**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      20-F**


(Amendment
            No. 1)


**(Mark
      One)**





[X]
            REGISTRATION
                STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
                ACT
                OF 1934





OR





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


For
                the fiscal year ended
                _________________________________





OR





[
                ]
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





OR





[
                ]
            SHELL
                COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                EXCHANGE
                ACT OF 1934





for
        the transition period from __________ to
        ___________





Commission
      file number____________________________





**DYNASTY
      GAMING, INC.**


(Exact
      name of the Registrant as specified in its charter)





**Quebec,
      Canada**


(Jurisdiction
      of incorporation or organization)





**759
      Square Victoria, Suite 300**


**Montreal,
      Quebec**


**Canada
      H2Y 2J7**


(Jurisdiction
      of incorporation or organization)





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




Title
      of Each Class




None




Name
      of each exchange on which registered




Not
      applicable




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





COMMON
      SHARES WITH NO PAR VALUE


(Title
      of
      Class)








Securities
      for which there is a reporting obligation pursuant to Section 15(d) of the
      Act:
      None





On
      December 31, 2005, the registrant had 76,854,115 shares of common stock
      outstanding. As of May 31, 2006, the number of outstanding common shares was
      77,321,559.





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.






Yes __
              NoX







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 __
                NoX


Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. PER RULE 12-2 of Exchange
      Act.




Large accelerated filer [ ]
                Accelerated
                  filer [ ]
                Non-accelerated filer
                  [X]





Indicate
      by a check mark which financial statement the Registrant has elected to
      follow.




Item 17 X
                Item
                  18 __
    1


**EXPLANATORY
      NOTE**





The
      Company’s consolidated financial statements are stated in Canadian Dollars
      (CDN$) and are prepared in accordance with Canadian Generally Accepted
      Accounting Principles (GAAP), the application of which, in the case of the
      Company, conforms in all material respects for the periods presented with United
      States GAAP, except as discussed in footnotes to the financial
      statements.





The
      financial statements as required under ITEM #17 are attached hereto and found
      immediately following the text of this Registration Statement. The audit reports
      of the Company are included herein immediately preceding the financial
      statements.


2


**TABLE
      OF CONTENTS**






**PART
                    I**
                **Page**Item
                    1.
                Identity
                    Of Directors, Senior Management And Advisers
                6Item
                    2.
                Offer
                    Statistics And Expected Timetable
                6Item
                    3.
                Key
                    Information
                7Item
                    4.
                Information
                    On The Company
                16Item
                    5.
                Operating
                    And Financial Review And Prospectus
                25Item
                    6.
                Directors,
                    Senior Management And Employees
                32Item
                    7.
                Major
                    Shareholders And Related Transactions
                42Item
                    8.
                Financial
                    Information
                44Item
                    9.
                The
                    Offer And Listing
                46Item
                    10.
                Additional
                    Information
                48Item
                    11.
                Quantitative
                    And Qualitative Disclosure About Market Risk
                60Item
                    12.
                Description
                    Of Securities Other Than Equity Securities
                60**PART
                    II**Item
                    13.
                Defaults,
                    Dividend Arrearages And Delinquencies
                61Item
                    14.
                Material
                    Modifications To The Rights Of Security Holders And
                    Use Of ProceedsItem
                    15.
                Controls
                    and Procedures
                61Item
                    16
                [Reserved]
                61**PART
                    III**Item
                    17
                Financial
                    Statements
                61Item
                    18.
                Financial
                    Statements
                61Item
                    19
                Exhibits
                62









3


**CERTAIN
      INFORMATION**





As
      used
      in this annual report, “we,” “us,” “our,” the “Company,” “DNY” and “Dynasty”
refers to Dynasty Gaming Inc. and its subsidiaries, Mahjong Systems Ltd. and
      Mahjong Development Inc., except where it is clear that such terms mean only
      Dynasty Gaming Inc.





We
      maintain our books of account in Canadian dollars, and accordingly, have
      provided the financial data in this Form 20-F in Canadian dollars in accordance
      with generally accepted accounting principles in Canada. Canadian GAAP standards
      conform in all material respects with generally accepted accounting principles
      in the United States, except as noted in our financial statements attached.
      See
“Item 19.” All references to dollar amounts in this Form 20-F, unless otherwise
      indicated, are in Canadian dollars. See “Item 3. Key Information—Selected
      Financial Data—Exchange Rate Information” for historical information regarding
      the noon buying rates in New York City for cable transfers in Canadian dollars
      as certified for customs purposes by the Federal Reserve Bank of New York with
      respect to the Canadian dollar. You should not construe these translations
      as
      representations that the Canadian dollar amounts actually represent such US
      dollar amounts or could have been or could be converted into US dollars at
      the
      rates indicated or at any other rates. Such rates are the number of United
      States dollars per one Canadian dollar and are the inverse of rates quoted
      by
      the Federal Reserve Bank of New York for Canadian dollars per US$1.00. The
      average exchange rate is based on the average of the daily exchange rates during
      such periods. On June 1, 2006, the exchange rate was approximately Cdn.$1.00
      per
      US$ 0.906810. *As
      reported by Bank of Canada





**FORWARD-LOOKING
      STATEMENTS**





This
      report contains forward-looking statements. We may make additional written
      or
      oral forward-looking statements from time to time in filings with the Securities
      and Exchange Commission or otherwise. The words ‘believe,’ ‘expect,’
‘anticipate,’ ‘project’ and similar expressions identify forward-looking
      statements, which speak only as of the date the statement is made. Such
      forward-looking statements are within the meaning of that term in
      Section 27A of the Securities Act of 1933 and Section 21E of the
      Securities Exchange Act of 1934. Although we believe that our expectations
      are
      based on reasonable assumptions within the bounds of our knowledge of our
      business and operations, our business is subject to significant risks and there
      can be no assurance that actual results of our development and manufacturing
      activities and our results of operations will not differ materially from our
      expectations.





Forward-looking
      statements are subject to inherent risks and uncertainties, some of which cannot
      be predicted or quantified. Future events and actual results could differ
      materially from those set forth in, contemplated by or underlying the
      forward-looking statements. Statements in this annual report including those
      set
      forth in ‘Risk Factors’ in this report, describe factors, among others, that
      could contribute to or cause such differences.











4























**PART
      I**





**ITEM
      1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**





***Directors
      and senior management.*** **** The
      following table provides the names and titles of our directors and senior
      management.




**Name**
                **Title**Albert
                    Barbusci
                Director,
                    President, and Chief Executive Officer (1)David
                    Wolk
                Director
                    (1)Linda
                    Lemieux
                Director;
                    President and Director of Mahjong Development Inc. (1)Kiyoshi
                    Eguchi
                Director
                    (1)Mark
                    Billings
                Chief
                    Financial Officer (1)Anthony
                    Barbusci
                Vice
                    President of Finance and Corporate Secretary (1)Adriaan
                    Brink
                President
                    and Director of Mahjong Systems Ltd.
                    (1)




(1)
              The
                  business address for our directors and senior management is 759
                  Square
                  Victoria, Suite 300, Montréal, Québec, Canada H2Y
                  2J7.
 *
                On
                      July 14, 2006 the Company received Ian Sherrington’s resignation, which
                      was dated as of June 24, 2006. Mr. Sherrington’s resignation stated his
                      resignation as employee, President and Director of Mahjong
                      Development
                      Inc. The Company has updated this Amendment No. 1 to Form 20-F
                      accordingly. The terms of Mr. Sherrington’s resignation from the Company
                      may be found in Exhibit 4.17 of Item 19 of this Registration
                      Statement. On
                      July 14, 2006 Linda Lemieux was appointed President and Director
                      of
                      Mahjong Development
                      Inc.




***Auditors.*** The
      following table provides the names and addresses of our auditors for the
      preceding three years.


**Name
                    and business address**
                **Term**Horwath
                    Appel
                  1
                    Westmount Square, Suite 900
                  Montréal,
                    Québec, Canada H3Z 2P9
                1994
                    - Present


**ITEM
      2. OFFER STATISTICS AND EXPECTED TIMETABLE**





Not
      applicable.





5


**ITEM
      3. KEY INFORMATION**





**A.**  **Selected
      financial data**





The
      following tables summarize selected financial data for the Company (stated
      in
      Canadian dollars) prepared in accordance with Canadian generally accepted
      accounting principles (“Canadian GAAP”).  The information in the table was
      extracted from the more detailed financial statements and related notes included
      herein and should be read in conjunction with these financial statements and
      with the information appearing under the heading “Item 5 - Operating And
      Financial Review And Prospects”.  Note 28 of the financial statements
      of the Company included herein sets forth the measurement differences were
      such
      information to be presented in conformity with United States generally accepted
      accounting principles (“U.S. GAAP”).






**INFORMATION
                  IN ACCORDANCE WITH CANADIAN GAAP:****Year
                  Ended December 31****2005**
              ****
              **2004**
              ****
              **2003**
              ****
              **2002**
              ****
              **2001**(a) Total
                  revenue
              
              
              
              
              $
              7,956,157
              
              $
              6,238,792
              
              $
              3,959,448
              
              $
              9,901,611
              
              $
              13,426,270(b) Earnings
                  (loss) from continuing operations
              
              
              
              
              
              ($1,184,559
              )
              
              ($888,320
              )
              
              ($282,512
              )
              $
              168,051
              
              
              ($411,718
              )Total
              
              
              
              
              
              ($1,184,559
              )
              
              ($2,204,904
              )
              
              ($703,468
              )
              $
              168,051
              
              
              ($411,718
              )Per Share1
              
              
              
              
              
              ($0.03
              )
              
              ($0.06
              )
              
              ($0.02
              )
              $
              0.00
              
              
              ($0.01
              )(c) Total
                  assets
              
              
              
              
              $
              11,286,534
              
              $
              3,023,375
              
              $
              9,535,808
              
              $
              11,581,996
              
              $
              6,787,146(d) Total
                  long-term debt
              
              
              
              
              $
              63,561
              
              $
              94,319
              
              $
              312,858
              
              $
              43,528
              
              $
              41,206(e) Capital
                  stock
              
              
              
              
              $
              12,405,434
              
              $
              3,589,810
              
              $
              3,831,116
              
              $
              3,831,116
              
              $
              2,336,590(f) 
Total
                shareholders’ equity
              
              
              
              
              $
              8,774,587
              
              $
              721,987
              
              $
              3,112,702
              
              $
              3,887,565
              
              $
              2,224,988(g) Cash
                    dividends declared per share
              
              
              
              
              
              n/a
              
              
              n/a
              
              
              n/a
              
              
              n/a
              
              
              n/a(h) Net
                earnings (loss) for the periodTotal
              
              
              
              
              
              ($1,184,559
              )
              
              ($2,204,904
              )
              
              ($703,468
              )
              $
              168,051
              
              
              ($411,718
              )Per
                  Share1
              
              
              
              
              
              ($0.03
              )
              
              ($0.06
              )
              
              ($0.02
              )
              $
              0.00
              
              
              ($0.01
              )(1) The
                  effect of potential share issuances pursuant to the exercise of
                  options
                  and warrants would be anti-dilutive and, therefore, basic and diluted
                  losses are the same.**INFORMATION
                  IN ACCORDANCE WITH U.S. GAAP:****Year
                  Ended December 31******
              ****
              
              ****
              ****
              **2005**
              ****
              ****
              **2004**
              ****
              ****
              **2003**
              ****
              ****
              **2002**
              ****
              ****
              **2001**(a) Total
                  revenue
              
              
              
              
              $
              7,956,157
              
              $
              6,238,792
              
              $
              3,959,448
              
              $
              9,901,611
              
              $
              13,426,270(b) Earnings
                  (loss) from continuing operations
              
              
              
              
              
              ($1,184,559
              )
              
              ($903,403
              )
              
              ($297,162
              )
              $
              162,176
              
              
              ($411,718
              )Total
              
              
              
              
              
              ($1,184,559
              )
              
              ($2,219,987
              )
              
              ($718,118
              )
              $
              162,176
              
              
              ($411,718
              )Per
                  Share1
              
              
              
              
              
              ($0.03
              )
              
              ($0.06
              )
              
              ($0.02
              )
              $
              0.00
              
              
              ($0.01
              )(c) Total
                  assets
              
              
              
              
              $
              11,286,534
              
              $
              3,023,375
              
              $
              9,535,808
              
              $
              11,581,996
              
              $
              6,787,146(d) Total
                  long-term debt
              
              
              
              
              $
              63,561
              
              $
              94,319
              
              $
              312,858
              
              $
              43,528
              
              $
              41,206(e) Capital
                  stock
              
              
              
              
              $
              12,139,934
              
              $
              3,589,810
              
              $
              3,831,116
              
              $
              3,831,116
              
              $
              2,336,590(f) Total
                    shareholders’ equity
              
              
              
              
              $
              8,774,587
              
              $
              721,987
              
              $
              3,112,702
              
              $
              3,887,565
              
              $
              2,224,988(g) Cash
                dividends declared per share
              
              
              
              
              
              n/a
              
              
              n/a
              
              
              n/a
              
              
              n/a
              
              
              n/a(h) Net
                earnings (loss) for the periodTotal
              
              
              
              
              
              ($1,238,554
              )
              
              ($2,285,145
              )
              
              ($789,513
              )
              $
              162,805
              
              
              ($411,718
              )Per
                  Share1
              
              
              
              
              
              ($0.03
              )
              
              ($0.06
              )
              
              ($0.02
              )
              $
              0.00
              
              
              ($0.01
              )(1) The
                  effect of potential share issuances pursuant to the exercise of
                  options
                  and warrants would be anti-dilutive and, therefore, basic and diluted
                  losses are the same.


***Exchange
      Rates*** ****





The
      following table sets forth the high and low for each month during the previous
      six months, of the noon buying rates for US dollars per Canadian dollars in
      the
      City of New York for cable transfers as certified for customs purposes by the
      Federal Reserve Bank of New York. Such rates are the inverse of rates quoted
      by
      the Federal Reserve Bank of New York for Canadian dollars per
      US$1.00.


**May**
              **2006**
            **April**
              **2006**
            **March**
              **2006**
            **February**
              **2006**
            **January**
              **2006**
            **December**
              **2005**High
            0.9100
            0.8926
            0.8834
            0.8788
            0.8744
            0.8690Low
            0.8903
            0.8534
            0.8531
            0.8638
            0.8528
            0.8521








As
      of May
      31, 2006, the exchange rate to convert one Canadian dollar into one US dollar
      was $0.9068.





The
      following table sets out the average exchange rates for the five most recent
      financial years calculated by using the average of the noon exchange rate on
      the
      last day of each month during the period.





**Year
                Ended December 31****2005**
            **2004**
            **2003**
            **2002**
            **2001**Average
                for the period(1)
            1.2085
            1.2980
            1.3918
            1.5699
            1.5513





(1)
      The
      average rates set forth for each period are based on exchange rate of the amount
      of Cdn.Dollars equaling $1US Dollar.








6










**B.**  **Capitalization
      and indebtedness**





The
      following table summarizes our capitalization and indebtedness as of May 31,
      2006. The information in the table should be read in conjunction with the more
      detailed combined financial statements and notes presented elsewhere in this
      registration statement.






**As
                  At**
                **May
                  31, 2006**
                **(Unaudited)**
                **(Cdn$)****Indebtedness**
 Long-term
                  obligations
                Guaranteed
                Unguaranteed
                Secured
                Unsecured
              
              
              Nil
                Nil
                $30,800
                  (1)
                Nil**Shareholders’
                  Equity**
                Common
                  Shares: 77,321,559 common shares, with no par value, issued and
                  outstanding
                unlimited number
                  of authorized common shares
              
              
              [$12,534,559
              ]Accumulated
                  deficit
              
              
              ($6,617,765
              )Subject
                  to Escrow Agreement
              
              
              14,881,112Free
                  trading common shares
              
              
              62,440,447Warrants
                  (Expiring 12/29/07)
              
              
              7,500,000Broker
                  Options (Expire 12/29/07)
              
              
              1,350,000Options
                  to Acquire Stock
              
              
              5,109,889Fully
                  Diluted Shares
              
              
              91,281,448Net
                  shareholders' equity
              
              $
              6,574,280Total
                  capitalization
              
              $
              6,623,417
 1.
              Loan
                  repayable in consecutive monthly principal payments of $1,400 plus
                  interest at prime plus 1%, secured by a moveable hypothec on
                  furniture.





**C.**  **Reasons
      for the Offer and use of Proceeds**





Not
      applicable.


7


**RISK
      FACTORS**





*Investing
      in our securities will provide you with an equity ownership interest in Dynasty.
      As one of our shareholders, your investment will be subject to risks inherent
      in
      our business. If any of the following risks actually occur, our business could
      be harmed. In that event, the trading price of our shares might decline, and
      you
      could lose all or part of your investment. You should carefully consider the
      following factors as well as other information contained in this registration
      statement before deciding to invest in shares of our securities. Additional
      risks that are not currently known to us or that we deem immaterial may also
      harm us and the value of your investment. An investment in our securities
      involves a high degree of risk.* *When
      evaluating our business and product opportunities investors should carefully
      review and consider the following risk factors in addition to the other
      information contained in this Registration Statement on Form 20-F.*







DNY
      and
      its subsidiaries operate in rapidly changing environments that involve numerous
      risks and uncertainties, many of which are beyond our control and which could
      have a material effect on our business, revenues, operating results and
      financial condition. The following discussion highlights some, although not
      all,
      of these risks and uncertainties.




**Risks
      Related to Our Business**





***Change
      of Business Focus; Change of Source of Revenue and Limited Operating History
      of
      Mahjong Mania***





During
      the fiscal year ended December 31, 2005, 79% of DNY’s consolidated revenues were
      derived from its subsidiary, CPC Econometrics. On September 21, 2005, the
      Company acquired Mahjong Systems Ltd. and Mahjong Development Inc. and thereby
      changed the principal business focus of the Company to the development and
      commercialization of the *Mahjong
      Mania* software. The financial statements, which should be reviewed in conjunction
      with
      this section, are not indicative of the Company’s future business focus.





The
      Company’s *Mahjong
      Mania* subsidiaries, Mahjong Systems Limited and Mahjong Development Inc., have a
      limited operating history and, as of December 31, 2005, had no history of
      revenues or earnings. The likelihood of our success must be considered in the
      light of the problems, expenses, difficulties, complications, and delays
      frequently encountered in connection with the startup and growth of a new
      business, and the competitive environment in which we will operate. Our success
      is dependent upon the successful financing and development of our business
      plan.
      No assurance of success is offered. Unanticipated problems, expenses, and delays
      are frequently encountered in establishing a new business and marketing and
      developing products. These include, but are not limited to, competition, the
      need to develop customers and market expertise, market conditions, sales,
      marketing and governmental regulation. Our failure to meet any of these
      conditions would have a materially adverse effect upon us and may force us
      to
      reduce or curtail our operations.





***Market
      Demand for Mahjong Mania***





Although
      the Company believes that the market for its *Mahjong
      Mania* product
      is potentially large, there is no assurance that consumers will adopt the
      Company’s gaming software or that the Company will be successful in selling this
      product into new markets. If the markets in which our gaming products fail
      to
      grow, or if the business of our existing and future licensees fails to grow,
      or
      grows more slowly than DNY presently anticipates, this could have a material
      adverse effect on the business, revenues, operating results and financial
      position of the Company.








***Government
      Regulation***





The
      Company and our licensees are subject to applicable laws in the jurisdictions
      in
      which we operate, including the Mohawk Territory of Kahnawake, Gibraltar and
      others. Some jurisdictions have introduced legislation and regulations
      attempting to restrict or prohibit Internet gaming, while other jurisdictions
      have taken the position that Internet gaming is legal and have adopted or are
      in
      the process of considering legislation to regulate Internet gaming.





The
      United Kingdom (“UK”) and other European jurisdictions, such as Gibraltar and
      Malta, are adopting a regulated Internet gaming approach. There is no assurance,
      however, that the UK or other regulatory regimes will provide a commercially
      viable market; furthermore, they may create restrictions that can have a
      material adverse effect on our customers, business, revenues, operating results
      and financial position.





Existing
      legislation in some jurisdictions, including US federal and state statutes,
      has
      been and could continue to be construed to prohibit or restrict Internet gaming,
      and there is a risk that governmental authorities may view DNY and/or our
      licensees as having violated such statutes. Therefore, there is a risk that
      legal proceedings could be initiated against us, our licensees, Internet Service
      Providers and others involved in the Internet gaming industry. Such proceedings
      could have a material adverse effect on our business, revenues, operating
      results and financial condition, as well as diverting the attention of
      management.





Given
      the
      popularity of Mahjong in Asia, one of the markets of great interest to the
      Company is the People’s Republic of China (“China”). It is the Company’s
      understanding that gambling, including Internet gambling, is generally
      prohibited in China. DNY intends to market its Mahjong product into China in
      a
      non-wager format in accordance with its understanding of the current laws in
      place in China. Changes to the regulatory framework in China could, however,
      have a material adverse effect on the Company’s business, revenues, operating
      results and financial condition. There can be no assurance that DNY’s attempts
      to market its products in China will be successful.





The
      Company and our licensees may also be subject to applicable laws in other
      jurisdictions in which we operate. For example, the Patriot Act contains
      provisions which could be used against the Internet gaming industry. The
      jurisdiction of the United States now extends to all non-U.S. banks that have
      correspondent accounts in the United States. This means that any such non-U.S.
      bank processing U.S. gaming transactions will be violating U.S. law, regardless
      of the fact that they are in full compliance with the laws of their own country.
      Pursuant to the Patriot Act, the United States can now obtain a pretrial
      restraining order freezing assets, including bank accounts, of defendants in
      U.S. civil actions, once process has been served on the non-U.S. party. This
      means that the U.S. merely has to serve papers on a non-U.S. bank, and it can
      freeze the non-U.S. bank's U.S. correspondent account, if that bank is
      processing U.S. gaming transactions or holding operating funds or the profits
      of
      an operator accepting U.S. wagers.





Thus,
      if
      allegedly tainted funds are deposited in a non-U.S. bank account of a non-U.S.
      bank, the United States can seize and forfeit an equal amount of funds on
      deposit in the non-U.S. bank's correspondent account. Currently, the U.S.
      Justice Department has taken the view that all offshore gaming funds are
      tainted, because all offshore gaming is illegal. This creates a serious
      disincentive for non-U.S. banks to provide banking services to Internet gaming
      operators, and thus could negatively impacts Dynasty’s market of potential
      licensees. Some U.S. banks have announced that they will decline authorization
      to Americans who try to use their credit cards for online gaming.





However,
      our Company is not reliant on the U.S. as our principal market, which is in
      stark contrast to the majority of gaming operators. Our main focus is on Asian
      markets, as well as Asians living outside Asia, including the United States.
      Accordingly, the Company does not believe the above would substantially impact
      their business operations.







8


***Competition***





Although
      DNY believes it is one of the first to develop an aggregate player, online
      cash-wager version of Mahjong, the Internet gaming market is quite competitive,
      with a large number of gaming and software operators and developers, and is
      subject to rapid technological change. The Company’s direct source of current or
      potential competitors comes from other developers of Internet gaming software.
      Some of these potential competitors have significantly greater financial,
      technical, marketing and sales resources and may be able to respond more quickly
      than DNY to new or emerging technologies and to changes in customers’
requirements, thereby rendering the Company’s existing or future services
      obsolete, unmarketable or less competitive. Current and potential competitors
      may make strategic acquisitions or establish cooperative relationships amongst
      themselves or with other solution providers, thereby increasing the ability
      of
      their services to address the needs of DNY’s prospective clients. This could
      have a material adverse effect on the Company’s revenues, operating results and
      financial condition.





Based
      on
      our research and market intelligence, we believe that we may be the only company
      that has developed an online multiplayer, cash-wager version of Mahjong. We
      are
      aware of only two companies that have a similar offer, which are: FunTown,
      which
      was recently acquired by GigaMedia, a Taiwanese company listed on NASDAQ; and
      TankSoft, a private company that signed a partnership agreement with Playtech
      Ltd., a software provider listed on the London Stock Exchange, in early June
      2006.





