52,509)
   Accrued expenses and deferred revenue          (763,343)        (950,798)
                                                ----------       ----------
Total short term liabilities
   from discontinued operations                 (1,015,717)      (1,070,496)
                                                ----------       ----------
   Net assets from discontinued operations      $2,052,990       $1,925,070
                                                ==========       ==========


NOTE 6.    CASH FLOWS

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

                                                    Nine Months Ended March 31,
                                                        2006        2005
                                                        ----        ----


   Increase in accounts receivable                  $(750,513)     $     --
   Increase in inventories                            (52,925)           --
   Increase in prepaid expenses and
     other current assets                            (282,657)      15,526)

   Increase in accounts payable                         1,817        23,870
   (Increase) decrease in other
    provisions and accruals                           615,857       (64,891)
                                                    ---------      --------
                                                    $(468,421)     $(56,547)
                                                    =========      ========


Cash flows from discontinued operations for the nine months ended March 31, 2006
and 2005 were as follows:




                                                                              12
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                        SILVERSTAR HOLDINGS LTD - 10-Q
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                2006           2005
                                                                ----           ----
Cash flows from operating activities:
<S>                                                           <C>           <C>
   Net income from discontinued operations                    $150,811      $221,836
   Loss on disposal of fixed assets                              2,762            --
   Depreciation and amortization                                 5,563         8,010
   Decrease in accounts receivable                                 752         1,068
   (Increase) decrease in inventories                           (4,537)       18,739

   (Increase) decrease in prepaid assets                         5,239        (8,212)

   Increase in accounts payable                                (49,372)     (186,828)
   Increase (decrease) in
        other provisions and accruals                         (187,455)      400,339
   Change in cash included in net assets
     from discontinued operations                              (82,920)      (86,890)
                                                               -------       -------
        Net cash provided by
       (used in) operating activities                         (159,157)      368,062
                                                              --------       -------

Cash flows from financing activities:
   Short term borrowings (repayments), net                     182,048      (305,160)
                                                               -------      --------
   Net cash provided by (used in) financing activities         182,048      (305,160)
                                                               -------      --------
   Net cash flows provided by discontinued operations         $ 22,891      $ 62,902
                                                              ========      ========
</TABLE>



NOTE 7.  BUSINESS SEGMENTS

As a result of the sale of all the assets  and  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.  The operations of the  entertainment  software segment are focused on
the publishing of software games for the PC platform.  The operations of Fantasy
Sports which fully  comprised the Company's  operations in the internet  fantasy
sports games  segment have been  reported as  discontinued  operations as of the
quarter ending March 31, 2006.


NOTE 8.  DEBT

Line of Credit


In June  2002,  The  Company  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  liability  is due on demand  and has a  floating
interest  rate that is based on the prime rate minus  1.75%.  On March 31, 2006,
this rate was at 6.2%.  The  balance  outstanding  under  this line of credit at
March 31,  2006,  was  $886,306 of which  $249,237  is  included  in  short-term
liabilities from discontinued operations.


Long Term Debt

                                   March 31, 2006   June 30, 2005

   Vehicle and equipment loans      $   6,875     $  10,633
   Term loan                          226,944       360,259
                                     --------      --------

                                      233,819       370,892
        Less current portion         (233,819)     (220,845)
                                     --------      --------

        Long-term debt, net                --      $150,047
                                    =========      ========


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").

                                                                              13

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--------------------------------------------------------------------------------


Interest accrues on the principal balance of the note at an annual interest rate
equal to prime plus 1.5%.  On March 31, 2006 the  interest  rate was 9.25%.  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 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 March 31, 2006, net of unamortized discounts is as
follows:

    Principal amount of note                           $5,000,000
    Discount for beneficial conversion features           (97,390)
    Discount for fair value of warrants and options      (520,666)
                                                       ----------

    Balance as of March 31, 2006, net of
      unamortized discounts                            $4,381,944
                                                       ==========


Scheduled  maturities of the convertible  debenture as of March 31, 2006 were as
follows:

      1 Year or less:           $1,481,480
      1-2 Years                  3,518,520
      - -                       ----------
                       Total    $5,000,000
                                ==========

Interest  expense  related to the note amounted to $177,083 during the period of
October 31, 2005 through March 31, 2006.