***Internet
      Viability and System Infrastructure and Reliability***





The
      growth of Internet usage has caused interruptions and delays in processing
      and
      transmitting data over the Internet. There can be no assurance that the Internet
      infrastructure or the Company’s own network systems will continue to be able to
      support the demands placed on us by the continued growth of the Internet, the
      overall online gaming industry or that of our clients.





The
      Internet’s viability could be affected by delays in the development or adoption
      of new standards and protocols to handle increased levels of Internet activity
      or due to increased government regulation. If critical issues concerning the
      commercial use of the Internet are not favorably resolved (including, but not
      limited to, security, reliability, cost, accessibility and quality of service),
      if the necessary infrastructure is not sufficient, or if other technologies
      and
      technological devices eclipse the Internet as a viable channel, this may
      negatively affect Internet usage, and our business, revenues, operating results
      and financial condition will be materially adversely affected.





End-users
      of our software depend on Internet Service Providers, online service providers,
      gaming site operators and our system infrastructure for access to the sites
      operated by our licensees. Many of these services have experienced service
      outages in the past and could experience service outages, delays and other
      difficulties due to system failures, instability and interruption. Our licensees
      may lose customers as a result of delays or interruption in service, including
      delays or interruptions relating to high volumes of traffic or technological
      problems. As a result, we may not be able to meet the level of service that
      we
      have contracted for, and we may be in breach of our contractual commitments,
      which could have a material adverse effect on DNY’s business, revenues,
      operating results and financial condition.







9




***Access
      to Capital***




*If
      DNY does not obtain additional financing, then there is a risk that DNY will
      not
      be able to complete commercial development of its technology or achieve net
      revenues from the commercial application of its technology.*




There
      can
      be no assurance that DNY will operate profitably at any time in the future.
      The
      Company believes that it will be able to launch successfully with its current
      financial resources, and that this does not presently require substantial cash
      resources. There is no assurance that DNY will be able to secure such financing,
      when needed, or that such financing will be obtained on terms favorable to
      the
      Company. Failure to obtain adequate financing could result in significant delays
      in the development of DNY's products and a substantial curtailment of
      operations. Future financings could result in substantial dilution to DNY's
      existing shareholders.




*If
      DNY is not able to successfully manage its growth, DNY’s operating and capital
      expenses may be higher than anticipated and its revenues may be lower than
      anticipated.*




If
      DNY
      becomes successful, it will have to anticipate rapid growth and plan for it.
      Future operating results will depend on our management's ability to manage,
      hire
      and retain qualified employees, properly generate revenues and control expenses
      and many promising businesses have been unsuccessful in managing
      growth.





***Dependence
      on Key Personnel***





The
      Company depends on a number of key management individuals, the loss of any
      one
      of whom may have a material adverse effect on the Company’s business.
      Competition for highly skilled management, technical and sales personnel is
      intense. While the company maintains employment agreements with its directors
      and executive personnel (see Item 6. Directors, Senior Management, and
      Employees), the inability to retain and keep employees and to attract and retain
      additional key employees who have the requisite skills may have a material
      adverse effect on the Company’s business.





***Foreign
      Exchange***





Our
      financial results are reported in Canadian dollars, which is subject to
      fluctuations in respect of the currencies of the countries in which we may
      operate, including US dollars, British pound sterling, Euros and Canadian
      dollars. Accordingly, fluctuations in the exchange rate of world currencies
      could have a positive or negative effect on our reported results. DNY currently
      does not utilize a hedging program. There can be no assurance that we will
      not
      experience currency losses in the future, which could have a material adverse
      effect on our business, revenues, operating results and financial
      condition.





***Intellectual
      Property***





The
      Company relies on a combination of laws and contractual provisions to establish
      and protect our rights in our software and proprietary technology. Our ability
      to protect our proprietary information is crucial to the success of our
      business. There can be no assurance that the steps we have taken to protect
      our
      proprietary rights will be adequate to deter misappropriation of our technology.
      Any such misappropriation could have a material adverse effect on DNY’s
      business, revenues, operating results and financial condition.





***Company's
      Officers and Directors Resident Outside US; Potential Unenforceability of Civil
      Liabilities and Judgments***





The
      Company and all of its officers and all of its directors are residents of
      countries other than the United States. All of the Company's assets are located
      outside the United States, with exception to one of the Company’s subsidiaries,
      CPC Econometrics, Inc, which is located in Georgia. The company is planning
      to,
      and anticipates, divesting itself of this subsidiary in the near future. As
      a result, it may not be possible for investors to effect service of process
      within the United States upon such persons or enforce in the United States
      against such persons judgments obtained in United States courts, including
      judgments predicated upon the civil liability provisions of United States
      federal securities laws or state securities laws.






10





The
      Company believes that a judgment of a United States court predicated solely
      upon
      civil liability under United States securities laws would probably be
      enforceable in Canada if the United States court in which the judgment was
      obtained has a basis for jurisdiction in the matter that was recognized by
      a
      Canadian court for such purposes.  However, there is doubt whether an
      action could be brought in Canada in the first instance on the basis of
      liability predicated solely upon such laws.





**Risks
      related to our common stock** **:**





***Stock
      Volatility***





The
      market price of our common shares has experienced fluctuations and may continue
      to fluctuate significantly. The market price of our common shares may be
      adversely affected by various factors, including proposed Internet gaming
      legislation or enforcement of existing laws, innovation and technological
      changes, the emergence of new competitors, quarterly variations in revenue
      and
      results of operations, speculation in the press or analyst community and general
      market conditions or market conditions specific to particular industries,
      including the Internet and gaming.





THERE
      IS
      A LIMITED MARKET FOR OUR COMMON STOCK WHICH MAY MAKE IT MORE DIFFICULT FOR
      YOU
      TO DISPOSE OF YOUR STOCK.





Our
      common stock has been quoted on the TSX Venture Exchange under the symbol "DNY"
      since December 9, 2005. Prior to our name change, our stock was listed under
      the
      symbol “EIH” and “YRA.” There is a limited trading market for our common stock.
      Accordingly, there can be no assurance as to the liquidity of any markets that
      may develop for our common stock, the ability of holders of our common stock
      to
      sell our common stock, or the prices at which holders may be able to sell our
      common stock.





OUR
      HISTORIC STOCK PRICE HAS BEEN VOLATILE AND THE FUTURE MARKET PRICE FOR OUR
      COMMON STOCK MAY CONTINUE TO BE VOLATILE. FURTHER, THE LIMITED MARKET FOR OUR
      SHARES WILL MAKE OUR PRICE MORE VOLATILE. THIS MAY MAKE IT DIFFICULT FOR YOU
      TO
      SELL OUR COMMON STOCK FOR A POSITIVE RETURN ON YOUR INVESTMENT.







***Penny
      Stock Rules***




*As
      DNY’s shares are subject to the U.S. “Penny Stock” Rules, investors who purchase
      DNY’s shares may have difficulty re-selling their shares as the liquidity of the
      market for DNY’s shares may be adversely affected by the impact of the “Penny
      Stock” Rules.*




Although
      DNY’s stock is not currently deemed “Penny Stock,” our stock may be subject to
      U.S. "Penny Stock" rules in the future, which may make the stock more difficult
      to trade on the open market. DNY's common shares have traded on the TSX Venture
      Exchange (or its predecessor exchange) since October 2, 2000. For further
      details on the market performance of DNY's common stock, see "Item 9A." A "penny
      stock" is generally defined by regulations of the U.S. Securities and Exchange
      Commission ("SEC") as an equity security with a market price of less than
      US$5.00 per share. However, an equity security with a market price under US$5.00
      will not be considered a penny stock if it fits within any of the following
      exceptions:






11




(i)          
      the equity security is listed on NASDAQ or a national securities
      exchange;




(ii)
               the issuer of the equity
      security has been in continuous operation for less than three years, and either
      has (a) net tangible assets of at least US$5,000,000, or (b) average annual
      revenue of at least US$6,000,000; or




(iii)         the
      issuer of the equity security has been in continuous operation for more than
      three years, and has net tangible assets of at least US$2,000,000.




Our
      Company’s common stock is currently not deemed penny stock under exception
      (iii), since the Company has been in operation for more than three years and
      has
      net tangible assets of more than US$2,000,000.




If
      an
      investor buys or sells a penny stock, SEC regulations require that the investor
      receive, prior to the transaction, a disclosure explaining the penny stock
      market and associated risks. Furthermore, trading in DNY's common stock is
      currently subject to Rule 15g-9 of the Exchange Act, which relates to non-NASDAQ
      and non-exchange listed securities. Under this rule, broker/dealers who
      recommend DNY's securities to persons other than established customers and
      accredited investors must make a special written suitability determination
      for
      the purchaser and receive the purchaser's written agreement to a transaction
      prior to sale. Securities are exempt from this rule if their market price is
      at
      least $5.00 per share.




In
      the
      event DNY’s stock is deemed to be penny stock in the future, penny stock
      regulations will tend to reduce market liquidity of DNY's common stock, because
      they limit the broker/dealers' ability to trade, and a purchaser's ability
      to
      sell, the stock in the secondary market.




The
      low
      price of DNY's common stock has a negative effect on the amount and percentage
      of transaction costs paid by individual shareholders. The low price of DNY's
      common stock also limits DNY's ability to raise additional capital by issuing
      additional shares. There are several reasons for these effects. First, the
      internal policies of certain institutional investors prohibit the purchase
      of
      low-priced stocks. Second, many brokerage houses do not permit low-priced stocks
      to be used as collateral for margin accounts or to be purchased on margin.
      Third, some brokerage house policies and practices tend to discourage individual
      brokers from dealing in low-priced stocks. Finally, broker's commissions on
      low-priced stocks usually represent a higher percentage of the stock price
      than
      commissions on higher priced stocks. As a result, DNY's shareholders may pay
      transaction costs that are a higher percentage of their total share value than
      if DNY's share price were substantially higher.




The
      rules
      described above concerning penny stocks may adversely affect the market
      liquidity of DNY's securities. DNY believes its shares will likely continue
      to
      be thinly-traded and that its stock is a "penny stock" as its tangible assets
      (basically cash and property, plant and equipment) may decline to less than
      US$2
      million. For more information about penny stocks, contact the Office of Filings,
      Information and Consumer Services of the U.S. Securities and Exchange
      Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, or by telephone
      at
      (202) 272-7440.







12








**ITEM
      4. INFORMATION ON OUR COMPANY**





**A.**  **History
      and Development of the Company.**





Dynasty
      Gaming Inc. / Jeux Dynasty Inc. was incorporated in Quebec, Canada on August
      11,
      1994 under the name 3059219 Canada Inc. pursuant to the Canada Business
      Corporation Act. The Company proceeded to change its name numerous times prior
      to adopting the name Dynasty Gaming Inc. Specifically, the Company changed
      its
      name pursuant to the Canada Business Corporation Act as follows: Gramcorp
      Aggregate Inc. on June 8, 1995, Golden Gram Resources Inc. on March 19, 1996,
      Events International Holding Corporation (“EIHC”) on October 15, 2001, and
      Dynasty Gaming Inc. on December 5, 2005.





DNY
      is
      headquartered in Montreal, Canada and, together with its subsidiaries, employs
      30 full-time professional and support staff.




The
      principal office of the Company is located at 759
      Square Victoria, Suite 300, Montreal, Quebec, Canada H2Y 2J7, and its telephone
      number is (514) 288-0900.





The
      Company and its subsidiaries are solidifying a two-phased strategy to secure
      a
      lead position in the Chinese market and within the international online gaming
      sector with its first-to-market software for an aggregate player, cash-wager
      version of Mahjong.





In
      May
      2002, the Company, then known as EIHC, established a new subsidiary known as
      MedEvents Inc., and launched its first Internet portal known as obgynevents.com,
      which exclusively focused on women’s health. At the time, EIHC was a world
      leader in the field of planning and managing world conferences for international
      professional medical federations. The new portal, which was managed by
      MedEvents, Inc., would allow EIHC to offer an online, virtual congress to a
      wide
      range of conference non-attendees.





On
      August
      8, 2002, the shareholders approved the acquisition of CPC Econometrics Inc.,
      a
      company controlled by Barry Sheehy, a shareholder of the Company. Following
      receipt of regulatory approval, the transaction was closed on August 26, 2002.
      The purchase price was satisfied by the issuance of 800,000 common shares of
      the
      Company.





Cadence
      Healthcare Communications Inc. was launched in October 2002 to support the
      business of Events International Meeting Planners Inc. (“EIMP”), which was at
      that time Dynasty’s primary business.  Over the years, EIMP had developed
      important relationships with several pharmaceutical companies. These
      pharmaceutical companies were important exhibitors and sponsors for many of
      the
      events, organized by EIMP. It seemed a natural extension of the Company’s
      business model to form an advertising agency, with healthcare expertise to
      provide marketing, promotional and advertising services to both EIMP and its
      clients. EIMP became Cadence Healthcare’s first and most important client. The
      Agency subsequently began to focus on the pharmaceutical industry and developed
      new clients from some of the EIMP contacts.





In
      September 2004, the Company, which was then known as Events International
      Holding Corporation, disposed of its EIMP business by means of a sale. EIMP
      was
      sold to Edward Polak, a former President and director of the Company, who had
      originally been part owner of EIMP prior to it being acquired by the Company
      in
      October 2001.





On
      September 19, 2005, DNY received regulatory approval from the TSX Venture
      Exchange **** to
      finalize the acquisition of *Mahjong
      Mania* . *Mahjong
      Mania* is a
      trade name used by Mahjong Systems Limited and Mahjong Development Inc.,
      formerly known as 9143-3250 Québec Inc.






13





On
      September 21, 2005, the Company finalized the purchase of Mahjong Systems
      Limited (MSL) and Mahjong Development Inc. (MDI), collectively known as the *Mahjong
      Mania* companies. MSL is based in the Turks and Caicos Islands and licenses Internet
      gaming software developed by its affiliate MDI, a company based in Montreal,
      Quebec, Canada. MSL is licensed for Internet gaming operations by the Mohawk
      Territory of Kahnawake, which is located outside Montreal, Quebec, Canada.
      MSL’s
      objectives are to sign licensing agreements with gaming operators for our
      aggregate model ( *see
      Market Strategy section below* ).





The
      acquisition was satisfied through the issue of 9,000,000 DNY common shares.
      The
      assets of MSL and MDI include the intellectual property, software and
      development work involving the *Mahjong
      Mania* Internet
      gaming software, as well as software licensing agreements. *Mahjong
      Mania* Internet
      gaming software is a unique technology and is considered to be the
      first-to-market of an aggregated multiplayer Mahjong gaming system developed
      for
      the Internet. Currently, MDI is the owner of the trademark “Mahjong Mania &
Design” issued by the Canadian Intellectual Property Office.





On
      November 25, 2005, at the DNY annual and special meeting of shareholders, DNY’s
      shareholders approved a change of name for the Company from Events International
      Holding Corporation to Dynasty Gaming Inc. The primary purpose of the name
      change was to ensure that the Company’s new name would be more suitable in light
      of the Company’s newly acquired business strategy, which is the development and
      marketing of our *Mahjong
      Mania* gaming
      software. At the meeting, Kiyoshi Eguchi, a resident of Japan and retired
      executive of Dentsu Inc., was elected to the board in addition to the reelection
      of Albert Barbusci, Linda Lemieux and David Wolk.





The
      Company currently intends to divest itself of its Cadence Healthcare
      Communication’s Inc., MedEvents Inc. and CPC Econometrics, Inc. subsidiaries in
      the near future in order to focus its efforts on the Mahjong Mania
      business.





**B.**  **Business
      Overview**




The
      Company and its subsidiaries are solidifying a two-phased strategy to secure
      a
      lead position in the Chinese market and within the international online gaming
      sector with its first-to-market software for an aggregate player, cash-wager
      version of Mahjong. MDI has completed its first phase of development work on
      its *Mahjong
      Mania* gaming
      software, including the back office support systems, and clients of DrHo888.com,
      Mahjongclub.com and Ladbrokes.com are now playing a cash wager version of the
      game. MSL executives are in continuous discussions and negotiations with other
      major online gaming site operators to expand the market for *Mahjong
      Mania* .
      To
      date, 12 licensing agreements have been signed and management of MSL believes
      that a number of additional licensing agreements will be signed this
      year.




The
      Company is committed to devoting its management and financial resources to
      the *Mahjong
      Mania* business. The MedEvents subsidiary is inactive, and the Cadence Healthcare
      and
      CPC Econometrics subsidiaries no longer fit into DNY’s long-term business plan.
      Although a formal plan does not yet exist, DNY will be looking into the best
      way
      to divest itself of these three subsidiaries in the near future.





With
      the
      acquisition of the *Mahjong
      Mania* business
      in 2005, the principal focus of Dynasty is in three lines of business: our
      aggregate or licensing model outside China, our prepaid card strategy in China
      and the World Cup of Mahjong. The following table highlights the projected
      capital budgets for 2006, 2007 and 2008.







14




Year
              
              **Aggregate**
              ****
              **Prepaid**
              ****
              **World
                  Cup**
              ****
              **Total**2006
              
              $
              500,000
              
              $
              1,100,000
              
              $
              0
              
              $
              1,600,0002007
              
              $
              380,000
              
              $
              100,000
              
              $
              0
              
              $
              480,0002008
              
              $
              1,430,000
              
              $
              600,000
              
              $
              0
              
              $
              2,030,000Total
              
              $
              2,310,000
              
              $
              1,800,000
              
              $
              0
              
              $
              4,110,000


Since
      the
      aggregate model is 100% owned by Dynasty Gaming, 100% of the capital
      expenditures for this business unit will be our responsibility. As for the
      prepaid card strategy, this will most likely be set up as a joint venture with
      the Ho Group ( *see
      Ho Majiang section below* ).
      Our
      stake is this joint venture is presently pegged at 20%; however, this is subject
      to change. Thus, the Ho Majiang capital expenditures will not appear on the
      DNY
      balance sheet, as we will not consolidate the assets and liabilities from this
      joint venture due to our minority interest; this is in accordance with generally
      accepted accounting principles. This joint venture will be a separate legal
      entity and capitalized by the joint venture partners. Moreover, there are no
      anticipated capital expenditures associated with the World Cup of Mahjong as
      the
      management of this event is expected to be subcontracted to a third party and
      there will be no capital outlays required on our part.




*Potential
      Markets*




Mahjong,
      often referred to as Asian Poker, is the most widely played game in China and
      has gained widespread popularity in Japan, Taiwan, Korea and other Asian
      countries with surprisingly high levels of play in the USA and Europe. The
      Company’s management believes that it is the basis for an enormous terrestrial
      gambling market in Asia, but has yet to translate into the Internet gaming
      space. However, worldwide Internet gambling is one of the fastest growing
      sectors of the global economy. According to Christiansen Capital Advisors,
      LLC,
      compound annual growth of Internet gaming over the nine-year period, 2001 to
      2010, is projected at 26%, reaching a $24.5 billion by 2010.





With
      nearly a decade of experience in Internet gaming, MSL’s principals are well
      positioned to establish partnerships with top level Internet gaming operators
      and leverage existing player bases through its aggregate model. With poker
      on
      the Internet earning in excess of US $4,000,000 per day, the Company’s
      management believes that the market for multiplayer skill games is well
      established. We have established strategic partnerships with some of the most
      powerful gaming operators and distributors in the world, including:





**Ho
                Casinos**
            This
                group is the owner or controller of 15 of 17 casinos in Macau, worth
                an
                estimated $3.6 billion. In 2004, casino revenues for this group totaled
                nearly $4 billion. Mahjong Mania is now available onwww.drho888.com**Ladbrokes**
            Ladbrokes
                is a U.K.-based organization, and is one of the world’s largest online
                sportsbook operations. A customized version of Mahjong Mania was
                recently
                launched on this site (www.ladbrokes.com).**Golden
                Palace**
            Golden
                Palace is one of the oldest, largest and most successful Internet
                Casino
                operations. Its flagship casino is
                www.goldenpalace.com.**Microgaming**
            Our
                Company has an agreement in principle to provide Mahjong software
                to the
                clients of Microgaming, which is one of the largest online gaming
                software
                providers.








*Mahjong
      Mania*





*Mahjong
      Mania* is a
      unique and first-of-its-kind Mahjong game designed specifically for use by
      online gaming casinos, sports books and poker rooms. Although Mahjong is widely
      available on the Internet in a solitaire version, as well as multi-player free
      play and incidental two-player paying games, no website has yet created a
      quality Mahjong game inside an Internet gaming room with real cash wagers. *Mahjong
      Mania* is the
      first to offer this model through licensed casino and sports book partners,
      complete with customized casino branding and an aggregate gaming system back
      up.





*Mahjong
      Mania* offers a
      graphically appealing implementation of the multiplayer game of Mahjong with
      the
      associated accounting and transactional systems to enable play-for-cash wagers.
      Its aggregate gaming system, which allows players from different partner
      websites to be pooled into a single game room, ensures a constant source of
      online players for multiple table stakes and options. Management believes that
      no other Mahjong software currently provides this aggregation feature.
      Multi-language support, private game rooms and multi-currency payments are
      several of the additional and distinctive features offered by *Mahjong
      Mania* .





The
      intellectual property for *Mahjong
      Mania* is held
      by Mahjong Systems Ltd. (MSL), a Turks and Caicos company, and Mahjong
      Development Inc. (MDI, formerly, 9143-3250 Quebec Inc.), a Canadian software
      development company. MSL is primarily engaged in the licensing of this software
      while MDI manages all technology development.





Mahjong
      is the owner of a number of Internet domain names as listed below:





6245664.com
            mahjong.ws
            mahjongpalace.combetmahjong.com
            mahjongcentral.com
            mahjongportal.comclubmahjong.com
            mahjongcity.com
            mahjongtemple.comegawan.com
            mahjongclub.com
            monstermahjong.comegawan.net
            mahjongclub.net
            play888.comegawan.org
            mahjongfamily.com
            play888.netgoldenmahjong.com
            mahjongfun.com
            play888.orggomahjong.com
            mahjongheaven.com
            sikwoo.comimperialmahjong.com
            mahjonglounge.com
            sikwu.commahjong-mania.com
            mahjongmania.com
            speedmahjong.commahjong-systems.com
            Mahjongmayhem.com
            worldseriesofmahjong.comworldseriesofmahjongg.com








DNY
      is
      not dependent upon patents or licenses. The Company does, however, maintain
      an
      Internet gaming license from the Mohawk Territory of Kahnawake.





*Ho
      Majiang*





Additionally,
      the Company has undertaken a joint venture, to be called Ho Majiang, between
      Dynasty Gaming and the Ho Group, our proposed interest is 20%, as per our press
      release dated March 22, 2006, but this is subject to change. The entity, which
      may list on the Hong Kong Stock Exchange, will market prepaid cards in China
      ( *See*  *Marketing
      Strategy* ),
      and
      revenues will be derived solely from the sale of prepaid cards. We anticipate
      the joint venture to begin operating in the fourth quarter of 2006.







15


*The
      World Cup of Mahjong*





Our
      Company has entered into a joint venture with the Ho Group to create and sponsor
      the first World Cup of Mahjong tournament, which is presently scheduled for
      December 2006. The event will be held in Macau, off the coast of China, where
      the Ho Group is the largest operator of casinos. As part of the joint venture
      with the Ho Group, Ho Majiang will be the presenting sponsor and Dynasty Gaming
      will support 50% of the marketing budget for the event.




The
      Company and Ho Group have contracted the United States-based Elevation Group
      of
      Companies, sports and entertainment event and marketing specialists, to manage
      all aspects of the project from event production and promotion activities to
      television production and distribution.





The
      Company will consolidate all revenues and expenses on its income statement
      and
      represent the Ho Group’s share of net income as a non-controlling interest after
      continuing operations. All assets and liabilities will be consolidated, with
      the
      Ho Group’s minority interest represented as a liability on our balance
      sheet.





*Marketing
      Strategy*





*Mahjong
      Mania* is
      proceeding with a dual-track market strategy. Track One, referred to as the
      Aggregate Strategy, targets the international gaming community worldwide,
      including the 34 million Chinese who live overseas and the 2.9 million Chinese
      Americans. Track Two, referred to as the China Strategy, targets mainland China.