                                                                              14

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                        SILVERSTAR HOLDINGS LTD - 10-Q
--------------------------------------------------------------------------------

Amortization  of discounts for the  beneficial  conversion  features and warrant
resulted in charges to Amortization  of Convertible  Debt Discounts and Issuance
Costs  totaling  $103,009  during the three  months  ended March 31,  2006.  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 $81,743
of these costs was included in  Amortization  of Convertible  Debt Discounts and
Issuance Costs during the quarter ended March 31, 2006.

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      $  184,753
    2007         613,561
    2008         287,393
    2009          22,809
    ----          ------

   Total      $1,108,516
              ==========

NOTE 10.     GUARANTEE AND OTHER COMMITTMENT

During the first  quarter of fiscal 2006,  the Company  entered into  agreements
with two of Strategy  First's  game  developers  to  guarantee  certain of their
royalty payments. The guarantee is limited to $100,000.

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.

On March 29, 2006,  Strategy First entered into an agreement to acquire  certain
intellectual property rights for $200,000 in cash and the issuance of options to
acquire  100,000  shares of the Company's  common stock at an exercise  price of
$1.50.  The options vest when net sales,  as defined in the purchase  agreement,
exceed $750,000 and expire on December 31, 2008. The agreement also provides for
commissions  of  twenty-five  percent  of net  sales in the  event  they  exceed
$500,000 through December 31, 2008


NOTE 11.   SUBSEQUENT EVENTS

On April 7, 2006,  the Company  sold all the assets and certain  liabilities  of
Fantasy  Sports  to  FUN  Technologies,  LLC  for  approximately  $4.4  million,
including  $3.85  million  paid in  cash at  closing.  The  Company  anticipates
recognizing a profit on the sale during the quarter  ended June 30, 2006.  These
proceeds will be used for repayment of debt and general corporate purposes.

In early April 2006, First South African Holdings,  a wholly owned South African
subsidiary  of the  Company,  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.  The Company  believes that
its South African tax filings are in full compliance  with all applicable  laws.
The Company intends to vigorously defend its position in this regard.

On May 9, 2006, the Company  prepaid $1.4 million face amount of its outstanding
convertible secured debentures, thereby reducing the outstanding balance to $3.6
million.


                                                                              15

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--------------------------------------------------------------------------------


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. ("Fantasy Sports").  In April 2006, we sold all the
assets and certain  liabilities of Fantasy Sports.  In 2001, we acquired 100% of
Student  Sports,  Inc,  which we sold in  2003.  In 2005,  we  acquired  100% of
Strategy  First  Inc.  ("Strategy  First").  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

In April 2006, we sold all the assets and certain liabilities of Fantasy Sports.
See "Subsequent  Events" for more  information  regarding the sale. As a result,
the financial  information  for Fantasy  Sports is  classified  as  discontinued
operations for the  three-month and nine- month periods ended March 31, 2005 and
2006. Information in the management discussion and analysis,  therefore, relates
solely  to  the  operations  of  our  remaining   subsidiary,   Strategy  First.
Additionally,  since there is no comparative  prior year data for Strategy First
as we acquired  Strategy First through the jurisdiction of a bankruptcy court in
April 2005,  in certain  cases our recent  results are  compared to those of the
prior quarter ended December 31, 2005.


Quarter Ended March 31, 2006 As Compared to Quarter Ended March 31, 2005

Revenues

Revenues  were  $1,495,000  in the third  quarter  of fiscal  2006.  There is no
comparable data for the 2005 period.