*Track
      One, Aggregate Strategy* : *Mahjong
      Mania* will
      benefit from two streams of income: software
      licensing fees (initial and renewal), and a share (or commission) of winnings
      from each game played. Agreements with online gaming operators will initially provide for 15% to 40%
      of
      this commission to be paid to MSL. The balance of commission derived from *Mahjong
      Mania* (85% to
      60% respectively) is divided pro rata between the providing website partners.
      There is no risk to the casino operator or MSL since the house does not take
      a
      position in this game.




*Mahjong
      Mania’s* sales
      and marketing strategy will be to pursue licensing contracts with leading
      software houses and online casinos. In the early phases, marketing will depend
      largely on the ability and willingness of online partners to promote the game
      and bring the greatest number of players to *Mahjong
      Mania* .
      This
      will ensure that a critical mass of players and a high level of interest will
      be
      achieved very rapidly.





License
      fees range from $25,000 to $75,000. Together with our licensee partners, we
      intend to collect a 10% commission, or rake, on each winning game of Mahjong.
      This rake will then be split between the Company and our licensees, with 60%
      to
      85% of the rake being paid to our licensees and 15% to 40% remaining with the
      Company. The rake share paid to the licensee is determined on an individual
      basis, as per the contracts we sign with them. The number of players per gaming
      partner ranges from a low of 30,000 to a high of 10,000,000. Approximately
      75
      online gaming partnerships have been targeted through 2009.





The
      initial growth strategy of *Mahjong
      Mania* in Track
      One focuses on providing a new product for a niche cyber-market whose demand for
      a paying, multi-player game has not yet been met. To our knowledge, no
      successful online multi-player Mahjong gaming solution has previously
      existed.





There
      are
      two pricing decisions we have made with respect to the aggregate strategy.
      First, we have decided to charge a rake of 10% of each winning hand of Mahjong.
      This is consistent with the 10% rake collected by the Mahjong clubs in Hong
      Kong, for example. As the value of the winning hands gets bigger, our rake
      percentage may decrease. Second, we split this rake with our licensees. Our
      share is between 15% and 40%, with the licensee taking the remainder. This
      split
      is consistent with our market intelligence and experience in the Internet gaming
      industry. We believe that these percentages are reasonable and are along the
      lines offered by other Internet gaming software providers for licenses of their
      technology.





16


*Track
      Two, China Strategy* :
      The
      Asia-Pacific region already constitutes the world's largest Internet market,
      exceeding both Europe and North America. Usage is growing annually at 57% and
      nearly 160 million users, of which 80 million have access to broadband, are
      expected to be online by the end of 2006. (Source: China Gaming Market Analysis
      and Forecast 2004 - 2009 report)





Gambling
      is technically not allowed in China, although interpretations of the legal
      codes
      in this area are ambiguous. The strategy in China follows existing and proven
      practices of offering subscriptions using prepaid cards and points, which can
      be
      converted into prizes. Marketing of prepaid cards is legal in China and is
      the
      backbone of Internet interchange. The prepaid card strategy relies on
      establishing a network to produce and distribute the cards to retailers, who
      purchase the cards from the distributor and earn a percentage of the card value
      when sold.




In
      Canada, Mahjong Development Inc.(MDI) develops interactive gaming software
      under
      contract with its Turks and Caicos affiliate, Mahjong Systems Limited (MSL).
      MSL, in turn, licenses online gaming systems to various licensees. These
      licensees are generally licensed to operate online casinos in the country where
      their gaming equipment is physically located. A significant debate exists
      whether the laws of any country other than the country where the computer gaming
      servers are physically located have jurisdiction over the operations of MSL’s
      licensees.





MSL’s
      licensees hold a gaming license in the country of their operation. The licensees
      each have the responsibility to determine from which countries they will accept
      gaming transactions and ensure that their own gaming license is maintained.
      All
      of the gaming transactions of MSL’s licensees are accepted on servers in
      jurisdictions that license and regulate Internet gaming and are governed by
      the
      conditions of those countries and the respective gaming licenses.





We
      are
      currently conducting some test marketing with Junnet, our prepaid card
      distributor in mainland China. We will have more detailed information concerning
      pricing and various price points over the summer of 2006.





Historically,
      gaming activities have been subject to extensive statutory and regulatory
      control by government authorities, and have been very dependent and likely
      significantly affected by any changes in the political climate and economic
      and
      regulatory policies of the countries where gaming facilities are located. These
      changes may impact MSL’s and MDI’s operations in a materially adverse way.
      Various laws and regulations could have a direct and material effect on the
      business, and indirectly could have a material effect on the public demand
      for
      the *Mahjong
      Mania* gaming
      software.





Most
      countries and jurisdictions within countries have laws or regulations
      restricting gaming activities. For example, in the United States, the 1961
      Wire
      Act contains provisions which make it a crime for anyone in the business of
      gaming to use an interstate or international wire communication line to make
      sports wagers or to transmit information assisting in the placing of sports
      wagers. Other United States laws impacting gaming activities include the
      Interstate Horse Racing Act, the Interstate Wagering Paraphernalia Act, the
      Travel Act, the Organized Crime Control Act, and the Patriot Act.





17


While
      MSL
      has been advised that its activities do not violate or are not subject to such
      laws and regulations, because there is very little clear statutory and case
      law
      authority, this conclusion is not free from doubt. MSL faces the risk of either
      civil or criminal proceedings brought by governmental or private litigants
      who
      disagree with MSL’s interpretation (and the interpretation of MSL’s legal
      counsel) of laws and regulations. Because there is little guiding authority,
      there is a risk that MSL could lose such lawsuits or actions and be subject
      to
      significant damages or civil or criminal penalties and fines. Such proceedings
      could also involve substantial litigation expense, diversion of the attention
      of
      key executives, injunctions or other prohibitions being invoked against MSL’s
      licensees or MSL’s affiliates.





The
      uncertainty surrounding regulation of Internet gaming could have a material
      adverse effect on MSL’s business, revenues, operating results and financial
      condition. Several countries and governmental authorities, most notably law
      enforcement agencies in the United States, believe that the laws of their
      country restrict, and in some instances prohibit, interactive gaming operators
      from doing business with residents of their countries and, in some instances,
      prohibit or restrict residents of their respective countries from doing business
      with interactive gaming operators located in a foreign country. Specifically
      the
      United States federal law (18 U.S.C. ss. 1084), commonly referred to as the
      1961
      Wire Act, is a federal statute that purports to make it illegal for a sports
      betting or sports wagering business to use a wire communication facility to
      transmit bets or wagers in interstate or foreign commerce.





In
      response to the events of September 11, 2001, the United States enacted the
      Patriot Act, which is intended to address worldwide terrorism. However, the
      Patriot Act also contains provisions which could be used against the Internet
      gaming industry. The jurisdiction of the United States now extends to all
      non-U.S. banks that have correspondent accounts in the United States. This
      means
      that any such non-U.S. bank processing U.S. gaming transactions will be
      violating U.S. law, regardless of the fact that they are in full compliance
      with
      the laws of their own country. Pursuant to the Patriot Act, the United States
      can now obtain a pretrial restraining order freezing assets, including bank
      accounts, of defendants in U.S. civil actions, once process has been served
      on
      the non-U.S. party. This means that the U.S. merely has to serve papers on
      a
      non-U.S. bank, and it can freeze the non-U.S. bank's U.S. correspondent account,
      if that bank is processing U.S. gaming transactions or holding operating funds
      or the profits of an operator accepting U.S. wagers.





Thus,
      if
      allegedly tainted funds are deposited in a non-U.S. bank account of a non-U.S.
      bank, the United States can seize and forfeit an equal amount of funds on
      deposit in the non-U.S. bank's correspondent account. Currently, the U.S.
      Justice Department has taken the view that all offshore gaming funds are
      tainted, because all offshore gaming is illegal. This creates a serious
      disincentive for non-U.S. banks to provide banking services to Internet gaming
      operators, and thus negatively impacts the Company’s market of potential
      licensees. Some U.S. banks have announced that they will decline authorization
      to Americans who try to use their credit cards for online gaming





In
      management’s opinion if current laws or any future laws become applicable to
      activities of MSL’s licensees or its affiliates that perform services for the
      licensees, such laws would have a material adverse effect on MSL’s business,
      revenues, operating results and financial condition. If it was determined that
      such law was applicable to the activities of MSL’s licensees and affiliates, the
      licensees would have to change the types of wagering provided to residents
      of
      the United States. This would impact their current operations and there may
      be a
      delay in offering acceptable wagering products to such customers. There would
      be
      no assurance that the wagering products offered to such customers would be
      as
      profitable to MSL’s licensees or to its affiliates as the wagering products
      currently offered to such customers by the licensees.





18


The
      Company and the industry as a whole are under threat from certain factions
      within the U.S. Congress that seek to ban certain aspects of Internet gambling.
      Early in the 108th Congress, U.S. Congressman Jim Leach (R-IA) introduced HR
      21,
      the Unlawful Internet Gambling Funding Prohibition Act, which was based on
      similar legislation that he introduced in the 107th Congress. This legislation
      attempts to prohibit Internet gambling by forbidding the use of credit
      instruments of United States banks from being used to make bets or wagers over
      the Internet. Shortly afterwards, U.S. Senator Jon Kyl (R-AZ) introduced similar
      legislation, S. 627, in the U.S. Senate. In June of 2003, HR 21 was reintroduced
      as HR 2143 by U.S. Congressman Spencer Bachus (R-AL) without any civil and
      criminal sanctions in order to bypass the U.S. House of Representatives
      Committee on Judiciary. After a very close vote on an amendment to HR 2143,
      the
      House of Representatives passed that legislation. In late July 2003, the U.S.
      Senate's Committee on Banking voted to report an altered version of S. 627.
      MSL
      will monitor this situation since the passage of this legislation could have
      an
      impact on the business of MSL’s licensees and ultimately the Company. However,
      our principal focus is in the Asian markets, and our exposure to the U.S. market
      will not be substantial. Accordingly, we will not be reliant on U.S. customers
      for our continued operations.





In
      March
      2004, the World Trade Organization held in favor of Antigua and Barbuda and
      against the United States of America with regard to unlawful trade restrictions
      relating to Internet gaming. Due to the recent timing of this ruling and without
      the ruling being published in full, it is too early to determine what, if any,
      influence this may have on United States led legislation.





In
      addition, as electronic commerce further develops, it may generally be the
      subject of government regulation. As well, current laws, which pre-date or
      are
      incompatible with Internet electronic commerce, may be enforced in a manner
      that
      restricts the electronic commerce market. Any such developments could have
      a
      material adverse effect on the Company's business, revenues, operating results
      and financial condition.





Other
      jurisdictions, including more specifically the United Kingdom, have taken the
      position that Internet gaming is legal and have adopted or are in the process
      of
      drafting legislation to regulate Internet gaming. In April 2005, the United
      Kingdom enacted legislation - The Gambling Act 2005 - to regulate online gaming
      for the first time in that jurisdiction. The British government is presently
      drafting the underlying rules and regulations to establish its regulatory
      framework. The first online license application are expected to be accepted
      in
      January 2007, with licenses granted and operational by September
      2007.





19


**C** **.**  **Organizational
      Structure**





The
      Company has the following subsidiaries, with the first two being the future
      focus. The other three are of little or declining importance, and will likely
      be
      phased out completely in the near-term.





**1.
      Mahjong Development Inc.:** This
      is
      the software development arm of the *Mahjong
      Mania* business, which was acquired in 2005. It will continue to improve and customize
      the *Mahjong
      Mania* gaming
      software.





**2.
      Mahjong Systems Ltd.:** This
      is
      the Turks & Caicos Island-based licensing arm of the Mahjong Mania business,
      which was also acquired in 2005. The licensing activity undertaken by this
      subsidiary will be the foundation of the Company’s future revenue.





**3.
      MedEvents Inc.:** Operations
      were suspended during the quarter ending September 30, 2005. This subsidiary
      was
      engaged in the marketing and administration of a specialized medical portal
      (“obgynworld”), which represented an exclusive channel for delivering
      educational information on women’s health issues and for providing
      pharmaceutical product details to approximately 200,000 specialist physicians
      worldwide.





**4.
      CPC Econometrics Inc.:** This
      is a
      U.S.-based firm providing consulting services in the financial, healthcare
      and
      pharmaceutical fields. This subsidiary has no significant contracts for 2006,
      and the Company expects operations of CPC to be wound down in 2006.





**5.
      Cadence Healthcare Communications Inc.:** This
      is a
      developer of healthcare advertising and marketing programs for companies in
      the
      pharmaceutical industry. The Company is reviewing this subsidiary’s operations
      now that the focus has moved to the Mahjong Mania business.














20


**D.**  **Property,
      plants and equipment**





The
      following sets forth information concerning our facilities and
      equipment:


Item
                  and Location
              Principal
                  Use
              Expiration
                  Date of Lease
              Approximate
                  Number of Units / Square FeetCanada
                  Steamship Lines Building
                759
                  Square Victoria, Suite 300
                Montreal,
                  QC H2Y 2J7
              Primary
                  Office Location
              November
                  30, 2007 (1)
              6,601
                  Sq. Ft.Computer
                  Hardware, Kahnawake
              Business
                  operations
              n/a
              6
                  Units (2)
                22
                  Units (3)




(1) Represents
      office rent of $5,225.79 per
      month, under a 10-year lease ending on November
      30, 2007.


(2)
      These
      units represent assets of MSL, a wholly owned subsidiary of the Company, and
      represent total value of $64,974.72.


(3)
      These
      units represent assets of MDI, a wholly-owned subsidiary of the Company, and
      represent a total value of $73,054.47.


* The
      Company is currently in the process of divesting itself of its MedEvents,
      Cadence Healthcare, and CPC Econometrics subsidiaries, as well as all of these
      subsidiary’s assets.





**ITEM
      4A. UNRESOLVED STAFF COMMENTS**





Not
      Applicable.





**ITEM
      5. OPERATING AND FINANCIAL REVIEW AND PROSPECTUS**





The
      following information should be read in conjunction with our audited
      consolidated financial statements and related notes, which are prepared in
      accordance with Canadian generally accepted accounting principles ("CDN
      GAAP"), included elsewhere in this Form 20-F. A reconciliation of amounts
      presented in accordance with United States generally accepted accounting
      principles ("US GAAP") is described in Note #28 to the audited consolidated
      financial statements for the years ended December 31, 2005 and December 31,
      2004. All amounts are expressed in Canadian dollars unless otherwise indicated.
       The summary of Significant Accounting Policies contained in Note #2
      to our consolidated financial statements should be read in conjunction with
      the
      consolidated financial statements and this discussion of results of operations
      and liquidity and capital resources.





This
      document contains certain forward-looking statements including, among others,
      anticipated trends in our financial condition and results of operations and
      our
      business strategy. These forward-looking statements are based largely on our
      current expectations and are subject to a number of risks and uncertainties.
      Actual results could differ materially from these forward-looking statements.
      Important factors to consider in evaluating such forward-looking statements
      include (i) changes in external competitive market factors or in our internal
      budgeting process which might impact trends in our results of operations; (ii)
      unanticipated working capital or other cash requirements; (iii) changes in
      our
      business strategy or an inability to execute our strategy due to unanticipated
      changes in the industries in which we operate; and (iv) various competitive
      factors that may prevent us from competing successfully in the
      marketplace.









21


**A.**  **Operating
      Results**





The
      Company’s consolidated revenues were $120,702 for the three months ended March
      31, 2006, and $7.9 million for the year ended December 31, 2005, compared to
      $2,274,684 for the three months ended March 31, 2005 and $6.2 million for in
      the
      year ended December 31, 2004. The increase in revenue of $1.7 million from
      the
      year-ended 2004 to 2005 is substantially attributable to the success of CPC
      Econometrics’ consulting practice, whose revenues increased by $1.1 million in
      the year. DNY, on a non-consolidated basis, increased its revenue by $135,000,
      and $557,000 of the 2005 increase in revenue is due to Cadence Healthcare
      generating all of its revenue from external sources, compared to fiscal 2004
      in
      which this subsidiary generated 32% of its revenue from affiliates.





During
      the fiscal year ended December 31, 2005, the Company continued to fund the
      operations of its subsidiaries. The most significant investment was and
      continues to be the funding of the *Mahjong
      Mania* software
      development, marketing and sales efforts. The Company is reporting a pre-tax
      consolidated operating loss from continuing operations of $939,832, compared
      to
      a pre-tax loss of $677,310 for the previous year. This overall loss is mainly
      due to overhead operating costs and more specifically the continued investment
      in human resources.





**Mahjong
      Development Inc. and Mahjong Systems Ltd.,** collectively known as *Mahjong
      Mania,* generated $15,539 in revenues for the three months ended March 31, 2006, and
      no
      revenue for the Company during the fiscal year ended December 31, 2005.
      Operating losses amounted to $507,535 with salaries, selling and travel expenses
      accounting for 94% of the total. MSL, the marketing arm of *Mahjong
      Mania* ,
      has
      signed 12 licensing agreements and three of these have had the aggregate system
      integrated into their online systems. The Company expects minimal revenue in
      the
      second quarters of 2006 followed by stronger third and fourth quarters. Based
      on
      the expected successful launch of sites from several additional contracts,
      as
      well as the implementation of the China Strategy component of the *Mahjong
      Mania* business
      plan, revenue should be stronger by the fourth quarter of this fiscal
      year.





**MedEvents** did not
      generate any revenue for the three months ended March 31, 2006, and revenue
      for
      the fiscal year ended December 31, 2005 was $9,187 compared to the $27,267
      in
      revenue for the fiscal year ended December 31, 2004. The *obgynworld* portal,
      in which the Company invested considerable time and money, was shut down earlier
      in the year due to the lack of support from the International Federation of
      Gynecology and Obstetrics and the pharmaceutical industry. Following the shut
      down of the portal, the Company successfully negotiated the settlement of
      certain outstanding payables. The net effect results in a profit of $13,772
      for
      the year. This subsidiary remains inactive and will no longer be funded by
      the
      Company.





**CPC
      Econometrics, Inc.** ,
      a
      U.S.-based consulting practice, had a record year in the fiscal year ended
      December 31, 2005 with revenues of $6.3 million and a pre-tax profit of
      $637,396. Revenues for 2005 are up $1.1 million over the previous year. Revenues
      were $57,725 for the three months ended March 31, 2006. As mentioned in previous
      reports, the contractual work for the remaining major account has been completed
      and CPC’s level of involvement in the future is not assured. This subsidiary
      will generate lower revenue during 2006. The business of CPC is totally
      dependent on the efforts of Barry Sheehy, its founder and President. Mr. Sheehy
      has decided to begin the wind down of his practice.





**Cadence
      Healthcare Communications Inc.** (CHCI)
      had revenue of $47,438 for the three months ended March 31, 2006. The Company
      had revenues of $1.5 million and an operating loss of $219,826 in the fiscal
      year ended December 31, 2005, compared to revenue of $1.4 million and an
      operating loss of $43,433 for the fiscal year ended December 31, 2004. The
      current loss is due to higher staffing costs and increased selling expenses.
      CHCI has been investing in its human resources and trying aggressively to
      establish its presence within the pharmaceutical industry. These efforts have
      not provided the expected results. This subsidiary lost a major account at
      year-end, following which it began reducing overhead through staff reductions.
      Although there is no formal plan in place, the Company is looking at ways to
      sell or wind down the CHCI operations.







22




**Mahjong
      Software Development Costs**





The
      Company, upon the purchase of the *Mahjong
      Mania* companies,
      recorded $2.1 million in development costs and has deferred an additional
      $585,630 relating to the development of the *Mahjong
      Mania* Internet
      gaming software. These costs were not amortized as at December 31, 2005, given
      that the product was not fully launched.





**Stock
      Options Expensing**





The
      Company adopted the new CICA standard for stock-based compensation prospectively
      in 2004. Stock-based compensation expense relates to the amortization of the
      fair value of stock options granted to employees, directors, officers and
      consultants. Expenses are amortized over the vesting period of 18 months to
      36
      months. For awards granted before January 1, 2004, the Company did not recognize
      any compensation costs. The Company recorded $30,257 of stock-based compensation
      expense for the current year. There were no options granted in
      2004.





**Foreign
      Currency Transactions**





The
      Company incurred a foreign currency gain of $20,363 for the year, compared
      to a
      foreign currency gain of $29,824 for 2004. The decreased foreign currency gains
      experienced were due to a decrease in accounts payable balances subject to
      foreign exchange rate fluctuations and declining foreign exchange rates in
      2005
      compared to 2004. The Company does not utilize hedges or forward contracts
      to
      mitigate foreign currency risk.





**Selected
      Annual Information**





Revenue
      and Expenses:





Consolidated
      revenue for the Company was $120,702 for the three months ended March 31, 2006
      and $7,956,157 for the year ended December 31, 2005, compared to $2,274,684
      for
      the three months ended March 31, 2005 and $6,238,792 for the year ended December
      31, 2004. The Company’s cost of sales improved slightly, with direct costs of
      $499,118 for the three months ended March 31, 2006, and in 2005 being $5,294,768
      or 66% of revenue, compared to $4,315,070 or 69% in 2004. The Company’s selling,
      marketing and promotion expenses increased to $551,834, or 7% of revenue,
      compared to $250,157, or 4% for the previous year. The increase is due to the
      sales focus of *Mahjong
      Mania* .
      Administrative expenses of $2.7 million, or 34% of revenue, were higher in
      2005,
      compared to $1.8 million or 29% in 2004. The increase in administrative costs
      is
      mainly due to the operating expenses of the *Mahjong
      Mania* companies. As of the three months ended March 31, 2006, the Company’s
      consolidated selling and administration costs were $862,467.





Profitability:





The
      Company reported a consolidated after-tax loss for the three months ended March
      31, 2006 of $1,374,861 and $1,184,559 for the year ended December 31, 2005.
      The
      Company reported a consolidated after-tax loss of $65,970 for the three months
      ended March 31, 2005 and $2,204,904 for the year ended December 31, 2004. For
      comparative purposes, it is important to note that the 2004 loss consisted
      of an
      after-tax loss from continuing operations of $888,320 and a loss from the
      discontinued operations of Events International Meeting Planners Inc. of
      $1,316,584. The Company expects *Mahjong
      Mania* to begin
      contributing revenue as of the second half of 2006 and to reach profitability
      in
      fiscal 2007.





23


Balance
      Sheet:





The
      Company’s total assets as of the three months ended March 31, 2006 and December
      31, 2005 were $9,569,213 and $11,286,534, respectively, compared to $3,222,071
      and $3,023,375 for the three months ended March 31, 2005 and year ended December
      31, 2004, respectively. Cash on hand, following the injection of capital,
      increased to $6,231,638 for the three months ended March 31, 2006 and $6,053,266
      for the year ended December 31, 2005, compared to $618,836 for the three months
      ended March 31, 2005 and $319,045 for the year ended December 31, 2004. Current
      accounts receivable decreased to $313,809 for the three months ended March
      31,
      2006 and $1,758,571 for the year ended December 31, 2005, as compared to
      $1,415,751 for the three months ended March 31, 2006 and $1,863,630 for the
      year
      ended December 31, 2004. A significant addition to the Company’s long-term
      assets is an amount of $2,736,451 representing the capitalized development
      costs
      of the *Mahjong
      Mania* software. Goodwill in the amount of $328,348 was written down in full in the
      third quarter, following management’s concern over the uncertainty of the future
      of CPC Econometrics.





Total
      liabilities were $2,049,595 and $2,511,947 for the three months ended March
      31,
      2006 and fiscal year ended December 31, 2005, compared to $2,562,913 and
      $2,301,388 the three months ended March 31, 2005 and the previous fiscal year.
      Accounts payable were increased to $1,422,319 and $1,594,405 for the three
      months ended March 31, 2006 and fiscal year ended December 31, 2005 from
      $1,870,463 and $1,389,586 the three months ended March 31, 2005 and the previous
      fiscal year. Future tax liabilities on the foreign operations of CPC
      Econometrics amounted to $248,162, an increase of $148,050 over the previous
      year end. This tax liability arose from the difference between the cash basis
      used for tax purposes and the accrual basis used for financial statements.





Shareholders’
      equity as at the three months ended March 31, 2006 was $7,519,618 and $8,774,587
      as at the year ended December 31, 2005, compared to $659,158 for the three
      months ended March 31, 2005 and $721,987 as at the year ended December 31,
      2004.
      The equity is comprised of capital stock at a book value of $12,405,434,
      contributed surplus of $120,653, other capital (consisting of the cost for
      issuing warrants and options) of $475,530, cumulative translation adjustment
      of
      ($189,919) and a deficit of $4,037,111. The capital stock account has increased
      substantially by $8.8 million, following the two private placements and the
      issue of shares from the exercise of options and warrants.











24





**Summary
        of Quarterly Results**





Consolidated
              ResultsBy
              Quarter**2004**
            ****
            **2005**
            ****
            **2006**Q1
            
            Q2
            
            Q3
            
            Q4
            
            Q1
            
            Q2
            
            Q3
            
            Q4
            
            Q1$
            
            $
            
            $
            
            $
            
            $
            
            $
            
            $
            
            $
            
            $Revenues
            
            
            2,291,730
            
            
            693,615
            
            
            567,936
            
            
            2,685,511
            
            
            2,274,684
            
            
            2,126,225
            
            
            1,977,768
            
            
            1,577,480
            
            
            120,702Net
                (loss) earnings from continuing operations
            
            
            (202,467
            )
            
            (121,239
            )
            
            (722,674
            )
            
            158,060
            
            
            (65,970
            )
            
            (102,629
            )
            
            (554,297
            )
            
            (461,663
            )
            
            (1,374,861
            )Discontinued
                Operations
            
            
            (262,876
            )
            
            (363,727
            )
            
            (1,703,651
            )
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Gain
                on sale of discontinued operations
            
            
            --
            
            
            --
            
            
            --
            
            
            1,013,670
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --**Net
                earnings (loss)**
            
            
            (465,343
            )
            
            (484,966
            )
            
            (2,426,325
            )
            
            1,171,730
            
            
            (65,970
            )
            
            (102,629
            )
            
            (554,297
            )
            
            (461,663
            )
            
            (1,374,861
            )**Net
                earnings (loss) per share**Basic
            
            
            (0.012
            )
            
            (0.013
            )
            
            ($0.063
            )
            
            0.031
            
            
            (0.002
            )
            
            (0.002
            )
            
            (0.012
            )
            
            (0.008
            )
            
            (0.018
            )Fully
                diluted
            
            
            (0.012
            )
            
            (0.013
            )
            
            ($0.063
            )
            
            0.031
            
            
            (0.002
            )
            
            (0.002
            )
            
            (0.012
            )
            
            (0.008
            )
            
            (0.018
            )








**B.**  **Liquidity
      and Capital Resources**





As
      of
      March 31, 2006, the Company had $6,231,638 in cash and cash equivalents. As
      of
      December 31, 2005, the Company had $6,053,266 in cash and a $100,000 US term
      deposit. The term deposit is pledged to the Company’s principal banker as
      security for the operating line of credit of its subsidiary, CHCI. This cash
      position compares very favorably to cash on hand of $319,045 as at the previous
      year end.





The
      March
      31, 2006 consolidated financial statements reflect a working capital (current
      assets less current liabilities) of $5,091,380. As of December 31, 2005, the
      Company had working capital of $5,853,636, as compared to $329,700 as of
      December 31, 2004. The significant improvement in working capital is due to
      the
      injection of capital through the private placements that closed in April and
      December 2005 (discussed below). This strong position will enable the Company
      to
      fund the ongoing development and marketing of the *Mahjong
      Mania* software
      product until such time as the Mahjong subsidiaries become cash flow positive.
      The Company’s cash flow requirements for the immediate future will be limited to
      normal operating activities.





On
      December 28, 2005, the Company announced that it had closed a private placement,
      raising gross proceeds of CDN$5.25 million. This offering, as announced on
      December 12 th ,
      resulted in the sale of 15 million units of the Company at a price of $0.35
      per
      unit. The funds raised will be used to further develop and expand the operations
      of the Company’s Mahjong gaming software business and for general working
      capital.





Each
      unit
      sold consists of one common share and one-half of one share purchase warrant,
      with each full warrant entitling a holder to acquire an additional common share
      at a price of $0.50 per share for a period of two years. As a result of this
      private placement being handled by non-Canadian agents, 90% of the units were
      sold to U.S. residents and 10% to qualified Canadian and other non-U.S.
      investors.





The
      Company paid the agents a cash commission of 8% of the gross proceeds, together
      with the issue of 1.35 million broker warrants, with each broker warrant
      entitling the holder to acquire an additional common share at a price of $0.50
      per share for a period of two years. All of the units and the broker warrants
      are subject to a four (4) month hold period, which expired on April 28,
      2006.






25


Following
      this private placement, the Company’s resources improved dramatically and will
      be used to fund regular operations with a focus on the continuing development
      and marketing of its *Mahjong
      Mania* product.
      No significant capital expenditures are planned other than the investment in
      additional computer hardware and software required by the Mahjong
      subsidiaries.





In
      April
      2005, **** the
      Company issued a private placement raising gross proceeds of CDN$1.2 million,
      which resulted in the sale of 8 million units of the Company at a price of
      $0.15
      per unit. Each unit sold consisted of one common share and one-half of one
      share
      purchase warrant. Each full warrant entitles a holder to acquire an additional
      common share at a price of $0.25 per share for a period of one year after
      issuance.





Due
      to
      the above private placements, the Company is adequately funded and has no
      debt.








**C.**  **Research
      and Development, Patents and Licenses, Etc.**





Development
      activities are undertaken with a reasonable expectation of commercial success
      and of future benefits arising from the work. Development costs are aimed at
      improving the performance or enhancing the processes of the MM back office
      and/or game functionality to ensure new sales of the aggregate module and
      increased player participation. The new functionality or process is clearly
      defined and the costs attributable thereto are identified; the technical
      feasibility has been established; and the future market for the product or
      process is clearly defined.





The
      chart
      below outlines the amount spent during each of the last three fiscal ended
      December 31, 2005, 2004 and 2003, respectively, on company-sponsored research
      and development activities:




2005
            2004
            2003Research
                and Development Expenses
            $2,736,451
            Nil
            Nil








**D.**  **Trend
      Information**





The
      online multi-player gaming market is growing exponentially year-over-year.
      According to U.S.-based Bear Stearns, online gaming exceeded $8 billion in
      revenues by 2002. Datamonitor, taking a more conservative approach, predicted
      online gaming would be worth $8.25 billion in 2003 and $11 billion in 2004
      on
      its way to reaching $125 billion by 2015.





Internet
      penetration is a critical factor in the growth of these annual figures. Within
      Asia, Japan (in terms of percentage uptake) has held the lead but China has
      recently shown tremendous growth, particularly in broadband
      connections.





The
      traditional online gaming world consists of software houses and online casino
      websites that license and operate gaming software. Those software houses that
      have been first-to-market have flourished. They have delivered software that
      delivers most of the gaming options that were previously available only from
      traditional sources such as casinos.






26





Recently,
      specialist software houses have begun to offer single multi-player games, such
      as Poker or Bingo, to third party websites. The unique feature of these new
      multi-player games is that the players from partner websites are ‘pooled’ into a
      single gaming room to play against each other. This is known as an *aggregate
      system* ****** and
      is
      designed to provide a ****** *critical
      mass* ****** of
      players virtually around the clock, thereby ensuring continual play and
      profit.




Mahjong
      is considered to be a game of skill rather than entirely dependent on luck.
      The
      definition of skill gaming and associated law varies widely from country to
      country.




Online
      casino operators and software houses are continually seeking new content and
      gaming opportunities for their player clients. In general online casino
      operators and sports books are comfortable with using third-party software
      and
      already do so for other gaming offerings such as Poker and Bingo.





Global
      Marketplace for Mahjong:





*
            45.9%
                of Hong Kong residents surveyed had played social games such as Mahjong
                for money (“**A
                Study of Hong Kong People’s Participation in Gambling
                Activities**”
                Centre for Social Policy Studies, The Hong Kong Polytechnic
                University);





*
            China
                is expected to surpass USA with most mobile phone and internet customers
                by 2006 (Business Week 15 March
                2004);





*
            Unlimited
                growth potential as Asia increases online
                presence.





DNY
      will
      benefit from two streams of income: initial and renewal software licensing
      fees
      and a share or commission on winnings from each game played. Tradition in Hong
      Kong’s Mahjong clubs holds that the house takes a 10% commission, or rake, from
      each winning amount. Our agreements with online gaming operators will initially
      provide for 15% to 40% of the rake to be paid to MSL. Both the rake percentage
      and our share of the rake may be adjusted in response to market forces over
      time. The balance of the rake is divided pro rata between the providing website
      partners. There is no risk to the gaming operator or the Company since the
      house
      does not take a position in this game.





**E.**  **Off-Balance
      Sheet Arrangements**





The
      Company does not have any off-balance sheet arrangements that have or are
      reasonably likely to have a current or future effect on the Company's financial
      condition, changes in financial condition, revenues or expenses, results of
      operations, liquidity, capital expenditures or capital resources that are
      material to investors. ****







**F.**  **Tabular
      disclosure of contractual obligations**





The
      following table summarizes our contractual obligations as of December 31, 2005,
      and the effect these obligations are expected to have on our liquidity and
      cash
      flows in future periods.






27





**Payments
                Due by Period****Less
                than**
              **1
                year**
            
            **1-3
                years**
            
            **4-5
                years**
            
            **After**
              **5
                years****Contractual
                Obligations:**Long-Term
                Debt Obligations
            
            $
            249,400
            (2)
            $
            36,400
            
            
            --
            
            
            --Capital
                (Finance) Lease Obligations
            
            $
            18,963
            
            
            27,160Operating
                Lease Obligations (1)
            
            $
            76,892
            
            $
            57,486
            
            
            --
            
            
            --Purchase
              ObligationsOther
                Long-Term Liabilities Reflected on the Company’s Balance Sheet under
                Canadian GAAP
            
            
            --
            
            
            --
            
            
            --
            
            
            --**Total
                Contractual Obligations and Commitments:**
            
            $
            345,255
            
            $
            121,046
            
            
            --
            
            
            --





(1) Represents
      office rent of $5,226 per
      month, under a 10-year lease ending on November
      30, 2007 and a second office rent of $2,836 per month, under a 10-year lease
      which was cancelled May 1, 2006.


(2)
      Represents $53,200 of secured obligation and $232,600 of an unsecured
      obligation, as further described in Item 3B “Capitalization and Indebtedness.”
The $232,600 ( US$ 200,000 ) debt payable to FIGO was due on July 1, 2004 and
      is
      recorded as current assets in 2006.












**ITEM
      6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES**





**A.**  **Directors
      and senior management**





The
      following table sets forth certain information concerning our directors and
      senior management as of May 31, 2006. All
      of
      our directors are residents of Canada, with the exception of Kiyoshi Eguchi,
      who
      is a resident of Japan :





Name
                Age
                PositionAlbert
                    Barbusci
                49
                Director,
                    President, and Chief Executive OfficerMark
                    Billings
                36
                Chief
                    Financial OfficerAnthony
                    Barbusci
                56
                Vice
                    President of Finance and Corporate SecretaryDavid
                    Wolk
                61
                DirectorKiyoshi
                    Eguchi
                66
                DirectorLinda
                    Lemieux
                55
                Director
                    of Dynasty Gaming Inc. President of Mahjong Development Inc.Adriaan
                    Brink
                43
                President
                    and Director of Mahjong Systems
                    Ltd.
 * 
            On
            July 14, 2006 the Company received Ian Sherrington’s resignation, which was
            dated as of June 24, 2006. Mr. Sherrington’s   resignation stated
            his resignation as employee, President and Director of Mahjong Development
            Inc.
            The Company has updated this Amendment No. 1 to Form 20-F accordingly.
            The terms
            of Mr. Sherrington’s resignation from the Company may be found in Exhibit 4.17
            of Item 19 of this Registration Statement. On July 14, 2006 Linda Lemieux
            was
            appointed President and Director of Mahjong Development Inc.


Set
      forth
      below is a biographical description of our directors and senior management
      based
      on information supplied by each of them.





***Albert
      Barbusci (1)***





Albert
      Barbusci has been the Company’s President and CEO since December 2004. He has
      also served as a Director since May 2002. Mr. Barbusci is a successful
      entrepreneur who has transformed vision and opportunity into several successful
      enterprises over the last 20 years. His first business, Cadence Communications,
      launched in Montreal in 1980, was an award-winning advertising and marketing
      agency that laid the foundation for the creation of Dentsu Cadence Canada Inc.,
      a partnership with Japan’s Dentsu Inc., the world’s largest stand-alone agency
      with billings over $14 billion annually.





In
      1994,
      he became a partner of the Atlanta Consulting Group, a successful U.S. business,
      consulting to Fortune 1000 companies and in 1998, he partnered with Grey
      Healthcare Group, one of the largest Pharmaceutical Marketing and Advertising
      agencies in the world for the purpose of establishing Phase V Communications
      in
      Canada. Continuing his focus on the healthcare sector, he established Biotonix
      Inc. in partnership with the Desjardins Group in 2000. Biotonix is the first
      Internet-based Health company (iHealth) to successfully utilize sophisticated
      knowledge systems and Web-based applications to deliver non-invasive production
      solutions for lower back pain, cumulative trauma disorders, Osteoporosis and
      fitness/wellness.





***Mark
      Billings***





Mr.
      Billings has served as the Company’s Chief Financial Officer since March 2006.
      Prior to joining Dynasty, Mr. Billings held several executive positions, both
      in
      Canada and abroad. In March 2000, Mr. Billings accepted the position of Chief
      Financial Officer at G.P. Group Ltd., located in St. John’s, Antigua, and
      Barbuda. As CFO, Mr. Billings led the financial operations of this Internet
      gaming operator, which ran over 50 live sites at the time. Mr. Billings
      instituted financial controls, led annual audits, invested surplus cash,
      negotiated acquisitions for the company and prepared the company to list on
      the
      London Stock Exchange.





In
      February 2003, Mr. Billings initiated his own consulting group, Marengo
      Management Inc. (3581799 Canada Inc.) located in Montreal, Quebec, Canada.
      As
      President of his own consulting firm, Mr. Billings raised venture capital funds
      for a European Internet company and a Canadian environmental
      company.





Immediately
      prior to joining Dynasty, in 2004 Mr. Billings took the position of Vice
      President of Investment Banking at Desjardins Securities Inc., located in
      Montreal, Quebec, Canada. While at Desjardins, Mr. Billings led several
      investment banking mandates in the small-cap and micro-cap space in Canada
      and
      took several companies public on the TSX Venture Exchange.






28


***Anthony
      Barbusci*** ***(1)***





Mr.
      Barbusci has been with the Company since 2001. Since October 2001, Mr. Barbusci
      has served as Vice President of Finance and Corporate Affairs. In August 2002,
      Mr. Barbusci took on the further responsibility of Corporate Secretary. For
      the
      period between December 2004 and March 2006, Mr. Barbusci also served as Acting
      Chief Financial Officer, and has been recently replaced in that capacity by
      Mr.
      Mark Billings. Prior to joining the Company, Mr. Barbusci held senior branch
      and
      regional management positions with major Canadian banks and trust companies
      for
      over 20 years. He held the position of Vice President, Finance and
      Administration with Events International Meeting Planners Inc., from 1995-1998.
      He also served as a senior consultant, reporting to the Board of Directors,
      on
      financial management and regulatory issues, for a publicly traded biotechnology
      company before returning to Events International in October 2001, where he
      oversaw the day-to-day financial, contractual, regulatory and corporate affairs
      of the corporation and its subsidiaries.





***David
      Wolk***





Mr.
      Wolk
      has served as Director of the Company since August 2003, and sits as Chair
      of
      the Company’s Audit Committee. Mr. Wolk is currently the principal of his own
      financial communications and investor relations consultancy, David Wolk &
Company, which he began in May 2002. Prior to starting his own business, Mr.
      Wolk served as the Managing Director of a financial communications consultancy,
      Opis Communications Inc. Mr. Wolk has also served as Vice President of National
      Public Relations, Inc., a corporate communications advising firm, and was the
      Senior Vice President of Hill & Knowlton Canada, a corporate and financial
      communications consultancy.





***Kiyoshi
      Eguchi***





Mr.
      Eguchi has served as a director of the Company since November 2005. Mr. Eguchi
      previously served as Chief Executive Officer for Hong Kong and New York offices
      of Japanese advertising giant, Dentsu Inc. Mr. Eguchi continues to privately
      consult businesses and is a resident of Tokyo, Japan.





***Linda
      Lemieux***





Ms.
        Lemieux has served as a Director of the Company since June 2004. Additionally,
        Ms. Lemieux currently serves as Director and President of Mahjong
        Development Inc., our wholly owned subsidiary. Prior to joining the Company,
        Ms.
        Lemieux served as Vice-President of Information Technology, and was CIO and
        a
        member of the board of directors for Telemedia Inc. She also served as President
        of Vision2011 and Chief Operating Officer of Biotonix Inc. Ms. Lemieux is
        currently president of a Montreal-based technology-consulting
        firm.





***Adriaan
      Brink***





Adriaan
      Brink currently serves as President and Director of Mahjong Systems Ltd., our
      wholly-owned subsidiary. Mr. Brink also is Chief Executive Officer of Genesis
      Consulting Anstalt, a consulting firm located in Liechtenstein. Prior to holding
      these positions, Mr. Brink was Chief Executive Officer of Zabadoo AG, a company
      that produced Lottery Software.






29





***(1)*** *Anthony Barbusci, the Company’s Vice President of Finance and Corporate
      Secretary is the brother of Albert Barbusci, who is the Company’s Director,
      President, and Chief Executive Officer.*








**B.**  **Compensation**





During
      the fiscal year ended December 31, 2005, the Company paid or accrued a total
      of
      $456,335 in compensation to its directors and officers. No other funds were
      set
      aside or accrued by the Company during the fiscal year ended December 31, 2005
      to provide pension, retirement or similar benefits for directors or officers
      of
      the Company pursuant to any existing plan provided or contributed to by the
      Company under applicable Canadian laws.





The
      Company is required, under applicable securities legislation in Canada, to
      disclose to its shareholders details of compensation paid to its executive
      officers.  The following fairly reflects all material information regarding
      compensation paid to the Company’s executive officers and directors which has
      been disclosed to the Company’s shareholders under applicable Canadian
      law.





*Cash
      and Non-Cash Compensation - Executive Officers and Directors*





The
      Company currently has six executive officers and directors: Albert Barbusci,
      David Wolk, Linda Lemieux, Kiyoshi Eguchi, Mark Billings, and Anthony Barbusci.
      The following table sets forth all annual and long term compensation for
      services in all capacities to the Company for the fiscal year ended December
      31,
      2005 in respect of the individuals who were, at December 31, 2005, the Company’s
      directors and members of management:






30









**Name
                  and Principal Position**
              **Year**
              **Actual
                  Annual Compensation**
              **Long-Term
                  Compensation Awards**
              **All
                  Other Compensation**
                **($)****Salary**
                **(Cdn.$)**
              **Bonus**
                **($)**
              **Other
                  Annual Compensation**
                **($)**
              **Awards**
              **Payouts****Securities
                  Under Options Granted**
                **#**
              **Restricted
                  Shares or Restricted Share Units**
                **($)**
              **LTIP
                  Payouts**
                **($)**Albert
                  Barbusci, President, Chief Executive Officer and Director
                  (1)(5)
              2005
              $0
              Nil
              147,800
              Nil
              Nil
              Nil
              NilDavid
                  Wolk, Director (5)
              2005
              $0
              Nil
              $34,000
              125,000
                  shares exercisable at $0.15
              Nil
              Nil
              NilLinda
                  Lemieux, Director (2) (5)
              2005
              $0
              Nil
              $65,000
              125,000
                  shares exercisable at $0.15
              Nil
              Nil
              NilKiyoshi
                  Eguchi, Director (5)
              2005
              Nil
              Nil
              Nil
              Nil
              Nil
              Nil
              NilAnthony
                  Barbusci, Vice President of Finance and Corporate
                  Secretary
              2005
              $89,354.49
              Nil
              Nil
              125,000
                  shares exercisable at $0.15
              Nil
              Nil
              Leased
                  Automobile
                Company’s
                  cost of providing benefit $7,860.00Adriaan
                  Brink (3)
              2005
              Nil
              Nil
              $17,320.00
                (Sales
                  Commissions)
                $65,000.00
                (Cash
                  compensation for consulting fees)
              333,333
                  shares exercisable at $0.44
              Nil
              Nil
              NilIan
                  Sherrington (4)
              2005
              $20,000
              Nil
              $10,000
              333,333
                  shares exercisable at $0.44
              Nil
              Nil
              Nil


(1)
        Albert Barbusci received compensation pursuant to a Consulting Agreement
        between
        the Company and Cadence Communications Inc., a consultant company of which
        Mr.
        Barbusci is the President.
 (2)
          Linda
          Lemieux also serves as President and Director of Mahjong Development Inc.(MDI).
          Ms. Lemieux is currently employed by MDI under a consulting agreement,
          which
          provides for monthly fees of $10,000 per month payable to her personal
          operating
          company, Vision 2011. Ms. Lemieux was paid a total salary of $65,000 in
          2005 .
 (3)
          Adriaan Brink is President and Director of Mahjong Systems Limited. Adriaan
          Brink received total fees of $82,320, which were paid to Genesis Consulting,
          Adriaan Brink’s personal operating company.
 (4)
Ian
          Sherrington, a former President and Director of Mahjong Development Inc.,
          was
          placed on salary as of November 1, 2005. Mr. Sherrington received $20,000
          in
          2005 as salary for his position as President of MDI, and $10,000 under
          a
          consulting agreement effective November 1, 2005. Mr. Sherrington’s fees were
          paid to Sherrington Systems, which is Mr. Sherrington’s personal operating
          company. On July 14, 2006 the Company received Ian Sherrington’s resignation,
          which was dated as of June 24, 2006. Mr. Sherrington’s resignation stated his
          resignation as employee, President and Director of Mahjong Development
          Inc. The
          Company has updated this Amendment No. 1 to Form 20-F accordingly. On July
          14,
          2006 Linda Lemieux was appointed President and Director of Mahjong Development
          Inc.


(5)
      The
      Company’s Directors receive compensation of $1,000 per attendance at the
      Company’s Director’s Meetings.









31


In
      order
      to attract and retain highly qualified personnel, we provide incentives in
      the
      form of stock options to certain of our qualified employees, directors, officers
      and consultants on terms and conditions which are in accordance with the
      prevailing rules and policies of the TSX Venture Exchange, and our Board of
      Directors.  As at May 31, 2006, we had issued 2,116,666 incentive stock
      options to the following Directors and officers pursuant to our stock option
      plan:





The
      following table sets out certain information relating to common stock options
      not exercised by our senior management and directors as at May 31, 2006
      (1):







**Name**
              **Title
                  of Class**
              **Securities
                  Acquired on Exercise**
                **(#)**
              **Exercise
                  Price (Cdn $)**
              **Unexercised
                  Options at May 31, 2006**
                **(#)**
              **Expiry
                  Date**Albert
                  Barbusci
              Common
              Nil
              $0.50
              90,000
              March
                  5, 2011David
                  Wolk
              Common
              Nil
                
                82,000
                
                Nil
              $1.00
                
                $0.15
                
                $0.50
              25,000
                
                43,000
                
                90,000
              August
                  5, 2007
                
                March
                  1, 2010
                
                March
                  5, 2011Linda
                  Lemieux
              Common
              61,667
                
                Nil
              $0.15
                
                $0.50
              63,333
                
                90,000
              March
                  1, 2010
                
                March
                  5, 2011Kiyoshi
                  Eguchi
              Common
              Nil
              $0.50
              90,000
              March
                  5, 2011Anthony
                  Barbusci
              Common
              Nil
                
                Nil
                
                Nil
              $0.75
                
                $0.15
                
                $0.50
              100,000
                
                125,000
                
                90,000
              March
                  25, 2007
                
                March
                  1, 2010
                
                March
                  5, 2011Adriaan
                  Brink (2)
              Common
              Nil
              $0.44
              333,333
              September
                  21, 2010Ian
                  Sherrington
              Common
              111,111
              $0.44
              222,222
              September
                  21, 2010




(1)
      Mark
      Billings, Chief Financial Officer, was hired on March 20, 2006. Mr. Billings’
current compensation structure includes an annual salary of $120,000. Mr.
      Billings also owns 44,000 shares of DNY common stock, as well as options to
      purchase 500,000 shares of DNY common stock at a strike price of $0.50 per
      share, which expires on March 5, 2011.