Cost of Sales

Cost of sales was  $694,403  in the third  quarter of fiscal  2006,  or 46.4% of
total revenues. There is no comparable data for the 2005 period.

Selling, General and Administrative Expenses

Selling,  general and  administrative  expenses for the quarter  ended March 31,
2006 were $745,000.  Selling,  general and administrative  expenses for Strategy
First totaled  $471,000.  Corporate  overhead  expenses  decreased by $54,000 to
$265,000 from $319,000 in the same period last year.

                                                                              16

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                        SILVERSTAR HOLDINGS LTD - 10-Q
--------------------------------------------------------------------------------


Selling,  general and  administrative  expenses for the quarter  ended March 31,
2006 were $745,000.  Selling,  general and administrative  expenses for Strategy
First totaled  $471,000.  Corporate  overhead  expenses  decreased by $54,000 to
$265,000 from $319,000 in the same period last year.

Amortization and Depreciation

Amortization  of  intangible  assets was $35,000 for the third quarter of fiscal
2006. Depreciation was $8,300 for the period. For the comparable period in 2005,
depreciation was $2,100.

Foreign Currency Losses

Foreign  currency losses are primarily  related to the assets remaining from the
sale of our discontinued South African  operations.  The foreign currency losses
during the third quarter of fiscal 2006 were approximately  $165,000 as compared
to a loss of  $319,000 in the third  quarter of fiscal  2005.  Foreign  currency
losses of  $232,000  were  related  to the sale of  discontinued  South  African
operations. Strategy First recognized $22,000 in gains and $45,000 in gains were
recognized by us on the 1 million Euros  deposited with the Commercial  Court in
Vienna which was subsequently returned to us.

The  functional  currency  of  Strategy  First is the  Canadian  dollar  and its
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
March 31, 2006 the Rand  appreciated  approximately  1.5% against the US dollar,
while it depreciated 5% in the corresponding period last year. The gain realized
by the appreciation of the South African Rand was offset by the loss in value of
the Rand  put/US  dollar  call option  thereby  resulting  in a net loss for the
period.  Foreign  currency  gains are  non-cash  items until  converted  into US
dollars, when any accumulated gains or losses will be converted into cash.

Acquisition Costs Incurred

During the quarter  ended March 31, 2006, we incurred  approximately  $75,500 in
litigation  expenses  in  connection  with  the  unsuccessful  acquisition  of a
European  Software  Company.  We are seeking damages for breach of contract from
this European software company. There is no assurance that we will be successful
in this litigation.

Amortization of Convertible Debt Discounts and Issuance Costs

On October 31,  2005,  we issued a $5,000,000  principal  amount  Variable  Rate
Secured  Convertible  Note and a warrant to  purchase  additional  shares of our
Common Stock.  Based upon the closing price per share of our Common Stock on the
date of issuance,  and the  effective  conversion  rate,  there was a beneficial
conversion feature.  Approximately $665,000 of the proceeds was allocated to the
warrants.  We 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
$185,000 for the quarter ended March 31, 2006.

Interest Expense

Interest  expense of $128,000  was recorded  during the third  quarter of fiscal
2006 as compared to $760 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
$106,000 during the quarter ended March 31, 2006.

Interest Income

Interest  income of $135,000  was  recorded  during the third  quarter of fiscal
2006,  as compared to interest  income of $125,000  during the third  quarter of
fiscal 2005.

                                                                              17

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                        SILVERSTAR HOLDINGS LTD - 10-Q
--------------------------------------------------------------------------------

Provision for Income Taxes


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


Net Loss


We  recognized  a net loss of $608,000 for the three months ended March 31, 2006
as compared to a net loss of $647,000  during the three  months  ended March 31,
2005. Losses from discontinued operations (Fantasy Sports) were $207,000 for the
quarter ended March 31, 2006 as compared to $125,000 for the  comparable  period
in the prior fiscal year. We recognized a net loss from continuing operations of
$401,000  during  the third  quarter  of fiscal  2006 as  compared  to a loss of
$522,000 during the same period in the prior year.  Strategy First registered an
operating gain of $288,000.  Other factors that  contributed to the loss for the
three  months  ended  March 31,  2006  included  the  foreign  currency  loss of
$165,000,  $185,000 in amortization  of convertible  debt discounts and issuance
costs,  $75,000 in acquisition costs, and $124,000 in interest expense.  None of
these expenses were incurred during the first three months of 2005.



Selected Sequential Quarterly Comparisons

Revenues

Revenues  were  $1,495,000  in the third  quarter of fiscal 2006, an increase of
$512,000 from the quarter ended  December 31, 2005. The increase in revenue over
the  previous  quarter  was  primarily  the  result of new  online  distribution
contracts signed during the quarter.

Cost of Sales


Cost of sales was  $694,005  in the third  quarter of fiscal  2006,  or 46.4% of
total  revenues.  Cost of sales was 48.2% during the quarter ended  December 31,
2005.  The decrease in the  percentage of cost of sales is due to the lower cost
of our online distribution contracts.


Selling General and Administrative Expenses

Selling,  general and  administrative  expenses for the quarter  ended March 31,
2006 were $745,000 as compared with $728,000 for the quarter ended  December 31,
2005.

Nine Months Ended March 31, 2006 as Compared to Nine Months Ended March 31, 2005

Revenues

Revenues were $2,850,000 in the first nine months of fiscal 2006.

Cost of Sales

Cost of sales was  $1,330,000  in the first nine months of fiscal 2006, or 46.7%
of total revenues.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the nine months ended March 31,
2006 were $2,060,000.  Selling, general and administrative expenses for Strategy
First totaled $1,307,000. Corporate overhead expenses decreased to $753,000 from
$775,000 for the previous year.


                                                                              18

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                        SILVERSTAR HOLDINGS LTD - 10-Q
--------------------------------------------------------------------------------


Amortization and Depreciation

Amortization  of intangible  assets was $104,000 for the first three quarters of
fiscal 2006.  Depreciation  was $24,500 for the same period.  For the comparable
period in 2005, depreciation was $6,300.

Foreign Currency Gains (Losses)

Foreign  currency  gains  (losses) are related to the assets  remaining from the
sale of our discontinued South African  operations.  The foreign currency losses
during the first  nine  months of fiscal  2006 were  approximately  $148,000  as
compared to a gain of $222,000 in the first nine months of fiscal 2005.  Foreign
currency  losses of  $262,000  were  related to the sale of  discontinued  South
African  operations.  Strategy First recognized  $24,000 in gains and $16,000 in
gains were recognized by us on the 1 million Euros deposited with the Commercial
Court in Vienna which was  subsequently  returned to us.  During the nine months
ended  March 31, 2006 the Rand  appreciated  approximately  6.4%  against the US
dollar,  while it appreciated 1% in the  corresponding  period last year.  Gains
(losses) from the  discontinued  South African  operations are the result of the
fluctuations of the South African Rand against the US dollar.  The gain realized
by the appreciation of the South African Rand was offset by the loss in value of
the Rand  put/US  dollar  call option  thereby  resulting  in a net loss for the
period.

The  functional  currency  of  Strategy  First is the  Canadian  dollar  and its
products are sold throughout the United States and Europe

Acquisition Costs Incurred

During the first nine months of fiscal 2006, we incurred  approximately $285,000
in expenses pursuing the unsuccessful  acquisition of and subsequent  litigation
against a European software company.

Amortization of Convertible Debt Discounts and Issuance Costs

On October 31,  2005,  we issued a $5,000,000  principal  amount  Variable  Rate
Secured  Convertible  Note and a warrant to  purchase  additional  shares of our
Common Stock.  Based upon the closing price per share of our Common Stock on the
date of issuance,  and the  effective  conversion  rate,  there was a beneficial
conversion feature.  Approximately $665,000 of the proceeds was allocated to the
warrants.  We 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
$308,000 during the nine months ended March 31, 2006.