(2)
        Adriaan Brink holds the common stock options through his personal operating
        company, Genesis Consulting Anstalt.


(3)
On
        July
        14, 2006 the Company received Ian Sherrington’s resignation, which was dated as
        of June 24, 2006. Mr. Sherrington’s resignation stated his resignation as
        employee, President and Director of Mahjong Development Inc. The Company
        has
        updated this Amendment No. 1 to Form 20-F accordingly. The terms of Mr.
        Sherrington’s resignation from the Company may be found in Exhibit 4.17 of Item
        19 of this Registration Statement. On July 14, 2006 Linda Lemieux was appointed
        President and Director of Mahjong Development Inc.







32


*Pension
      and Retirement Plan Disclosure*





The
      Company does not provide retirement benefits for directors and executive
      officers.





*Termination
      of Employment, Change in Responsibilities and Employment
      Contracts*





Except
      for as disclosed below, there are no employment contracts, consulting
      agreements, or “change of control agreements” in place between the Corporation
      and any of its Named Executive Officers.





Albert
      Barbusci, the Company’s Chief Executive Officer, is a party to an employment
      agreement with the Company, which continues indefinitely until terminated in
      accordance with its terms. The employment agreement provides, among other
      things, for stock options and participation in benefits and plans as provided
      and defined in the employment agreement. Cadence Communications Inc.
      (“Cadence”), a consulting company of which Mr. Barbusci is President, is also a
      party to a consulting agreement with the Company. The consulting agreement,
      which provides for a 5-year term beginning March 16, 2006, unless terminated
      beforehand, provides for an annual fee of $225,000 to be paid by the Company
      to
      Cadence, along with a base fee equal to 2% of the Company’s pre-tax profits. The
      Company may terminate the consulting agreement in the event of a breach by
      Cadence of the confidentiality or non-competition provisions referred to in
      the
      consulting agreement, or if Cadence continuously fails to substantially perform
      its duties. Cadence may terminate the consulting agreement in the event of
      a
      material breach by the Company, a change in control of the Company, or a removal
      or non-reappointment of Cadence’s President from any executive position or from
      the Board of Directors of the Company. In the event of termination of the
      consulting agreement by the Company, the Company shall pay Cadence any accrued
      but unpaid base fees and performance fees for the period up to the date of
      termination, any accrued but unpaid expenses, as well as any other benefits
      to
      which Cadence is entitled.




Mark
      Billings, the Company’s Chief Financial Officer, is a party to a 3-year
      employment agreement with the company, due to terminate on March 6, 2009, unless
      terminated beforehand in accordance with the terms of the employment agreement.
      The employment agreement provides, among other things, for payment of the
      executive’s salary of $120,000 annually, stock options, bonus, benefits and
      plans as provided and defined in the employment agreement. The Company may
      terminate the employment agreement upon the executive’s death or disability, or
      upon just cause, including breach of the non-competition provisions, in which
      case the Company shall pay to the executive or his beneficiary any accrued
      but
      unpaid base salary, bonus and vacation for the period up to the date of death
      or
      disability and any benefits to which the executive is entitled, other than
      options that have not vested in the event of termination for just cause.







33




Adriaan
      Brink, along with Genesis Consulting Anstalt (“Genesis”), of which Mr. Brink is
      the key executive, are parties to a management agreement with the Mahjong
      Systems Limited (“MSL”), a wholly owned subsidiary of the Company. The
      management agreement provides, among other things, for payment of Genesis’ base
      fee of $120,000 annually. In addition, Genesis is entitled to a performance
      fee
      equal to 20% of the first year license fees payable to MSL under those license
      agreements executed by MSL and third parties in the year, where the agreements
      were initiated and closed by Genesis or Mr. Brink. Genesis is further entitled
      to a performance fee equal to 10% of the first year license fees payable to
      MSL
      under those license agreements executed by MSL and third parties in the year,
      other than those previously described. Genesis is further entitled to options,
      as described in the management agreement, and a bonus equal to 100% of the
      base
      fee in the event that MSL and MDI’s combined consolidated financial statements
      reach $4 million. In the event that Genesis or Mr. Brink fail to execute any
      reasonable, lawful direction relating to the business, or breach the
      non-competition provisions referred to in the management agreement, MSL may
      terminate the agreement. The management agreement provides for the communication
      by Genesis and Mr. Brink to MSL of title to all intellectual property held
      by
      Genesis or Mr. Brink commencing on the date of the agreement for a term of
      5
      years, unless terminated beforehand per the terms of the management
      agreement.




*Directors*





The
      Company has no arrangements, standard or otherwise, pursuant to which directors
      are compensated by the Company for their services in their capacity as
      directors, or for committee participation, or involvement in special assignments
      during the most recently completed financial year or subsequently up to and
      including the date of this annual report, except that directors are compensated
      for their actual expenses incurred in the conduct of their duties as directors
      and certain directors may be compensated for services rendered as consultants
      or
      experts. To date, our directors are compensated $1,000 per attendance at our
      directors meetings.





**C.**  **Board
      Practices**





The
      term
      of office of each director is until the next annual meeting of stockholders
      and
      until a successor is elected and qualified or until the director’s death,
      resignation or removal from office. Executive officers hold office until their
      successors are chosen and qualified, subject to earlier removal by the board
      of
      directors.





The
      general duty of the Board of Directors of the Company is to oversee the
      management of the business and affairs of the Company. In particular, the Board
      of Directors is responsible for the following matters: ****





(a)
            
            adopting
                a strategic planning process for the Company which establishes the
                Company’s long-term goals and strategies, and monitoring the success of
                the Company’s management in achieving those goals and implementing the
                strategy;





(b)
            
            identifying
                the principal risks with respect to all aspects of the Company’s business,
                ensuring that there are systems in place to effectively monitor and
                manage
                such risks with a view to the long-term viability of the Company,
                and
                achieving a proper balance between the risks incurred and the potential
                return to the Company’s members;





(c)
            
            engaging
                in succession planning, including appointing, training and monitoring
                senior management (which includes ensuring that objectives are in
                place
                against which management’s performance can be measured), establishing and
                maintaining programs to train and develop management, providing for
                the
                orderly succession of management, and assessing the performance and
                contribution of the Chief Executive Officer of the Company against
                mutually established objectives;
                and






34





(d)
            
            ensuring
                that the Company has a policy in place to enable it to communicate
                effectively with its shareholders, other stakeholders and the general
                public, effectively interpreting the operations of the Company to
                shareholders, accommodating feedback from shareholders, and ensuring
                that
                there are effective controls and information systems in place for
                the
                Board of Directors to discharge its responsibilities, such as an
                audit
                system which can inform the Board of Directors about the integrity
                of the
                data and the compliance of the financial information with appropriate
                accounting principles.





*Committee
      of the Board of Directors*





The
      Company maintains an Audit Committee, which oversees the accounting and
      financial reporting processes of the Company and all audits and external reviews
      of the financial statements of the Company on behalf of the Board, and has
      general responsibility for oversight of internal controls, accounting and
      auditing activities of the Company. Currently, Mr. David Wolk serves as the
      Chair of the Audit Committee.





The
      Committee reviews, on a continuous basis, any reports prepared by the Company’s
      external auditors relating to the Company’s accounting policies and procedures,
      as well as internal control procedures and systems. The Committee is also
      responsible for examining all financial information, including annual financial
      statements, prepared for securities commissions and similar regulatory bodies
      prior to filing or delivery of the same. The Audit Committee also oversees
      the
      annual audit process, the Company’s internal accounting controls, any complaints
      and concerns regarding accounting, internal controls or auditing matters and
      the
      resolution of issues identified by the Company’s external auditors. The Audit
      Committee recommends to the Board the firm of independent auditors to be
      nominated for appointment by the shareholders and the compensation of the
      auditors. The Audit Committee meets on an as needed basis.





**D.**  **Employees**





As
      of
      December 31, 2005, the Company had 30 employees and consultants, all of whom
      worked out of the Company’s head office, with exception for Adriaan Brink, who
      is currently based in Europe. The employees’ positions included managerial and
      support staff positions. All employees were engaged either directly as
      employees, through a management company or as consultants.





**E.**  **Share
      Ownership**




The
      following table sets forth the share ownership of those persons listed in Items
      6A and 6B above and includes the details of all options or warrants to purchase
      shares of the Company held by such persons:





Name
            Number
                of
              Common
              Shares
                Held
              at
                May 31, 2006
            Number
                of
              Options
                or
              Warrants
              Outstanding
                at
              May
                31, 20061
            Beneficial
              Ownership2Albert
                Barbusci3
            13,803,000
            90,000
            14,019,000David
                Wolk4
            Nil
            158,000
            98,000Linda
                Lemieux5
            180,000
            153,333
            273,333Kiyoshi
                Eguchi6
            Nil
            90,000
            30,000Anthony
                Barbusci7
            84,800
            315,000
            339,800Adriaan
                Brink8
            635,250
            333,333
            801,916Ian
                Sherrington9
            7,483,788
            222,222
            7,539,343Total:(1)
                For information regarding the class, amount, exercise prices, and
                expiry
                date of the options, please see “ITEM 6B. COMPENSATION”
                above.(2)
                Beneficial ownership is determined in accordance with the rules of
                the
                Securities and Exchange Commission and generally includes voting
                or
                investment power with respect to securities. Unissued common shares
                subject to options, warrants or other convertible securities currently
                exercisable or convertible, or exercisable or convertible within
                60 days,
                are deemed outstanding for the purpose of computing the beneficial
                ownership of common shares of the person holding such convertible
                security
                but are not deemed outstanding for computing the beneficial ownership
                of
                common shares of any other person.(3)
                Includes 13,803,000 shares held by Mr. Barbusci, personally and through
                Cadence Holdings, a corporation of which Mr. Barbusci is President
                and
                greater than 10% shareholder, as well as 186,000 shares held by Mr.
                Barbusci’s wife and minor children and 30,000 of vested stock options.(4)
                Mr. Wolk previously exercised 82,000 options at $0.15, acquiring
                82,000
                shares of the Company’s common stock. Beneficial share ownership includes
                98,000 vested stock options.


(5)
                    Ms. Lemieux previously exercised 67,667 options at $0.15, acquiring
                    67,667
                    shares of the Company’s common stock. Beneficial ownership includes 93,333
                    vested stock options. Effective June 24, 2006, Ms. Lemeux was
                    appointed
                    President and Director of Mahjong Development Inc.(6)
                    Beneficial ownership includes 30,000 vested stock
                    options.(7)
                    Beneficial ownership includes 255,000 vested stock
                    options.(8)
                    Adriaan Brink holds the Company’s common stock through his personal
                    operating company, Genesis Consulting Anstalt. Beneficial ownership
                    includes 166,666 vested stock options.(9)
                    Mr.
                    Sherrington previously exercised 111,111stock options at $0.44,
                    acquiring
                    111,111 shares of the Company’s common stock. Beneficial ownership
                    includes 55,555 vested stock options. On July 14, 2006 the Company
                    received Ian Sherrington’s resignation, which was dated as of June 24,
                    2006. Mr. Sherrington’s resignation stated his resignation as employee,
                    President and Director of Mahjong Development Inc. The Company
                    has updated
                    this Amendment No. 1 to Form 20-F
                    accordingly.
  *** Mark
        Billings, Chief Financial Officer, was hired on March 20, 2006. Mr. Billing
        owns
        44,000 shares of DNY common stock, as well as options to purchase 500,000
        shares
        of DNY common stock at a strike price of $0.50 per share, which expires on
        March
        5, 2011.




*Stock
      Option Plan*




The
      Company has established a stock option plan under which options to purchase
      the
      Company’s common shares may be granted at the discretion of the Board of
      Directors to any senior officer, director, employee, management company employee
      or consultant of the Company, or any of its subsidiaries. The number of common
      shares available for issuance under the Company’s stock option plans is
      7,500,000. Of the 7,500,000common shares available for issuance, 5,443,666
      have
      been awarded through stock option grants by the Board of Directors.




Information
      as to share and option information for directors and officers are discussed
      above in “ITEM 6. A. DIRECTORS AND SENIOR MANAGEMENT” and in “ITEM 6B.
      COMPENSATION.”




*Broker’s
      Warrants*






35


On
      December 28, 2005, the Company issued two Broker’s Warrant Certificates. The
      first, naming AM Capital, LLC as the Holder, provided for the issuance of
      750,000 non-transferable broker warrants, each warrant entitling the holder
      to
      purchase one common share of the Company at a price of CDN$0.50 per share at
      any
      time up to December 28, 2007. The warrants were issued pursuant to applicable
      prospectus and registration exemptions and subject to a four month hold period,
      which expired on April 29, 2006. The second Broker’s Warrant Certificate named
      RG Securities, LLC, and provided for the issuance of 600,000 non-transferable
      broker warrants under similar terms.








**ITEM
      7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**





**A.**  **Major
      shareholders**





As
      of May
      31, 2006, a total of 77,321,559 common shares in our capital stock were issued
      and outstanding.





To
      the
      best of Dynasty’s knowledge, no person, corporation or other entity is a
      beneficial owner of more than 5% of the common shares of Dynasty, except for
      those listed below:





**Title
                of Class**
            **Identity
                of Person or Group**
            **Number
                of Shares Beneficially Owned****(2)**
            **Percent
                of Class****(3)**Common
                Shares
            Albert
                Barbusci(1)
            14,019,000
            18.1%Common
                Shares
            Ian
                Sherrington
            7,539,343
            9.8%





(1)
            Albert
                Barbusci, Director, President and Chief Executive Officer, is the
                brother
                of Anthony Barbusci, Vice President of Finance and Corporate
                Secretary.


(2)
            Beneficial
                ownership is determined in accordance with the rules of the Securities
                and
                Exchange Commission and generally includes voting or investment power
                with
                respect to securities. Unissued common shares subject to options,
                warrants
                or other convertible securities currently exercisable or convertible,
                or
                exercisable or convertible within 60 days, are deemed outstanding
                for the
                purpose of computing the beneficial ownership of common shares of
                the
                person holding such convertible security but are not deemed outstanding
                for computing the beneficial ownership of common shares of any other
                person.


(3)
            Based
                on 77,321,559 common shares issued and outstanding at May 31,
                2006.




There
      are
      currently no voting rights arrangements among the Company’s shareholders and
      directors.




**B.**  **Related
      Party Transactions**




Except
      where described elsewhere in this Registration Statement, we have not, during
      the three most recently completed financial years and the subsequent period
      up
      to the date of this Registration Statement, entered into transactions or loans
      with any (a) enterprises that are directly or indirectly controlled by or under
      common control with us; (b) our associates; (c) individuals directly or
      indirectly owning voting right which give them significant influence over us
      or
      close members of their respective families, (d) our directors, senior management
      or close members of their respective families or (e) enterprises in which a
      substantial interest in the voting power is held or significantly influenced
      by
      any of the foregoing individuals (a “Related Party”), except as shown in the
      table below.







36


Transactions
        with related parties are in the normal course of operations. The following
        provides information on transactions with those related parties with whom
        the
        Company either received revenue or paid expenses. Companies are either owned
        or
        controlled by shareholders, directors or officers of the Company or its
        subsidiaries.
 
 As
          at the
          year ended December 31, 2005, the Company’s accounts payable resulting from
          related party transactions totaled an aggregate of $183,151.
 
 Direct
        costs were charged by Vision 2011, a company controlled by Linda Lemieux,
        who is
        a Director of the Company, in the amount of $60,000. Cadence Communication,
        a
        company controlled by Albert Barbusci, our President and CEO, charged direct
        costs in the amount of $134,651. Lisnacullen Farms, a company controlled
        by
        Christine Sheehy, wife of Barry Sheehy, the president of our CPC Econometrics
        subsidiary, charged direct costs of $322,738.
 
 Cadence
          Communication charged administrative costs of $152,800 to the Company.
          David
          Wolk, a director of the Company, charged administrative costs of $25,050
          to the
          Company. Genesis Consulting, a company controlled by Adriaan Brink, the
          President of our MSL subsidiary, charged administrative costs of $80,000
          to the
          Company.
 
 *Related
        Party Transactions for the period ended December 31, 2004* .
 
 During
          the year ended December 31, 2004, the Company received revenues in the
          aggregate
          amount of $28,016 from Biotonix, a company controlled by Albert Barbusci,
          and
          Cadence Communications, also controlled by Albert Barbusci. The Company
          received
          revenues from Biotonix in the amount of $11,871 and revenues from Cadence
          Communications in the amount of $16,145.
 
 Direct
        costs were paid to Cadence Communications, Lisnacullen Farms, and Value Strat
        in
        the aggregate amount of $847,597. These costs were paid to Cadence Communication
        in the amount of $107,458, Lisnacullen Farms in the amount of $312,987 and
        Valu
        Strat in the amount of $427,152. Value Strat is a company controlled by Brenda
        Schone, CFO of the Company.
 
 Management
        fees in the aggregate amount of $145,300, as well as promotion costs in the
        aggregate amount of $35,570, was paid to Cadence Communication.
 
 *Related
        Party Transactions for the period ended December 31, 2003* .
 
 During
          the year ended December 31, 2003, the Company received revenues in the
          aggregate
          amount of $55,395 from Biotonix and Cadence Communication.  Revenues were
          earned in the amount of $52,097 and $3,298, respectively.
 
 Direct
          costs were paid to Biotonix, Cadence Communications and Value Strat in
          the
          amount of $30,177, $199,008 and $335,543,
          respectively.




37




Selling
          costs were paid to Cadence Communications in the aggregate amount of $23,285.
          Administrative costs were paid to David Wolk in the amount of $30,183.
          Obligations under capital leases were attributable to BTX Financial, a
          company
          controlled by Dieter Jahnke, a director of the company in the amount of
          $68,716.




The
      above
      transactions are in the normal course of operations and are measured at the
      exchange amount, which is the amount of consideration established and agreed
      to
      by the related parties.





The
      Company believes that all these transactions were entered into on terms as
      favorable as could have been obtained from unrelated third parties because,
      based upon its experience in the industry, DNY believes it would have had to
      pay
      independent third parties more for comparable assets or services.





Other
      than the above transactions, DNY has not entered into any material transactions
      with any director, executive officer, and nominee for director, beneficial
      owner
      of five percent or more of DNY common stock, or family members of such persons.
      Also, other than the above transactions, DNY has not had any transactions with
      any promoter.







**ITEM
      8. FINANCIAL INFORMATION**





**A.**  **Consolidated
      Statements and Other Financial Information.**





The
      Company’s consolidated financial statements are stated in Canadian Dollars
      (CDN$) and are prepared in accordance with Canadian Generally Accepted
      Accounting Principles (GAAP), the application of which, in the case of the
      Company, conforms in all material respects for the periods presented with United
      States GAAP, except as discussed in footnotes to the financial
      statements.




The
      financial statements as required under ITEM #17 are attached hereto and found
      immediately following the text of this Registration Statement. The audit reports
      of the Company are included herein immediately preceding the financial
      statements.




*Audited
      Financial Statements*




Fiscal
      2005/2004/2003 periods ended December 31 st





*Legal/Arbitration
      Proceedings*




The
      Directors and the management of the Company do not know of any material, active
      or pending, legal proceedings against them; nor is the Company involved as
      a
      plaintiff in any material proceeding or pending litigation.







Policy
      on dividend distributions:





Dynasty
      has not paid any dividends on its outstanding common shares since its
      incorporation and does not anticipate that it will do so in the foreseeable
      future. All funds of Dynasty are being retained for development and distribution
      of *Mahjong
      Mania* and
      for
      the development of our prepaid card strategy in China.






38





**B.**  **Significant
      Changes**





There
      have been no significant changes to the business of Dynasty since December
      31,
      2005 except as disclosed herein.





39


**ITEM
      9. THE OFFER AND LISTING**





**A.**  **Offer
      and Listing Details**





Our
      common shares trade on the TSX Venture Exchange under the symbol “DNY.” The TSX
      Venture Exchange is monitored by the Ontario Securities Commission. Our common
      shares began trading on the TSX Venture Exchange under the symbol “DNY” on
      December 9, 2005. Before we were listed as “DNY,” and prior to our name change,
      our common shares were traded on the TSX Venture Exchange under the name Events
      International Holding Corporation and under the symbol “EIH.” As of June 1,
      2006, the stock price on the TSX Venture Exchange was CDN$1.15.





Our
      common shares are not currently traded on any US trading market. The high and
      low closing trading prices of our common shares for each full financial quarter
      for the two most recent full financial years are listed in the following chart.





**PERIOD**
            ****
            **HIGH**
              **(Cdn.$)**
            ****
            **LOW**
              **(Cdn.$)****Year
                Ended December 31, 2005**
              First
                Quarter
            
            0.24
            
            0.15****Second
                Quarter
            
            0.42
            
            0.16****Third
                Quarter
            
            0.65
            
            0.25Fourth
                Quarter
            
            0.66
            
            0.34**Year
                Ended December 31, 2004**
              First
                Quarter
            
            0.40
            
            0.16Second
                Quarter
            
            0.40
            
            0.095Third
                Quarter
            
            0.095
            
            0.05Fourth
                Quarter
            
            0.10
            
            0.03





The
      high
      and low closing trading prices of our common shares for the five most recent
      full financial years are listed in the following chart.





**PERIOD**
            ****
            **HIGH**
              **(Cdn.$)**
            ****
            **LOW**
              **(Cdn.$)****2005**
            
            0.66
            
            0.15**2004**
            
            0.40
            
            0.03**2003**
            
            0.65
            
            0.17**2002**
            
            1.48
            
            0.45**2001***
            
            n/a
            
            n/a


*The
      Company began trading on the TSX Venture Exchange, under the name Events
      International Holding Corporation (“EIH”), on April 25, 2002. The Company
      changed its name to Dynasty Gaming Inc. (“DNY”) on December 5, 2005, and began
      trading on the TSX Venture Exchange under that symbol on December 9, 2005.











40


The
      high
      and low closing market prices for each month for the most recent six months
      are
      listed in the following chart.





PERIOD
            HIGH
              (Cdn.$)
            LOW
              (Cdn.$)May
                2006
            1.31
            0.92April,
                2006
            1.22
            1.03March,
                2006
            1.33
            0.45February,
                2006
            0.495
            0.39January,
                2006
            0.68
            0.45December,
                2005
            0.66
            0.38







We
      are
      listing our common shares, with no par value, pursuant to Section 12(g) of
      the
      Exchange Act of 1934. Our shares of common stock are in registered form when
      issued. All of the shares outstanding are “restricted shares” within the meaning
      of Rule 144 of the Securities Act of 1933 and may be publicly sold only if
      registered under the Securities Act or sold in accordance with an applicable
      exemption from registration, such as Rule 144.





As
      of May
      31, 2006, there were 77,321,559 shares of our common stock outstanding; there
      were approximately 116 registered holders of our common stock, of which
      approximately 18% of the total outstanding common stock was held by 32
      registered holders located in the United States.





**B.**  **Plan
      of Distribution**





Not
      Applicable.





**C.**  **Markets**





Our
      Common Shares are quoted in Canada on the TSX Venture Exchange, under the
      trading symbol “DNY”.





**D.**  **Selling
      Shareholders**





Not
      Applicable.





**E.**  **Dilution**





Not
      Applicable.





**F.**  **Expenses
      of the Issue**





Not
      Applicable.




41





**ITEM
      10. ADDITIONAL INFORMATION**





**A.**  **Capital
      Share**





***Common
      stock.*** We
      presently are authorized to issue an unlimited number of shares of our common
      stock, no par value per share. As at May 31, 2006, we had 77,321,559 shares
      of
      our common stock issued and outstanding.





The
      holders of our common stock will elect all directors and are entitled to one
      vote for each share. All shares of our common stock will participate equally
      in
      dividends if declared by our board of directors, and in net assets in the event
      of the liquidation of Dynasty. All shares of our common stock presently
      outstanding are duly authorized, validly issued, fully paid and non-assessable
      by Dynasty. Our shares of common stock have no preference, conversion, exchange,
      preemptive or cumulative voting rights. At present, no common stock of DNY
      is
      held by the Company or any of its subsidiaries.





***Options.*** Set
      forth
      below is a table summarizing the 5,443,666 outstanding options to purchase
      shares of our common stock as of May 31, 2006.





**Name**
            **#
                of Options Granted**
            **Exercise
                Price**
            **Expiry
                Date**
            **Exercised**
            **Balance**
              **2006**Anthony
                Barbusci
            100,000
            0.75
            25-Mar-07
            -
            100,000David
                Wolk
            25,000
            1.00
            5-Aug-07
            -
            25,000Max
                Jarvie
            5,000
            0.38
            23-Jun-08
            -
            5,000Valerie
                Vucko
            10,000
            0.38
            23-Jun-08
            10,000
            -Anthony
                Barbusci
            125,000
            0.15
            1-Mar-10
            -
            125,000David
                Wolk
            125,000
            0.15
            1-Mar-10
            82,000
            43,000Linda
                Lemieux
            125,000
            0.15
            1-Mar-10
            61,667
            63,333Max
                Jarvie
            20,000
            0.15
            1-Mar-10
            -
            20,000Valerie
                Vucko
            10,000
            0.15
            1-Mar-10
            -
            10,000Michel
                Vezina
            50,000
            0.15
            1-Mar-10
            33,333
            16,667Grant
                Cregan
            25,000
            0.15
            1-Mar-10
            16,666
            8,334Dolores
                Di Re
            20,000
            0.15
            1-Mar-10
            -
            20,000Clare
                Vincelli
            5,000
            0.15
            1-Mar-10
            -
            5,000Rita
                De Marco
            5,000
            0.15
            1-Mar-10
            -
            5,000Graeme
                McDonald
            5,000
            0.15
            1-Mar-10
            -
            5,000Barbara
                Novek
            25,000
            0.15
            1-Mar-10
            16,000
            9,000Genesis
                Consulting
            333,333
            0.44
            21-Sep-10
            -
            333,333Ian
                Sherrington
            333,333
            0.44
            21-Sep-10
            111,111
            222,222Alan
                Tucker
            1,150,000
            0.50
            17-Oct-10
            -
            1,150,000Qian
                (Cheryl) Chen
            10,000
            0.45
            25-Oct-10
            3,000
            7,000Ernst
                van der Meché
            21,000
            0.44
            1-Nov-10
            -
            21,000Alliance
                Advisors, LLC
            200,000
            0.50
            29-Dec-10
            -
            200,000Dolores
                Di Re
            10,000
            0.50
            25-Jan-11
            -
            10,000Alan
                Tucker
            350,000
            0.50
            1-Feb-11
            -
            350,000Eric
                Capel
            6,000
            0.50
            12-Feb-11
            -
            6,000Albert
                Barbusci
            90,000
            0.50
            5-Mar-11
            -
            90,000David
                Wolk
            90,000
            0.50
            5-Mar-11
            -
            90,000








42






Linda
                Lemieux
            90,000
            0.50
            5-Mar-11
            -
            90,000Kiyoshi
                Eguchi
            90,000
            0.50
            5-Mar-11
            -
            90,000Anthony
                Barbusci
            90,000
            0.50
            5-Mar-11
            -
            90,000Mark
                Billings
            500,000
            0.50
            5-Mar-11
            -
            500,000Robert
                Josephson
            250,000
            0.80
            16-Mar-11
            -
            250,000Peter
                Kjaer
            700,000
            1.00
            6-Apr-11
            -
            700,000Derek
                McKee
            100,000
            1.11
            3-May-11
            -
            100,000Neil
                Pitman
            45,000
            1.11
            3-May-11
            -
            45,000Fengmin
                Zhang
            30,000
            1.11
            3-May-11
            -
            30,000Richard
                Elton
            30,000
            1.11
            3-May-11
            -
            30,000Stanley
                Zhang
            30,000
            1.11
            3-May-11
            -
            30,000Feng
                Hua
            30,000
            1.11
            3-May-11
            -
            30,000Youssef
                Masrour
            30,000
            1.11
            3-May-11
            -
            30,000Anne
                Lise Dupuis
            20,000
            1.11
            3-May-11
            -
            20,000ShengJie
                Xia
            20,000
            1.11
            3-May-11
            -
            20,000Ernst
                van der Meché
            40,000
            1.11
            3-May-11
            -
            40,000Adam
                Sofineti
            30,000
            1.11
            3-May-11
            -
            30,000Francis
                Fong
            30,000
            1.11
            3-May-11
            -
            30,000Xuesong
                Ma
            5,000
            1.11
            3-May-11
            -
            5,000Ding
                Jun
            5,000
            1.11
            3-May-11
            -
            5,000Hengbin
                Luo
            5,000
            1.11
            3-May-11
            -
            5,000




***Warrants.*** **** A s
      at
      December 31, 2005, the Company had issued 7,500,000 Share Purchase Warrants
      through a private placement of its common shares, and 1,350,000 Broker Stock
      Warrants. Each Share Purchase Warrant and Broker Stock Warrant may be exercised
      at the below-referenced exercise price to purchase one (1) common share.





Set
      forth
      below is a table summarizing all outstanding Share Purchase Warrants of the
      Company’s common stock, as of June 1, 2006:





**Name**
            **No.
                of Warrants**
            **Exercise
                Price**
            **Type**
            **Date
                Issued**
            **Expiry
                Date**Alan
                Silverman
            150,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Baracuda
                Motors, Inc.
            50,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Brookwood
                Partners, LLP
            162,500
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Bruce
                Schindler
            330,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Caledonia
                Corporate Management Group Ltd.
            355,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007David
                Nagelberg, IRA
            207,500
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Dencol
                Mortgage Corporation
            75,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007E-Cap
                Ventures, LLC
            50,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Edward
                Rose
            50,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Evan
                Todd Heller Trust
            125,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Fred
                G. Daniels
            75,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Gary
                Jakalow
            50,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Gibson
                & Ginsey, Inc. D/B/A Luxury Limousines and Transportation,
                Inc.
            84,286
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Gordon
                Freeman
            200,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Growth
                Ventures, Inc.
            150,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Heller
                Capital Investments, LLC
            835,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Irwin
                Lieber
            250,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Jacqueline
                McQuade
            50,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007






43




James
                Scoroposki
            500,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Joyce
                L. Heller Revocable Trust
            250,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Jyll
                Rosenfeld
            50,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Kendall,
                Jeremy
            71,500
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Larry
                Altman
            37,500
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Martin
                Smolowitz, Esq Direct Benefit Pension Plan
            50,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Michael
                Smith
            200,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Nancy
                Kerwin Mullins
            35,714
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Orchard
                Ventures LLC
            50,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Penson
                Financial Services
            71,500
            $
                0.50
            Issued
            3/6/2006
            12/28/2007Philip
                Bloom
            50,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Pinglick
                Holdings Inc.
            107,500
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Rachel
                Beth Heller Trust
            125,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007RH
                Capital Associates LLC
            207,500
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Roytor
                & Co.
            69,500
            $
                0.50
            Issued
            3/8/2006
            12/28/2007Seneca
                Ventures
            162,500
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Seymour
                Smith
            50,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Stephen
                Wien
            162,500
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Vito
                Errico
            75,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Woodland
                Partners
            500,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Woodland
                Venture Fund
            325,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007Zeke,
                LP
            1,100,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007





Set
      forth
      below is a table summarizing all outstanding Broker Stock Warrants of the
      Company’s common stock:





**Holder**
            **No.
                of Warrants**
            **Exercise
                Price**
            **Type**
            **Date
                Issued**
            **Expiry
                Date**RG
                Securities, LLC
            600,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007AM
                Capital, LLC
            750,000
            $
                0.50
            Issued
            12/28/2005
            12/28/2007





***History
      of share capital*** **.**





In
      December 2005, we issued a private placement raising gross proceeds of CDN$5.25
      million, which resulted in the sale of 15 million units (the “December Units”)
      of the Company at a price of $0.35 per December Unit. Each December Unit sold
      consisted of one common share and one-half of one share purchase warrant. Each
      full warrant entitles a holder to acquire an additional common share at a price
      of $0.50 per share for a period of two years. As a result of this private
      placement being handled by non-Canadian agents, 90% of the Units were sold
      to
      U.S. residents and 10% to qualified Canadian and other non-U.S. investors.
      The
      Company paid the agents a cash commission of 8% of the gross proceeds together
      with the issue of 1.35 million broker warrants, each broker warrant entitling
      the holder to acquire an additional common share at a price of $0.50 per share
      for a period of two years. All of the December Units and the broker warrants
      were subject to a four (4) month hold period which expired on April 28, 2006.
      As
      a result of this funding transaction, the issued and outstanding capital of
      Dynasty increased to 76,834,115 shares of common stock.





In
      April
      2005, **** we
      issued
      a private placement raising gross proceeds of CDN$1.2 million, which resulted
      in
      the sale of 8 million units (the “April Units”) of the Company at a price of
      $0.15 per April Unit. Each April Unit sold consisted of one common share and
      one-half of one share purchase warrant. Each full warrant entitles a holder
      to
      acquire an additional common share at a price of $0.25 per share for a period
      of
      one year after issuance. The April Units were issued pursuant to applicable
      prospectus and registration exemptions and were subject to a four (4) month
      hold
      period. The Company paid the agents, Jones Gable & Company, a cash
      commission of 10% of the gross proceeds of the proposed offering and issued
      agent’s warrants upon closing, entitling the agent to subscribe for common
      shares equal to 10% of the total number of April Units issued under the proposed
      offering, at a price of $0.15 per share.






44





**B.**  **Memorandum
      and Articles of association**





The
      following
      presents a description of certain terms and provisions of our Articles of
      Incorporation and by-laws.





The
      Company
      was incorporated in the Province of Quebec, Canada, on August 15, 1994 under
      the
      name 3059219 Canada Inc. On December 5, 2005, following several name changes,
      the Company approved a name change from Events International Holding Corporation
      to Dynasty Gaming Inc. Our corporate objectives and purpose are unrestricted.





The
      by-laws of the Company provide that a director who has a material interest
      in
      any transaction with Dynasty shall disclose such interest, though the Company’s
      Articles of Incorporation and by-laws do not place any restrictions on the
      voting powers of interested directors. The by-laws of the Company further
      provide that a director may fix their own remuneration without having to pass
      a
      resolution regarding same. A director may receive advances and is entitled
      to
      reimbursement for all expenses incurred in the execution of his office. The
      bylaws do not provide for a retirement or non-retirement age limit requirement
      for directors under a certain age limit. A person need not be a shareholder
      in
      order to become a director of the Corporation.





The
      holders of the Company’s Common shares are entitled to receive notice of, and
      attend and vote at all, meetings of shareholders. The annual meeting and special
      meetings of shareholders are held at such time and place as the board of
      directors shall determine, or by holders of not less than 5% of the securities
      issued by the Company who request that the directors call a meeting. Notices
      of
      meetings are sent out to shareholders not less than 21 days before the date
      of
      such meeting.





Currently,
      there are no specific rights, preferences and restrictions attaching to each
      of
      the Company’s common shares. The Company may issue common shares in one or more
      series and, pursuant to the Company’s Articles of Incorporation, the directors
      may, by majority resolution, alter the Articles of Incorporation to create,
      define and attach rights and restrictions to the shares of each
      series.





Pursuant
      to section 2(F) of the Company’s by-laws, the quorum at meetings of the
      Company’s shareholders shall be constituted by the presence of one (1)
      shareholder entitled to vote at any such meeting for purposes of choosing a
      chairman of the meeting, and of pronouncing the adjournment of the meeting.
      For
      any other purpose, a quorum at a meeting of the shareholders is attained, when
      at least fifteen minutes after the time set for the meeting, the shareholders
      representing a majority of the votes are in attendance, in person or represented
      by proxy.




There
      are
      no limitations on the rights of non-resident or foreign shareholders to hold
      or
      exercise voting rights on the securities of the Company imposed by foreign
      law
      or by the Articles of Incorporation or any other constituent document of the
      Company.





**C.**  **Material
      Contracts**





During
      the fiscal years ended December 31, 2005 and 2004, and as of June 1, 2006,
      the
      Company has entered into the material contracts listed below:





1.
            On
                May 19, 2004, the Company signed a software agreement with International
                Gaming and Entertainment Limited. Under the Agreement, Dynasty Gaming
                will
                earn licensing fees and an ongoing share of rake revenue from each
                game
                played on Intertop’s gaming site.





2.
            On
                March 27, 2005, the Company signed a software agreement with Apex
                Holdings. Under the Agreement, Dynasty Gaming will earn licensing
                fees and
                an ongoing share of rake revenue from each game played on Apex Holdings’
                gaming site.





3.
            On
                August 3, 2005, the Company signed a software agreement with UK-based
                online sports book operator, Betex (Group) plc. Under the combined
                licensing and profit sharing deal, Betex will use Mahjong Mania in
                its
                suite of online games.





4.
            On
                August 3, 2005, the Company, through its Mahjong Systems Ltd. subsidiary,
                signed a software agreement with Action Poker Gaming Inc (“Action Poker”).
                Under the Agreement, Dynasty Gaming will earn licensing fees and
                an
                ongoing share of rake revenue from each game played on the Action
                Poker’s
                gaming site.





5.
            On
                October 11, 2005, the Company entered into an agreement with Ho Casinos
                to
                provide its Mahjong Mania software for its exclusive Mahjong site,
                www.
                drho888.com. Dynasty Gaming will earn licensing fees and an ongoing
                share
                of rake revenue from each game played on the Ho Casinos gaming site.





6.
            On
                October 20, 2005, the Company, through its Mahjong Systems Ltd.
                subsidiary, entered into a contract with Ho Casinos. The contract
                covers
                the payment by Ho Casinos of license fees and share of revenue proceeds
                for the use of the Company’s*Mahjong
                Mania*gaming software on Ho Casinos’ Homahjong.com
                website.





7.
            On
                October 24, 2005, the Company signed a partnership agreement with
                Orbis
                Technology Ltd., which owns OpenBet Casinos, which is one of the
                most
                comprehensive platforms available for operators, and supports all
                major
                gambling products. Under the Agreement, the Company will earn licensing
                fees and share of revenue from each gaming network on which the*Mahjong
                Mania*software is installed.





8.
            On
                October 28, 2005, the Company, through its Mahjong Systems Ltd.
                subsidiary, entered into a contract with Absolute Entertainment SA.
                The
                contract covers the payment by Absolute Entertainment SA of license
                fees
                and share of revenue proceeds for the use of the Company’s*Mahjong
                Mania*gaming software.





9.
            On
                January 25, 2006, the Company integrated its*Mahjong
                Mania*software live on Ladbrokes.com, a leading online casino operator.
                This
                installation provides Mahjong Systems Ltd., a wholly-owned subsidiary
                of
                the Company, with a licensing fee and an ongoing share of rake revenue
                from each game played on the Ladbrokes gaming site.





10.
            On
                March 8, 2006, the Company, through its Mahjong Systems Ltd. subsidiary,
                entered into a contract with Golden Palace Ltd. The contract covers
                the
                installation and payment of royalties for the Company’s*Mahjong
                Mania*gaming software.





11.
            On
                March 28, 2006, the Company, through its Mahjong Systems Ltd. subsidiary,
                entered into a contract with Interactive Gaming Holdings Plc. The
                contract
                covers the payment by Interactive Gaming Holdings Plc of license
                fees and
                share of revenue proceeds for the use of the Company’s*Mahjong
                Mania*gaming software.





12.
            On
                April 24, 2006, the Company, through its Mahjong Systems Ltd. subsidiary,
                signed a partner agreement with Finsoft Limited covering the distribution
                of Dynasty’s*Mahjong
                Mania*software. Under the Agreement, the Company will earn licensing fees
                and
                revenue from each gaming network on which Finsoft installs Mahjong
                Mania
                software.




13.
                On
                      July 14, 2006 the Company received Ian Sherrington’s resignation, which
                      was dated as of June 24, 2006. Mr. Sherrington’s resignation stated his
                      resignation as employee, President and Director of Mahjong
                      Development
                      Inc. The Company has updated this Amendment No. 1 to Form 20-F
                      accordingly. The terms of Mr. Sherrington’s resignation from the Company
                      may be found in Exhibit 4.17 of Item 19 of this Registration
                      Statement. On
                      July 14, 2006 Linda Lemieux was appointed President and Director
                      of
                      Mahjong Development
                      Inc.




45




In
          connection with the above listed material contracts, the Company has filed
          a
          Confidentiality Request with the United States Securities and Exchange
          Commission, concurrently with the filing of its initial registration statement
          on Form 20-F, dated July 11, 2006. Accordingly, certain confidential information
          has been redacted from the above-listed material contracts, copies of which
          are
          included as exhibits to this registration statement. The redacted portions,
          as
          described and included in the Confidentiality Request, are subject to approval
          by the United States Securities and Exchange
          Commission.
  **D.**  **Exchange
      controls**







There
      are
      no government laws, decrees or regulations in Canada which restrict the export
      or import of capital or, subject to the following sentence, which affect the
      remittance of dividends or other payments to nonresident holders of our common
      shares. However, any such remittance to a resident of the United States is
      generally subject to non-resident tax pursuant to Article X of the 1980
      Canada-United States Income Tax Convention. See “Material Income Tax
      Considerations” above for additional discussion on tax matters.




There
      are
      currently no limitations of general application imposed by Canadian federal
      or
      provincial laws on the rights of non-residents of Canada to hold or vote our
      common shares. There are also no such limitations imposed by the Articles of
      Incorporation with respect to our common shares. There are, however, certain
      requirements on the acquisition of control of our securities by non-residents
      of
      Canada. The Investment Canada Act requires notification to and, in certain
      cases, advance review and approval by, the Government of Canada, of the
      acquisition by a “non-Canadian” of “control” of a “Canadian business”, all as
      defined in the Investment Canada Act. Generally speaking, in order for an
      acquisition to be subject to advance review and approval, the asset value of
      the
      Canadian business being acquired must meet or exceed certain monetary
      thresholds.





**E.**  **Taxation.**







The
      following summary of the material Canadian federal and U.S. federal income
      tax
      considerations generally applicable in respect to the holding or disposing
      of
      Common Shares as provided by the Company. This summary does not address all
      possible income tax consequences relating to an investment in the Common Shares
      of the Company. There may be provincial, territorial, state and local income
      taxes applicable to a potential shareholder, depending on the shareholder’s
      particular circumstances, which are not addressed in this summary, as well
      as
      estate tax and other non-income taxes applicable to a potential shareholder.
      The
      tax consequences to any particular holder, including a U.S Holder of Common
      Shares (defined below) will vary according to the status of that holder as
      an
      individual, trust, corporation, or member of a partnership, the jurisdiction
      in
      which the holder is subject to taxation, the place where the holder is a
      resident and generally, according to the holder’s particular circumstances.




U.S.
      Holder of Common Shares




References
      to a “U.S. Holder” of Common Shares in this section includes a citizen or
      individual resident of the U.S., a corporation created or organized in the
      U.S.,
      a trust or estate of which its income is includable in its gross income for
      U.S.
      federal income tax purposes without regard to its source, if (i) a court
      within the U.S. is able to exercise primary supervision over the administration
      of the trust and (ii) one or more U.S. trustees have the authority to
      control all substantial decisions of the trust, who are holders of Common Shares
      and who:







**•**
            
            for
                purposes of the Income Tax Act (Canada) (ITA) and the Canada-United
                States Income Tax Convention (1980), as amended by the protocol signed
                on
                July 29, 1997, (Treaty) are residents of the U.S., not Limited
                Liability Corporations (LLC) and have never been residents of
                Canada;**•**
            
            for
                purposes of the U.S. Internal Revenue Code of 1986 (Code) are U.S.
                persons;






46




**•**
            
            deal
                at arm’s length with the Company;**•**
            
            will
                hold the Common Shares as capital property for purposes of the
                ITA;**•**
            
            will
                hold the Common Shares as capital assets for purposes of the
                Code;**•**
            
            do
                not and will not hold the Common Shares in carrying on a business
                in
                Canada;**•**
            
            will
                not perform independent personal services from a fixed base situated
                in
                Canada; and**•**
            
            are
                  not or will not be subject to special provisions of Canadian or
                  U.S.
                  federal income tax law, including, without limiting the generality
                  of the
                  foregoing, financial institutions,
              real
                estate investment trusts, shareholders that have a functional currency
                other than the U.S. dollar, shareholders that own shares through
                a
                partnership or other pass-through entity, shareholders that hold
                shares as
                part of a straddle, hedge or conversion transaction, tax-exempt
                organizations, qualified retirement plans, insurance companies,
                shareholders who acquired their shares through the exercise of employee
                stock options or otherwise as compensation and mutual fund
                companies.






The
      following summary of Canadian federal and U.S. federal income tax considerations
      generally applicable to a U.S. Holder of Common Shares of the Company is based
      on the following, as at the time of this statement:







**•**
            
            the
                ITA and the Income Tax Regulations (Canada)
                (Regulations);**•**
            
            published
                proposals to amend the ITA and the Regulations;**•**
            
            published
                administrative positions and practices of the Canada Revenue Agency
                (CRA);**•**
            
            the
                Code, as amended;**•**
            
            Treasury
                Regulations;**•**
            
            published
                Internal Revenue Service (IRS) rulings;**•**
            
            published
                administrative positions of the IRS;**•**
            
            published
                jurisprudence that is considered applicable; and**•**
            
            the
                Treaty.




All
      of
      the foregoing is subject to material or adverse change, on a prospective or
      retroactive basis, at any time. Neither the estate tax laws of the U.S., nor
      the
      tax laws of the various provinces or territories of Canada and the tax laws
      of
      the various state and local jurisdictions of the U.S. are considered in this
      summary.




This
      summary is not exhaustive of all possible income tax consequences. The following
      discussion is for general information only and is not intended to be, nor should
      it be construed to be, legal or tax advice to any holder or prospective holder
      of Common Shares of the Company and no opinion or representation with respect
      to
      any such holder or prospective holder with respect to the income tax
      consequences to any such holder or prospective holder is made. Accordingly,
      holders and prospective holders of Common Shares of the Company should consult
      their own tax advisors about the Canadian federal and provincial and U.S.
      federal, state, local, and foreign income, estate and other tax consequences
      of
      purchasing, owning and disposing of Common Shares of the Company.




Canadian
      Federal Income Tax Consequences




*Disposition
      of Common Shares*




A
      U.S.
      Holder of Common Shares will not be subject to tax in Canada under the ITA
      on
      capital gains realized on the disposition of such Common Shares unless the
      shares are “taxable Canadian property”. Such Common Shares will be taxable
      Canadian property if, in general, at any time during the 60 month period
      immediately preceding the disposition, 25% or more of the Company’s issued
      shares of any class were owned by such holder, or by such holder and persons
      with whom such holder did not deal at arm’s length. If the Company’s shares are
“taxable Canadian property” to a U.S. Holder of Common Shares, 50% of any
      resulting capital gain realized on the disposition of such shares may be subject
      to tax in Canada. However, the Treaty provides that gains realized by a U.S.
      Holder of Common Shares on the disposition of shares of a Canadian corporation
      will be exempt from federal tax in Canada unless the value of the Canadian
      corporation is derived principally from real property situated in Canada.






47




*Dividend
      Distributions on Shares of the Company*




Dividends
      paid on the Company’s Common Shares held by a U.S. Holder of Common Shares will
      be subject to Canadian non-resident withholding tax. The Company is required
      to
      withhold taxes at source. Under the Treaty, a withholding rate of 5% is
      applicable to corporations resident in the United States, who do not have a
      permanent establishment in Canada in respect of which the dividends are
      effectively connected and who are beneficial owners of at least 10% of the
      voting shares of the Company, and are not a Limited Liability Company (LLC).
      Under the Treaty, a withholding rate of 15% is applicable in all other cases
      except LLC’s, where the withholding rate is 25%.