Interest Expense

Interest expense of $218,000 was recorded during the first nine months of fiscal
2006 as  compared  to $2,300 in the same  period  of the  prior  year.  Interest
expense  increased  primarily as a result of interest charges on the convertible
debenture security.

Interest Income

Interest  income of $324,000  was recorded  during the three  quarters of fiscal
2006, as compared to interest income of $447,000 during the first three quarters
of fiscal 2005. This decrease is primarily due to lower principal amounts of our
notes receivable.

Provision for Income Taxes


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



                                                                             19

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                        SILVERSTAR HOLDINGS LTD - 10-Q
--------------------------------------------------------------------------------


Net Income (Loss)

We  recognized  a net loss of  $1,111,000  for the first nine  months of 2006 as
compared to net income of $266,000  during the first nine months of Fiscal 2005.
Income from discontinued  operations  (Fantasy Sports) was $151,000 for the nine
months ended March 31, 2006 as compared to $222,000 for the comparable period in
the prior fiscal year.  We recognized a net loss from  continuing  operations of
$1,262,000  for the nine months ending March 31, 2006 as compared to a profit of
$44,000 during the first nine months of fiscal 2005.  Strategy First  registered
an operating gain of $12,000 during the first nine months of Fiscal 2006.  Other
factors  that  contributed  to the loss  included the foreign  currency  loss of
$147,000,  $308,000 in amortization  of convertible  debt discounts and issuance
costs,  $285,000 in acquisition costs, and $218,000 in interest expense. None of
these expenses were incurred during the first nine months of 2005.

Financial Condition, Liquidity and Capital Resources

Cash increased by $3,132,000 from $4, 865,000 at June 30, 2005, to $7,997,000 at
March 31, 2006.

Working  capital  increased  $1,307,000  from  $3,640,000  at June 30, 2005,  to
$4,947,000  at March 31,  2006.  This  increase is  primarily  the result of our
increased cash balances and the payoff of our line of credit.

We believe we have sufficient cash balances and outstanding  notes receivable to
meet our anticipated short and long-term obligations.

Currently, we carry approximately  $3,400,000 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 remaining Salwin note has a value of R19.7 million  including
accrued interest (approximately $3.3 million).

This note is  secured  by  approximately  18% of the  shares in First  Lifestyle
Holdings (Pty.) Ltd. it has no fixed repayment terms and if not paid by November
2020, it will be cancelled.  We monitor the financial results of First Lifestyle
Holdings on a quarterly and annual basis. It is our 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  (Pty.) Ltd. has sufficient
value to justify the carrying value of the Salwin note.

Once note payments are collected in South African Rand,  the Company  expects to
repatriate those funds to the United States. We believe that repatriation of the
full  amount  is  allowable  under  current  South  African   foreign   currency
regulations.  Over the last six 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.

Critical Accounting Policies

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


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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.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and all highly liquid investments with
original  maturities  of three  months or less.  The vast  majority  of 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 March 31, 2006 totaled $886,000,  which is used as collateral on our
line of credit.


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 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.

We review goodwill  annually (or more frequently  under certain  conditions) for
impairment  in  accordance  with SFAS No.  142,  Goodwill  and Other  Intangible
Assets.  We performed our annual impairment test of goodwill as of June 30, 2005
and  determined  that  goodwill  was not  impaired.  While  we  believe  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, 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.  Our 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.