United
      States Federal Income Tax Consequences




The
      U.S.
      federal income tax consequences related to the disposition and ownership of
      Common Shares, subject to the Passive Foreign Investment Company and Controlled
      Foreign Corporation Rules contained in the Code, are generally as follows:




*Disposition
      of Common Shares*




On
      a
      disposition of Common Shares a U.S. Holder of Common Shares generally will
      recognize a gain or loss. The gain or loss will be equal to the difference
      between the amount realized on the sale and the U.S. Holder of Common Share’s
      adjusted tax basis in those shares. Any such gain or loss will be a long-term
      capital gain or loss if the shareholder has held the shares for more than one
      year. Otherwise the gain or loss will be a short-term capital gain or loss.
      The
      gain or loss will generally be a U.S. source gain or loss.




*Dividend
      Distributions on Shares of the Company*




Dividend
      distributions (including constructive dividends) paid by the Company will be
      required to be included in the income of a U.S. Holder of Common Shares to
      the
      extent of the Company’s current or accumulated earnings and profits (E&P)
      attributable to the distribution without reduction for any Canadian withholding
      tax withheld from such distributions. Dividends paid in years prior to 2009
      will
      be taxable as capital gains if the Company constitutes as a “qualified foreign
      corporation” at the time the dividends are paid. In this regard, no assurance
      can be given that the Company currently constitutes a qualified foreign
      corporation or that it will constitute one at the time of any dividend payment.
      Even if a dividend payment is in fact not converted to U.S. dollars on the
      date
      of distribution, the amount of any cash distribution paid in Canadian dollars
      to
      a U.S. Holder will be equal to the U.S. dollar value of the Canadian dollars
      on
      the date of distribution based on the exchange rate on such date. To the extent
      distributions paid by the Company on the Common Shares exceed the Company’s
      current or accumulated E&P, they will be treated first as a return of
      capital up to a shareholder’s adjusted tax basis in the shares and then as
      capital gain from the sale or exchange of the shares. Any gain or loss resulting
      from currency exchange fluctuations during the period from the date a dividend
      is included in income to the date such payment is converted into U.S. dollars
      generally will be treated as ordinary income or loss.




Dividends
      paid by the Company on the Common Shares generally will not be eligible for
      the
“dividends received” deduction provided to corporations receiving dividends from
      certain U.S. corporations. The dividends may be subject to a backup withholding
      tax unless the U.S. Holder of Common Shares furnishes the Company with a duly
      completed and signed Form W-9 (or otherwise establishes its exemption from
      such
      tax). The U.S. Holder of Common Shares will be allowed a refund or a credit
      equal to any amount withheld under the U.S. backup withholding tax rules against
      the U.S. Holder’s U.S. federal income tax liability, provided the Holder
      furnishes the required information to the IRS.






48




*Foreign
      Tax Credit*




A
      U.S.
      Holder of Common Shares will generally be entitled to a foreign tax credit
      or
      deduction in an amount equal to the Canadian tax withheld. Dividends paid by
      the
      Company generally will constitute foreign source dividend income and “passive
      income” for purposes of the foreign tax credit, which could reduce the amount of
      foreign tax credits available to shareholders. There are significant and complex
      limitations that apply to the credit. The U.S. holders of Common Shares should
      consult their own tax advisors in this regard.




*Passive
      Foreign Investment Company Rules*




Special
      U.S. tax rules apply to a shareholder of a Passive Foreign Investment Company
      (PFIC). The Company could be classified as a PFIC if, after the application
      of
      certain “look through” rules, for any taxable year, either:







**•**
            
            75%
                or more of the Company’s gross income for the taxable year is “passive
                income”, which includes interest, dividends and certain rents and
                royalties; or**•**
            
            the
                average quarterly percentage, by fair market value of the Company’s assets
                that produce or are held for the production of “passive income” is 50% or
                more of the fair market value of all of the Company’s
                assets.




To
      the
      extent the Company owns at least 25% by value of the shares of another
      corporation, the Company is treated for purposes of the PFIC tests as owning
      the
      Company’s proportionate share of the assets of such corporation, and as
      receiving directly the Company’s proportionate share of the income of such
      corporation.




Distributions
      which constitute “excess distributions” from a PFIC and dispositions of shares
      of a PFIC are subject to the following special rules in the hands of a U.S.
      Holder:







**•**
            
            the
                excess distributions (generally any distributions received by a
                shareholder of a PFIC in any taxable year that are greater than 125%
                of
                the average annual distributions received by such shareholder in
                the three
                preceding taxable years or the shareholder’s holding period for the
                shares, if shorter) or gain would be allocated on a pro rata basis
                over a
                U.S. Holder of Common Share’s holding period for the
                shares;**•**
            
            the
                amount allocated to the current taxable year and any taxable year
                prior to
                the first taxable year in which the Company is a PFIC would be treated
                as
                ordinary income in the current taxable year; and**•**
            
            the
                amount allocated to each of the other taxable years would be subject
                to
                the highest rate of tax on ordinary income in effect for that year
                and to
                an interest charge based on the value of the tax deferred during
                the
                period during which the shares are
                owned.




U.S.
      Holders who actually or constructively own shares in a PFIC may be eligible
      to
      make certain elections which require them to include income for the PFIC on
      an
      annual basis.




For
      any
      tax year in which the Company is determined to be a PFIC, U.S. Holders may
      elect
      to treat their Common Shares as an interest in a qualified electing fund (QEF
      Election), in which case the U.S. Holders would be required to include in income
      currently their proportionate share of the Company’s ordinary earnings and
      long-term capital gains in years in which the Company is a PFIC regardless
      of
      whether distributions of such earnings and gains are actually distributed to
      such U.S. Holders. Any gain subsequently recognized upon the sale of their
      Common Shares by such U.S. Holders generally would be taxed as capital gain.
      If
      a U.S. Holder makes a QEF Election, the Company will seek to provide the Holder
      with the information that it will need in order to effectuate that election.




As
      an
      alternative to a QEF Election, a U.S. Holder generally may be able to avoid
      the
      imposition of the special tax and interest charge described above by electing
      to
      mark to market the Common Shares (Mark-to-Market Election) recognizing as
      ordinary income or loss for each taxable year, subject to certain limitations,
      the difference as of the close of the taxable year between the fair market
      value
      of the U.S. Holder’s Common Shares and the adjusted tax basis of such Common
      Shares. Losses would be allowed only to the extent of the net mark-to-market
      gain previously included by the U.S. Holder under the election in prior taxable
      years.






49




The
      PFIC
      rules and the available elections are complicated and U.S. Holders should
      consult with their own advisors for a complete understanding of the PFIC
      provisions.




*Controlled
      Foreign Corporation Rules*




Generally,
      if more than 50% of the voting power or total value of all classes of the
      Company’s shares is owned, directly or indirectly, by U.S. shareholders, who
      individually own 10% or more of the total combined voting power of all classes
      of the Company’s shares, the Company could be treated as a controlled foreign
      corporation (CFC) under Subpart F of the Code. This classification would require
      such 10% or greater shareholders to include in income their pro rata shares
      of
      the Company’s “Subpart F Income,” as defined in the Code. In addition, a gain
      from the sale or exchange of shares by a U.S. Holder of Common Shares who is
      or
      was a 10% or greater shareholder at any time during the five year period ending
      with the sale or exchange will be deemed ordinary dividend income to the extent
      that the Company’s E&P attributable to the shares sold or exchanged that
      were accumulated during the period that the shares were held by such U.S. Holder
      while the Company was a CFC. Any U.S. Holder owning directly or indirectly
      (by
      attribution) 10% or more of the total combined voting power of all classes
      of
      the Company’s shares should consult their own tax advisors





**F.**  **Dividend
      and paying agents.**





We
      have
      not declared or paid, and have no present intention to declare or to pay in
      the
      foreseeable future, any cash dividends with respect to our common stock. We
      currently intend to retain any earnings for reinvestment in our business.
      However, if dividends are declared by our board of directors, all shares of
      common stock will participate equally in the dividends and in net assets in
      the
      event of the liquidation of the Company.





**G.**  **Statement
      by experts**





The
      financial statements of the Company for each of the three fiscal years ended
      December 31, 2005, 2004 and 2003, included in this registration statement have
      been audited by Horwath Appel (the “Auditor”), independent auditors, as stated
      in their reports appearing herein, and have been so included in reliance upon
      the reports of such firm given upon their authority as experts in accounting
      and
      auditing. The auditor’s address is: 1 Westmount Square, Suite 900, Montreal,
      Quebec H3Z 2P9.





**H.**  **Documents
      on display**




The
      Company is required to file reports and other information with the securities
      commission in all provinces of Canada. You are invited to read and copy any
      reports, statements or other information, other than confidential filings,
      that
      the Company files with the provincial securities commissions. These filings
      are
      also electronically available from the Canadian System for Electronic Document
      Analysis and Retrieval (SEDAR) (www.sedar.com), the Canadian equivalent of
      the
      SEC’s electronic document gathering and retrieval system.




The
      Company will provide, without charge to each person, including any beneficial
      owner, on the written or oral request of such person, a copy of any or all
      documents referred to above which have been or may be incorporated by reference
      in this report (not including exhibits to such incorporated information that
      are
      not specifically incorporated by reference into such information). Requests
      for
      such copies should be directed to the Company’s principal executive offices at
      759 Square Victoria, Suite 300, Montreal, Quebec, Canada H2Y-2J7.






50




**I.**  **Subsidiary
      Information**




For
      more
      information on the Company’s subsidiaries, see “Item 4. Information on the
      Company—Organizational structure.”





**ITEM
      11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
      RISK**





The
      Company anticipates its primary market risk, if any, will be related to
      fluctuations in exchange rates.  Exchange rate risk may arise if the
      Company is required to use different currencies for various aspects of its
      operations.  Although the principal currency used in the export market is
      the U.S. dollar, the local expenses of the Company (e.g., rent, telephone,
      payroll, etc.) are likely to be paid in Canadian Dollars. The Company intends
      to
      monitor its exchange rate risk and take necessary actions to reduce its
      exposure, though the Company is not currently exploring hedging opportunities.





We
      do not
      use derivative financial instruments.





**ITEM
      12.** **DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES**





Not
      Applicable.




51


**PART
      II**





**ITEM
      13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES**





Not
      applicable





**ITEM
      14.** **MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS**





Not
      applicable





**ITEM
      15. CONTROLS AND PROCEDURES**





Not
      applicable





**ITEM
      16.**  **[reserved]**





**ITEM
      16A.**  **Audit
      committee financial expert.**





Not
      applicable.





**ITEM
      16B.**  **Code
      of Ethics.**





Not
      applicable.





**ITEM
      16C.**  **Principal
      Accountant Fees and Services.**





Not
      applicable.





**ITEM
      16D.**  **Exemptions
      form the Listing Standards for Audit Committees.**





Not
      applicable.





**ITEM
      16E.**  **Purchases
      of Equity Securities by the Issuer and Affiliated
      Purchasers.**





Not
      applicable.





**PART
      III**





**ITEM
      17. FINANCIAL STATEMENTS**





Our
      financial statements filed as part of this registration statement are listed
      in
      Item 19. Financial Statements and Exhibits.





All
      financial statement in this Form 20-F, unless otherwise stated, are presented
      in
      accordance with Canadian GAAP. Such financial statements have been reconciled
      to
      United States GAAP.





**ITEM
      18. FINANCIAL STATEMENTS**





The
      Company has elected to provide financial statements pursuant to ITEM
      17.






52




**ITEM
      19. EXHIBITS**





Exhibit
      No.   Description





1.1
            Certificate
                of Incorporation of 3059219 Canada Inc. dated August 11, 1994.
                *





1.2
            Certificate
                of Amendment, dated June 8, 1995. *





1.3
            Certificate
                of Amendment, dated March 19, 1996.
                *





1.4
            Certificate
                of Amendment, dated October 15, 2001.
                *





1.5
            Certificate
                of Amendment, dated December 5, 2005.
                *





1.6
            By-laws
                of Dynasty Gaming Inc. *





2.1
            Form
                of common stock certificate. *





4.
                1
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                International Gaming and Entertainment Limited dated as of May 19,
                2004. *
                **





4.2
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Apex
                Holdings dated as of March 27, 2005. *
                **





4.3
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Betex
                (Group), Plc. dated as of August 3, 2005. *
                **





4.4
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Action
                Poker Gaming, Inc. dated as of August 3, 2005. *
                **





4.5
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Ho
                Casinos dated as of October 11, 2005. * **





4.6
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Ho
                Casinos dated as of October 20, 2005. *
                **





4.7
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Orbis
                Technology, Inc. dated as of October 24, 2005. *
                **





4.8
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Absolute
                Entertainment SA, dated as of October 28, 2005. *
                **





4.9
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Ladbrokes.com dated as of January 25, 2006. *
                **





4.10
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Golden
                Palace Ltd. dated as of March 8, 2006. *
                **





4.11
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Interactive Gaming Holdings Plc. dated as of March 28, 2006. *
                **





4.12
            Agreement
                between Mahjong Systems Limited, a subsidiary of the Company, and
                Finsoft
                Limited dated as of April 24, 2006. *
                **





4.
                13
            Lease,
                dated October 15, 1997 for space located at Canadian Steamship Building,
                759 Square Victoria, Suite 300, Montreal, Quebec, Canada H2Y 2J7.
                *





4.14+
            Employment
                Agreement dated March 6, 2006, between Mark Billings and Dynasty
                Gaming
                Inc.*





4.15+
            Employment
                Agreement dated March 16, 2006, between Albert Barbusci and Dynasty
                Gaming
                Inc. *





4.16+
            Consulting
                Agreement dated January 1, 2006, between Cadence Communications Inc.
                and
                Dynasty Gaming Inc. *




4.17+
                Memorandum
                    of Agreement dated June 24, 2006 between
                    Mahjong Development Inc. and Ian Sherrington. (Filed
                    herewith)
 
 4.18+
                  Termination
                      of Consulting Agreement dated June 30, 2006
                      between Mahjong Development Inc. and Ian Sherrington. (Filed
                      herewith)
 4.19+
              Management
                  Agreement dated June 10, 2005 between Genesis Consulting Anstalt,
                  Adriaan
                  Brink, and Mahjong Systems Limited.
                  *
 
 4.20
              Stock
                  Option Plan. *





8.1
            List
                of wholly owned subsidiaries*





15.1
            Consent
                of Independent Registered Public Accounting Firm.
                (Filed herewith)


_________________________________





*
      Incorporated by reference to the Company's Form 20-F filed with the SEC  on
      July 11, 2006.


**
      Subject to confidential treatment by the United States Securities and Exchange
      Commission.


+
      Signifies management contract or compensatory arrangement.






53





**SIGNATURES**





The
      registrant hereby certifies that it meets all of the requirements for filing
      on
      Form 20-F and that it has duly caused and authorized the undersigned to sign
      this registration statement on its behalf.




**DYNASTY
                GAMING INC**.Date: July
                28, 2006
              By:
              /s/ Albert
                BarbusciName:
                Albert BarbusciTitle: President
                & Chief Executive Officer











54















**DYNASTY
      GAMING INC.**





**CONSOLIDATED
      FINANCIAL STATEMENTS**





**AS
      AT DECEMBER 31, 2005 AND 2004**












55







**DYNASTY
        GAMING INC.**


DECEMBER
      31, 2005, 2004






CONTENTS






Page**AUDITORS'
              REPORT**
            1**CONSOLIDATED
              FINANCIAL STATEMENTS**Consolidated
              Balance Sheets
            2Consolidated
              Statements of Operations and Deficit
            3Consolidated
              Statements of Shareholders' Deficit
            4Consolidated
              Statements of Cash Flows
            5Notes
              to Consolidated Financial Statements
            6






56






**Horwath
                  Appel S.E.N.C.R.I/L.L.P**
              **Compatables
                  Agrees**
                **Chartered
                  Accountants**
                
                **1
                  Westmount Square, Suite 900**
                **Montreal,
                  Quebec H3Z 2P9**
                **Telephone:
                  (514) 932-4115**
                **Fax:
                  (514) 932-6766**
                **E-mail:
                  info@horwathappel.com**
   AUDITORS'
        REPORT
    The
        Shareholders of:
 Dynasty
        Gami ng
        Inc.
   We
            have
            audited the consolidated balance sheets of Dynasty Gaming Inc. as at
            December
            31, 2005 and 2004, and the consolidated statements of operations and
            deficit,
            shareholders' deficit and cash flows for the three-year period ended
            December
            31, 2005. The consolidated financial statements are the responsibility
            of the
            Company's management. Our responsibility is to express an opinion on
            these
            consolidated financial statements based on our audits.
  We
            conducted our audits in accordance with Canadian generally accepted auditing
            standards and with the standards of the Public Company Accounting Oversight
            Board (United States). Those standards require that we plan and perform
            an audit
            to obtain reasonable assurance whether the financial statements are free
            of
            material misstatement. An audit includes examining, on a test basis,
            evidence
            supporting the amounts and disclosures in the consolidated financial
            statements.
            An audit also includes assessing the accounting principles used and significant
            estimates made by management, as well as evaluating the overall financial
            statement presentation
  In
            our
            opinion, these consolidated financial statements present fairly, in all
            material
            respects, the financial position of the Company as at December 31, 2005
            and 2004
            and the results of its operations and the changes in its cash flows
            for each of the years in the three-year period ended December 31, 2005
            in
            accordance with Canadian generally accepted accounting
            principles.
 
 Canadian
            generally accepted accounting principles vary in certain significant
            respects
            from accounting principles generally accepted in the United States. Application
            of accounting principles generally accepted in the United States would
            have
            affected results of operations for each of the years in the three year
            period
            ended December 31, 2005 and shareholders’ equity as at December 31, 2005, 2004
            and 2003 to the extent summarized in note 28 to the financial
            statements.
  Montreal,
                  Quebec
                March
                  7, 2006/s/
                  Horwath Appel
                  Chartered
                  Accountants






57





**DYNASTY
                    GAMING INC.**
                  **CONSOLIDATED
                    BALANCE SHEETS**
                  **AS
                    AT DECEMBER 31, 2005 AND 2004**
                  **(
                    IN CANADIAN DOLLARS)****2005**
                
                2004$
                
                $**ASSETS****Current
                  assets****Cash**
                
                
                **6,053,266**
                
                
                319,045**Restricted
                    term deposit (Note 9)**
                
                
                **116,300**
                
                
                120,200**Accounts
                    receivable**
                
                
                **1,758,571**
                
                
                1,863,630**Work-in-process**
                
                
                **30,866**
                
                
                70,564**Prepaid
                    expenses and deposits**
                
                
                **343,019**
                
                
                29,322**Loans
                    receivable**
                
                
                **-**
                
                
                134,008**8,302,022**
                
                
                2,536,769**Deferred
                    development costs**
                
                
                **2,736,451**
                
                
                **-****Property,
                    plant and equipment (Note 6)**
                
                
                **183,280**
                
                
                106,034**Assets
                    under capital leases (Note 7)**
                
                
                **64,781**
                
                
                52,224**Goodwill
                    (Note 8)**
                
                
                **-**
                
                
                328,348**11,286,534**
                
                
                3,023,375**LIABILITIES
                    AND SHAREHOLDERS****'****EQUITY**
                  **Current
                    Liabilities**
                  **Bank
                    indebtedness (Note 9)**
                
                
                **85,337**
                
                
                122,329**Accounts
                    payable and accrued liabilities**
                
                
                **1,594,405**
                
                
                1,389,586**Income
                    taxes payable**
                
                
                **13,491**
                
                
                26,148**Deferred
                    revenue**
                
                
                **238,629**
                
                
                299,255**Current
                    portion of obligations under capital leases (Note
                    10)**
                
                
                **18,962**
                
                
                12,439**Current
                    portion of long term debt (Note 11)**
                
                
                **249,400**
                
                
                257,200**Future
                    tax liabilities (Note 12)**
                
                
                **248,162**
                
                
                100,112**2,448,386**
                
                
                2,207,069**Obligations
                    under capital leases (Note 10)**
                
                
                **27,161**
                
                
                41,119**Long
                    term debt (Note 11)**
                
                
                **36,400**
                
                
                53,200**2,511,947**
                
                
                2,301,388**Shareholders****'****equity**
                  **Capital
                    stock (Notes 3 and 13)**
                
                
                **12,405,434**
                
                
                3,589,810**Contributed
                    surplus (Note 3)**
                
                
                **120,653**
                
                
                120,653**Other
                    capital (Note 15)**
                
                
                **475,530**
                
                
                **-****Cumulative
                    translation adjustment (Note 16)**
                
                
                **(189,919**
                **)**
                
                (135,924
                )**Deficit**
                
                
                **(4,037,111**
                **)**
                
                (2,852,552
                )**8,774,587**
                
                
                721,987**11,286,534**
                
                
                3,023,375
  Commitments,
        contingency, subsequent event and reconciliation of canadian to U.S. generally
        accepted accounting principals (Notes 22, 24, 25 and 28)
   **On behalf of the board:**
  **"Albert
        Barbusci",
        Director**
 **"David
        Wolk",
        Director**
  See
        accompanying Notes to Consolidated Financial
        statements.
   58
  **DYNASTY
                      GAMING INC.**
                    **CONSOLIDATED
                      STATEMENTS OF OPERATIONS AND DEFICIT**
                    **FOR
                      THE YEARS ENDED DECEMBER 31, 2005,
                      2004, AND 2003**
                    **(
                      IN CANADIAN
                      DOLLARS)**
 **2005**
                
                2004
                
                2003$
                
                $
                
                $**Revenues**
                
                
                **7,956,157**
                
                
                6,238,792
                
                
                3,959,448**Operating
                    expenses****Direct
                  costs**
                
                
                **5,294,768**
                
                
                4,315,070
                
                
                2,913,250**Marketing
                    and promotion**
                
                
                **551,834**
                
                
                250,157
                
                
                350,962**Administrative**
                
                
                **2,697,185**
                
                
                1,818,448
                
                
                557,210**Amortization
                    - property, plant and equipment and**
                  **assets
                    under capital leases**
                
                
                **53,360**
                
                
                49,793
                
                
                33,802**Amortization
                    - intangible assets (Note 11)**
                
                
                **-**
                
                
                1,266,717
                
                
                95,703**Impairment
                    (Note 5)**
                
                
                **-**
                
                
                302,923
                
                
                285,454**Impairment
                    - goodwill (Note 8)**
                
                
                **328,348**
                
                
                **-**
                
                
                **-****Other
                    income (Note 17)**
                
                
                **(29,506**
                **)**
                
                (25,854
                )
                
                (66,255
                )**Gain
                    on settlement of debt (Note 18)**
                
                
                **-**
                
                
                (1,065,803
                )
                
                -**Loss
                    on sale of property, plant and equipment**
                
                
                **-**
                
                
                4,651
                
                
                -**8,895,989**
                
                
                6,916,102
                
                
                4,170,126**Loss
                    from continuing operations before income taxes**
                
                
                **(939,832**
                **)**
                
                (677,310
                )
                
                (210,678
                )**Income
                    taxes (Note 12)**
                  **Current**
                
                
                **129,791**
                
                
                122,021
                
                
                38,784**Future**
                
                
                **114,936**
                
                
                88,989
                
                
                33,050**Net
                    loss from continuing operations**
                
                
                **(1,184,559**
                **)**
                
                (888,320
                )
                
                (282,512
                )**Loss
                    from discontinued operations**
                
                
                **-**
                
                
                (2,330,254
                )
                
                (522,252
                )**Gain
                    on sale of discontinued operations**
                
                
                **-**
                
                
                1,013,670
                
                
                101,296**Net
                    loss from discontinued operations**
                
                
                **-**
                
                
                (1,316,584
                )
                
                (420,956
                )**Net
                    loss**
                
                
                **(1,184,559**
                **)**
                
                (2,204,904
                )
                
                (703,468
                )**Deficit,
                    beginning of year**
                
                
                **(2,852,552**
                **)**
                
                (647,648
                )
                
                55,820**Deficit
                    , end of year**
                
                
                **(4,037,111**
                **)**
                
                (2,852,552
                )
                