Share-Based Payments

In December  2004,  the FASB issued SFAS No. 123R,  "Share-Based  Payment." This
statement  is  a  revision  of  SFAS  NO.  123,   "Accounting   for  Stock-Based
Compensation,"  supersedes APB Opinion No. 25,  "Accounting  for Stock Issued to
Employees"  and amends SFAS No. 95,  "Statement  of Cash  Flows." The  statement
eliminates the  alternative to use the intrinsic value method of accounting that
was  provided  in


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SFAS No. 123, which generally  resulted in no compensation  expense  recorded in
the financial  statements related to the issuance of equity awards to employees.
The statement also requires that the cost resulting from all share-based payment
transactions  be recognized in the financial  statements.  It  establishes  fair
value  as the  measurement  objective  in  accounting  for  share-based  payment
arrangements  and generally  requires all companies to apply a  fair-value-based
measurement  method in accounting  for  share-based  payment  transactions  with
employees.  In March 2005, the Securities  and Exchange  Commission  (the "SEC")
issued  Staff   Accounting   Bulletin  107  which   describes  the  SEC  staff's
expectations  in  determining  the  assumptions  that  underlie  the fair  value
estimates and discusses the interaction of SFAS No. 123R with existing guidance.
The Company  has adopted  SFAS No.  123R  effective  January 1, 2006,  using the
modified prospective  application method in accordance with the statement.  This
application  requires the Company to record compensation  expense for all awards
granted after the adoption date and for the unvested  portion of awards that are
outstanding at the date of adoption.


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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Interest Rate Risk

At March 31, 2006, our cash resources and notes  receivable  earned  interest at
variable  rates.  We also pay  interest  at  variable  rates on long term  debt.
Accordingly, any change in interest rates will affect our 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 March 31, 2006 Strategy First had net assets of $353,000  originating
in Canadian dollars and net assets of $344,000 originating in Euros.

Certain of our cash balances and the remaining notes receivable from the sale of
our South African  subsidiaries  are denominated in South African Rand. This has
exposed us to market risk with respect to  fluctuations in the relative value of
the South African Rand against the US dollar.

On March 9, 2005, we 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
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  liquidated  for
$28,000 in March 2006. Currently we have no foreign currency hedges in place.

At March 31,  2006,  we had assets  denominated  in South  African Rand of R32.9
million, (approximately $5.5 million).



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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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                        SILVERSTAR HOLDINGS LTD - 10-Q
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                           PART II - OTHER INFORMATION

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the  Company's  Annual  Meeting  of  Stockholders  held on  March  30,  2006,
shareholders  of the  Company  elected  the  following  nominees to the Board of
Directors to serve a one-year term. Votes cast were as follows:

Michael Levy
For:                 10,307,206
Withheld:                83,071

Clive Kabatznik
For:                 10,309,706
Withheld:                80,571

Cornelius J. Roodt
For:                 10,307,206
Withheld:                83,071

John T. Grippo
For:                 10,312,331
Withheld:                77,946

Douglas Brisotti
For:                 10,312,301
Withheld:                77,976

Shareholders  approved a proposal to approve the issuance of up to (a) 2,876,870
shares of the Company's  Common Stock  underlying a $5,000,000  principal amount
Variable Rate Secured Convertible Debenture due October 31, 2008 and (b) 791,139
shares of the  Company's  Common Stock  underlying a warrant  dated  October 31,
2005. Votes were cast as follows:

            For:               5,900,816
            Against:              62,007
            Abstention:           13,550
            Broker Non-Votes   4,413,904

Shareholders  ratified  the  appointment  of  Rachlin  Cohen & Holtz  LLP as the
Company's  independent  public  accountants for fiscal 2006.  Votes were cast as
follows:

            For:              10,328,931
            Against:              57,746
            Abstention:            3,600
            Broker Non-Votes           0


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

31.1  Certification  pursuant to 18 U.S.C.  1350 adopted 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.


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                        SILVERSTAR HOLDINGS LTD - 10-Q
--------------------------------------------------------------------------------

Reports on Form 8-K


1.    Current Report on Form 8-K filed on February 16, 2006.

2.    Current Report on Form 8-K filed on April 5, 2006.

3.    Current Report on Form 8-K filed on April 12, 2006.



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                        SILVERSTAR HOLDINGS LTD - 10-Q
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                                   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:  May 15, 2006
                                    SILVERSTAR HOLDINGS, LTD.


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








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