                (647,648
                )**Net
                    loss per share**
                  **Basic
                    and diluted**
                  **From
                    continuing operations**
                
                
                **(0.026**
                **)**
                
                (0.023
                )
                
                (0.007
                )**From
                    discontinued operations**
                
                
                **-**
                
                
                (0.034
                )
                
                (0.011
                )**(0.026**
                **)**
                
                (0.057
                )
                
                (0.018
                )**Weighted
                    average number of common shares**
                  **Basic**
                
                
                **46,165,603**
                
                
                38,534,906
                
                
                39,350,836**Diluted**
                
                
                **46,165,603**
                
                
                38,534,906
                
                
                39,350,836
  See
          accompanying Notes to Consolidated Financial statements.
   59
   **DYNASTY
                      GAMING INC.**
                    **CONSOLIDATED
                      STATEMENTS OF SHAREHOLDERS' DEFICIT**
                    **FOR
                      THE YEARS ENDED DECEMBER 31, 2005,
                      2004, AND 2003**
                    **(
                      IN CANADIAN DOLLARS)**
 **Capital**
                  **Stock**
                  **(note
                    **13)****
                
                **Capital** **Stock
                  (note **13)****
                
                **Contributed**
                  **Surplus**
                  **(Note3)**
                
                **Other**
                  **Capital**
                  **(Note15)**
                
                **Foreign**
                  **Currency**
                  **Translation**
                  **Adjustment**
                  **(Note16)**
                
                **Deficit**
                
                **Total**
                  **Shareholders'**
                  **Equity****#**
                
                $
                
                $
                
                $
                
                $
                
                $
                
                $Balance
                    - December 31, 2002
                
                
                38,600,836
                
                
                3,831,116
                
                
                
                
                
                
                
                
                629
                
                
                55,820
                
                
                3,887,565Shares
                    issued
                
                
                750,000
                
                
                750,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                750,000Cancelled
                
                
                (750,000
                )
                
                (750,000
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                (750,000
                )Foreign
                    currency translation
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (71,395
                )
                
                
                
                
                (71,395
                )Net
                    loss for the year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (703,468
                )
                
                (703,468
                )Balance
                    - December 31, 2003
                
                
                38,600,836
                
                
                3,831,116
                
                
                
                
                
                
                
                
                (70,766
                )
                
                (647,648
                )
                
                3,112,702Repurchase
                    of shares (Note 3)
                
                
                (2,413,054
                )
                
                (241,306
                )
                
                120,653
                
                
                
                
                
                
                
                
                
                
                
                (120,653
                )Foreign
                    currency translation
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (65,158
                )
                
                
                
                
                (65,158
                )Net
                    loss for the year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (2,204,904
                )
                
                (2,204,904
                )Balance
                    - December 31, 2004
                
                
                36,187,782
                
                
                3,589,810
                
                
                120,653
                
                
                
                
                
                (135,924
                )
                
                (2,852,552
                )
                
                721,987Shares
                    & warrants issued -Private
                    Placements
                
                
                23,000,000
                
                
                5,344,447
                
                
                
                
                
                466,500
                
                
                
                
                
                
                
                
                5,810,947Shares
                    issued - BusinessAcquisition
                
                
                9,000,000
                
                
                1,350,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,350,000Shares
                    issued - Brokers' & AgentWarrants
                
                
                8,542,666
                
                
                2,097,680
                
                
                
                
                
                (16,280
                )
                
                
                
                
                
                
                
                2,081,400Shares
                    issued - Stock OptionPlan
                
                
                123,667
                
                
                23,497
                
                
                
                
                
                (4,947
                )
                
                
                
                
                
                
                
                18,550Stock-based
                    costs (Note 14)
                
                
                
                
                
                
                
                
                
                
                
                30,257
                
                
                
                
                
                
                
                
                30,257Foreign
                    currency translation
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (53,995
                )
                
                
                
                
                (53,995
                )Net
                    loss for the year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,184,559
                )
                
                (1,184,559
                )Balance
                    - December 31, 2005
                
                
                76,854,115
                
                
                12,405,434
                
                
                120,653
                
                
                475,530
                
                
                (189,919
                )
                
                (4,037,111
                )
                
                8,774,587
   See
          accompanying Notes to Consolidated Financial statements.
   60
  **DYNASTY
                  GAMING INC.**
                **CONSOLIDATED
                  STATEMENTS OF CASH FLOWS**
                **FOR
                  THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003**
                **(
                  IN CANADIAN DOLLARS)****2005**
              
              2004
              
              2003**$**
              
              $
              
              $**Cash
                  flows from operating
                  activities****Net
                  loss from continuing operations**
              
              
              **(1,184,559**
              **)**
              
              (888,320
              )
              
              (282,512
              )**Items
                  not requiring cash flows:**
                **Amortization
                  of property, plant and equipment and**
                **assets
                  under capital leases**
              
              
              **53,360**
              
              
              49,793
              
              
              33,802**Amortization
                  of intangible assets (Note 11)**
              
              
              **-**
              
              
              1,266,717
              
              
              95,703**Impairment
                  (Note 5)**
              
              
              **-**
              
              
              302,923
              
              
              285,454**Impairment
                  - goodwill (Note 8)**
              
              
              **328,348**
              
              
              **-**
              
              
              **-****Gain
                  on settlement of debt (Note 18)**
              
              
              **-**
              
              
              (1,049,580
              )
              
              -**Loss
                  on sale of property, plant and equipment**
              
              
              **-**
              
              
              4,651
              
              
              -**Stock
                  based compensation (Note 14)**
              
              
              **30,257**
              
              
              **-**
              
              
              **-****Future
                  tax (Note 12)**
              
              
              **148,050**
              
              
              88,989
              
              
              33,050**(624,544**
              **)**
              
              (224,827
              )
              
              165,497**Net
                  change in non-cash assets and liabilities related to**
                **operations
                  (Note 19)**
              
              
              **(910,092**
              **)**
              
              (205,423
              )
              
              120,395**(1,534,636**
              **)**
              
              (430,250
              )
              
              285,892**Cash
                  flows from investing activities**
                **Acquisition
                  of property, plant and equipment**
              
              
              **(29,631**
              **)**
              
              (54,933
              )
              
              (272,839
              )**Increase
                  in development costs - gaming software**
              
              
              **(578,624**
              **)**
              
              **-**
              
              
              **-****Decrease
                  (increase) in loan receivable - shareholder**
              
              
              **104,636**
              
              
              338,329
              
              
              (8,888
              )**Decrease
                  (increase) in loan receivable**
              
              
              **30,200**
              
              
              (30,200
              )
              
              -**Proceeds
                  on sale of property, plant and equipment**
              
              
              **-**
              
              
              55,435
              
              
              -**Acquisition
                  of intangible assets**
              
              
              **-**
              
              
              **-**
              
              
              (851,820
              )**Cash
                  acquired on acquisition**
              
              
              **6,863**
              
              
              **-**
              
              
              **-****Cash
                  consideration on business acquisition**
              
              
              **-**
              
              
              **-**
              
              
              (125,000
              )**Cash
                  consideration on sale of business**
              
              
              **-**
              
              
              100
              
              
              125,000**(466,556**
              **)**
              
              308,731
              
              
              (1,133,547
              )**Cash
                  flows from financing activities**
                **(Decrease)
                  increase in bank indebtedness**
              
              
              **(37,340**
              **)**
              
              125,928
              
              
              -**Decrease
                  in restricted term deposit**
              
              
              **3,900**
              
              
              629,800
              
              
              -**Repayment
                  of long term debt**
              
              
              **(24,600**
              **)**
              
              (14,000
              )
              
              -**Increase
                  in long term debt**
              
              
              **-**
              
              
              84,000
              
              
              518,600**Decrease
                  in loan from director**
              
              
              **(60,000**
              **)**
              
              **-**
              
              
              **-****Decrease
                  in loan from shareholder**
              
              
              **-**
              
              
              **-**
              
              
              (85,574
              )**Repayment
                  of obligations under capital lease**
              
              
              **(39,867**
              **)**
              
              (11,082
              )
              
              (4,076
              )**Cash
                  transferred on sale of business**
              
              
              **-**
              
              
              (151,525
              )
              
              -**Issuance
                  of common shares - private placements**
              
              
              **6,450,000**
              
              
              **-**
              
              
              **-****Issuance
                  of common shares - warrants**
              
              
              **2,000,000**
              
              
              **-**
              
              
              **-****Issuance
                  of common shares - rights and options**
              
              
              **99,950**
              
              
              **-**
              
              
              **-****Share
                  issuance costs - private placements**
              
              
              **(639,053**
              **)**
              
              **-**
              
              
              **-****7,752,990**
              
              
              663,121
              
              
              428,950**Effect
                  of exchange rates changes on cash and cash**
                **equivalents**
              
              
              **(17,577**
              **)**
              
              246
              
              
              (4,515
              )**Cash
                  flows from continuing operations**
              
              
              **5,734,221**
              
              
              541,848
              
              
              (423,220
              )**Cash
                  flows from discontinued operations**
              
              
              **-**
              
              
              (1,944,133
              )
              
              672,386**Increase
                  (decrease) in cash and cash equivalents**
              
              
              **5,734,221**
              
              
              (1,402,285
              )
              
              249,166**Cash
                  and cash equivalents , beginning of year**
              
              
              **319,045**
              
              
              1,721,330
              
              
              1,472,164**Cash
                  and cash equivalents , end of year**
              
              
              **6,053,266**
              
              
              319,045
              
              
              1,721,330**Includes
                  cash and cash equivalents related to:**
                **Continuing
                  operations**
              
              
              **6,053,266**
              
              
              319,045
              
              
              432,204**Discontinued
                  operations**
              
              
              **-**
              
              
              **-**
              
              
              1,289,126**6,053,266**
              
              
              319,045
              
              
              1,721,330
   See
        accompanying Notes to Consolidated Financial
        statements.
  61




**DYNASTY
      GAMING INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**AS
      AT DECEMBER 31, 2005, 2004 AND 2003**


**(TABULAR
      AMOUNTS ARE IN CANADIAN DOLLARS)**





**1.**
            **Statutes
                of Incorporation and Nature of
                Activities**




Dynasty
      Gaming Inc. (“the Company”), formerly Events International Holding Corporation,
      is continued under the Canada Business Corporations Act. Through its
      wholly-owned subsidiaries, the Company is engaged in the development, marketing
      and licensing of proprietary online gaming software, the provision of management
      consulting on e-commerce and the creation of advertising strategies and
      programs.




The
      Company’s acquisition during 2005 of two affiliated companies involved in the
      technology development, marketing and licensing of Mahjong gaming software
      for
      online casino and sports book operations, resulted in a change of the Company’s
      primary business focus. The bulk of the Company’s resources are now committed to
      pursuing software licensing and share-of-revenue agreements with online gaming
      facilities.






**2.**
            **Significant
                Accounting Policies**






**(a)**
            **Basis
                of presentation**






The
      consolidated financial statements are prepared by management using accounting
      principles generally accepted in Canada and are reported in Canadian dollars
      unless otherwise stated.




**(b)**
            **Principles
                of consolidation**






The
      consolidated financial statements of the Company include the accounts of Dynasty
      Gaming Inc. and its wholly-owned Canadian subsidiaries: Mahjong Development
      Inc.; Cadence Healthcare Communications Inc. and MedEvents Inc.; its
      wholly-owned Turks and Caicos Island subsidiary: Mahjong Systems Limited; and
      its wholly-owned US subsidiary: CPC Econometrics Inc.




All
      significant inter-company transactions and balances have been eliminated upon
      consolidation.




Acquisitions
      are recorded as purchases and the operations of the companies acquired during
      the period are included in the statement of earnings from the dates of
      acquisition.




**(c)**
            **Cash
                and cash equivalents**






Cash
      and
      cash equivalents include short-term investments with maturities of 90 days
      or
      less when acquired.






**(d)**
            **Work-in-process**






The
      work-in-process is stated at the lower of cost and net realizable value. The
      cost of work-in-process is determined by the actual amount of unbilled
      costs.




62




**DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**




**2.**
            **Significant
                Accounting Policies -
                cont'd**





**(e)**
            **Deferred
                development costs**




Development
      costs of the Internet-based gaming software *MahjongMania* are
      recorded at cost, and upon completion, will be amortized over the estimated
      useful life not to exceed three years. The Company will perform periodic
      impairment reviews to ensure that unamortized deferred development costs remain
      recoverable from the projected future net cash flows that they are expected
      to
      generate.






**(f)**
            **Property,
                plant and equipment and assets under capital
                leases**






Property,
      plant and equipment and assets under capital leases are recorded at cost, less
      accumulated amortization. Amortization is provided at rates designed to amortize
      the costs of the assets over their estimated useful lives as
      follows:




On the
                declining
                balance method:1)
                  computer hardware and software
              30%2)
                  furniture and fixtures
              20%On
                  the straight-line method:1)
                  website
              3
                  years









**(g)**
            **Foreign
                currency translation**






The
      consolidated financial statements are presented in Canadian dollars. Foreign
      operations are classified as integrated or self-sustaining. All significant
      foreign operations are classified as self-sustaining operations.





(i)  Self-sustaining
      foreign operations




All
      assets and liabilities are translated at the exchange rates in effect at year
      end. Revenues and expenses are translated at the average exchange rate for
      the
      period. The resulting net gains or losses are included as a cumulative
      translation adjustment in the consolidated statement of shareholders’
equity.





(ii)  Accounts
      in foreign currencies




Accounts
      in foreign currencies are translated using the temporal method. Under this
      method monetary balance sheet items are translated at the exchange rates in
      effect at year end and non-monetary items are translated at the historical
      exchange rates. Revenues and expenses (other than depreciation and amortization,
      which are translated at the same exchange rates as the related assets) are
      translated at exchange rates in effect on the transaction dates or at the
      average exchange rates of the period. Translation gains or losses are included
      in the consolidated statement of operations.








63




**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**


**2.**
            **Significant
                Accounting Policies -
                cont'd**





**(h)**
            **Income
                taxes**






The
      Company uses the asset and liability method of accounting for income taxes.
      Under this method, the future income tax liabilities are determined based on
      “temporary differences” (differences between the accounting basis and the tax
      basis of the assets and liabilities), and are measured using the currently
      enacted, or substantively enacted, tax rates and laws expected to apply when
      these differences reverse. A valuation allowance is recorded against any future
      income tax asset if it is more likely than not that the asset will not be
      realized. Income tax expense or benefit is the sum of the Company’s provision
      for the current income taxes and the difference between the opening and ending
      balances of future income tax assets and liabilities.






**(i)**
            **Revenue
                recognition**






The
      Company recognizes revenues from consulting contracts on a percentage of
      completion basis, as specific critical events occur. Contracts for advertising
      and communication services are generally for periods of three to six months
      and
      revenues are recognized upon the acceptance by the clients of specific
      deliverables. Revenues resulting from the sale of software usage licences are
      recognized on a straight-line basis over the term of the software agreements
      and
      revenues from the share of the on-line game stakes are based on the percentage
      share as stipulated in the licence contracts and recognized at the end of the
      Internet game.




**(j)**  **Per
      share amounts**






Basic
      earnings or loss per share are determined using the weighted average number
      of
      common shares outstanding during the year.





Diluted
      earnings or loss per share is calculated by dividing net results available
      to
      common shareholders by the weighted average number of shares used in the basic
      per share calculation plus the number of common shares that would be issued
      assuming exercise or conversion of all dilutive potential common shares
      outstanding during the year using the treasury stock method.




**(k)**
            **Guarantees**






In
      the
      normal course of business, the Company enters into numerous agreements that
      may
      contain features that meet the AcG-14 definition of a guarantee. AcG-14 defines
      a guarantee to be a contract (including an indemnity) that contingently requires
      the Company to make payments to a third party based on (i) changes in an
      underlying that is related to an asset, a liability or an equity of the
      guaranteed party or (ii) failure of another party to perform under an obligation
      agreement. The Company has not provided any such guarantees to third
      parties.






**(l)**
            **Use
                of estimates**






The
      preparation of consolidated financial statements in conformity with Canadian
      generally accepted accounting principles (GAAP) requires management to make
      estimates and assumptions particularly as they relate to accounting for
      long-term contracts. These estimates and assumptions affect the reporting
      amounts of assets, liabilities, revenues and expenses. Actual results could
      differ from these estimates.




64




**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**






**2.**
            **Significant
                Accounting Policies -
                cont'd**




**(m)**
            **Impairment
                of long-lived assets**




The
      Corporation recognizes the impairment loss for a long-lived asset to be held
      and
      used when events or changes in circumstances cause its carrying value to exceed
      the total undiscounted cash flows expected from its use and eventual
      disposition. The impairment loss is calculated by deducting the fair value
      of
      the asset from its carrying value.






**(n)**
            **Stock-based
                compensation and other stock-based
                payments**




All
      stock
      compensation to non-employees are expensed to earnings.  Stock options
      awards to employees are measured based on the fair value of the options at
      the
      grant date and a compensation expense is recognized over the vesting period
      of
      the options, with a corresponding increase to other capital.  When the
      stock options are exercised, capital stock is credited by the sum of the
      consideration paid, together with the related portion previously recorded to
      other capital. **** For
      awards granted before January 1, 2004, the Company did not recognize any
      compensation ** cost.






**(o)**
            **Disposal
                of long-lived assets and discontinued
                operations**




An
      asset
      classified as held for sale is measured at the ** lower
      of
      carrying amount or fair value less disposal costs, and is not depreciated while
      classified as ** held
      for
      sale. The impact of the adoption of this standard is reflected on the
      consolidated financial ** statements
      (see Note 3).






**(p)**
            **Goodwill**




The
      Company is required to evaluate goodwill annually or whenever events or changes
      in circumstances indicate that the carrying amount may not be recoverable.
      Impairment is tested at the reporting unit level by comparing the reporting
      unit’s carrying amount to its fair value. The fair values of the reporting units
      are estimated using a combination of a market approach and discounted cash
      flows. To the extent a reporting unit’s carrying amount exceeds its fair value,
      an impairment of goodwill exists. Impairment is measured by comparing the fair
      value of goodwill, determined in a manner similar to a purchase price
      allocation, to its carrying amount.






**3.**
            **Discontinued
                Operations**




Effective
      September 30, 2004 the Company discontinued its convention management operations
      and sold 100% of the issued and outstanding shares of Events International
      Meeting Planners (EIMP). The sale was ratified on December 22, 2004 at the
      annual shareholders meeting.





EIMP
      was
      sold for $120,753: $100 of which was paid in cash and $120,653 of which was
      paid
      through cancellation of 2,413,054 common shares held in escrow. The net effect
      of the disposition on the Company cash position was ($151,425): $100 cash
      proceeds net of $151,525 cash disposed.








65





**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**





**3.**
            **Discontinued
                Operations - cont’d**





The
      effect of the sale on the Company’s equity is as follows:




Gain
                on sale of discontinued operations:Book
                value of EIMP as of September 30, 2004
            
            $
            (892,917
            )Proceeds
                from sale
            
            
            120,753$
            1,013,671Contributed
                surplus- shares cancelled as part of sale:Shares
                at $0.10 cost (2,413,054 shares)
            
            $
            241,306Shares
                at $0.05 market value (2,413,054 shares)
            
            
            120,653$
            120,653







The
      results of operations, cash flows and financial position of EIMP have been
      segregated in the accompanying consolidated financial statements.





The
      results of discontinued operations (up to September 30, 2004 for fiscal year
      2004) presented in the accompanying consolidated statements of income were
      as
      follows:





Discontinued
                operations EIMP
            
            **2004**
              **(273-day
                period)**
            
            **2003**
              **(365-day
                period)**Revenues
            
            $
            3,203,298
            
            $
            17,295,552Operating
                expensesDirect
                costs
            
            
            2,992,316
            
            
            15,266,092Selling
            
            
            143,755
            
            
            249,714Administrative
            
            
            666,861
            
            
            2,314,406Amortization
                - property, plant and equipment and assets under capital
                leases
            
            
            72,679
            
            
            108,761Impairment
                of goodwill
            
            
            1,547,916
            
            
            13,141Other
                expenses (income)
            
            
            110,025
            
            
            (96,305
            )Gain
                on settlement of debt
            
            
            -
            
            
            (139,301
            )5,533,552
            
            
            17,716,508Loss
                from discontinued operation - EIMP
            
            $
            (2,330,254
            )
            $
            (420,956
            )





On
      May
      29, 2003 the Company acquired 100% of the issued and outstanding shares of
      Voyages Caleche Inc. (Caleche), a company operating as a travel agency. The
      acquisition was effective January 1, 2003. As consideration for this
      acquisition, the Company issued 750,000 common shares, and paid $125,000 in
      cash
      and assumed a balance of purchase of $125,000 payable 15 days after receiving
      the December 31, 2003 financial statements of Caleche but no later than April
      15 th ,
      2004.





Effective
      December 31, 2003 the Company discontinued its travel agency operations and
      sold
      100% of the issued and outstanding shares of Caleche in a transaction designed
      to reverse the original purchase transaction. The Company received back $125,000
      in cash, the 750,000 common shares issued on the acquisition and cancellation
      of
      the balance of purchase of $125,000. The Company was also released from all
      Caleche obligations, warranties and guarantees.






66




**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**




**3.**
            **Discontinued
                Operations - cont’d**





The
      Company has reflected the reversal of the Caleche acquisition by removing all
      Caleche’s related revenues and expenses from the accompanying consolidated
      financial statements.





The
      revenues and expenses of Caleche from the time of acquisition to December 31,
      2003 were as follows:








Discontinued
                operations Caleche
            
            
            **2003**Revenues
            
            $
            983,239Operating
                expensesDirect
                costs
            
            
            668,081Selling
            
            
            88,185Administrative
            
            
            295,672Amortization
                - capital assets and assets under
              capital
                leases
            
            
            15,700Other
                expenses
            
            
            16,8971,084,535Loss
                from discontinued operation - Caleche
            
            $
            (101,296
            )





Discontinued
      operations EIMP and Caleche


**2004**
            
            **2003**Net
                loss from discontinued operations
            
            $
            (2,330,254
            )
            $
            (522,252
            )








The
      cash
      flows from discontinued operations presented in the accompanying consolidated
      statements of cash flows were as follows:




Discontinued
                operations EIMP
            
            
            **2004**
              **(273-day
                period)**
            
            ****
            **2003**
              **(365-day
                period)**Operating
                activities
            
            $
            (1,816,101
            )
            $
            (645,755
            )Investing
                activities
            
            
            (9,808
            )
            
            (55,714
            )Financing
                activities
            
            
            (118,224
            )
            
            1,373,855Cash
                flows from discontinued operations
            
            $
            (1,944,133
            )
            $
            672,386Interest
                paid
            
            $
            34,276
            
            $
            37,738








67




**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**




**4.**
            **Business
                Acquisition**




On
      September 21, 2005 the Company acquired 100% of the issued and outstanding
      shares of Mahjong Systems Limited and Mahjong Development Inc. The effective
      date of the acquisition was June 10, 2005. As consideration for this
      acquisition, the Company issued 9,000,000 common shares.




Details
      of the net assets acquired, at estimated fair value, are as
      follows:





Mahjong
                Development Inc.
            
            Mahjong
                Systems Limited$
            
            $Current
                assets
            
            
            41,358
            
            
            42,280Long
                term assets
            
            
            46,249
            
            
            41,857Development
                costs - gaming software
            
            
            2,150,821
            
            
            -2,238,428
            
            
            84,137Current
                liabilities
            
            
            903,458
            
            
            69,107Fair
                value of net assets acquired
            
            
            1,334,970
            
            
            15,030Total
              consideration - issuance of capital stock
            
            $
            1,350,000





On
      December 31, 2005, 8,100,000 of the shares issued in consideration were held
      in
      escrow and may only be released for trading based on a pre-determined schedule
      and conditions. The schedule calls for the release of 1,350,000 shares at six
      months intervals over a period of 36 months after the date of
      acquisition.




**5.**
            **Impairments**






**2004**
            
            2003$
            
            $(a) 
                Loan to shareholder bearing interest at prime plus 1%, on
                demand
            
            
            67,958
            
            
            285,454(b)
                 Website
            
            
            234,965
            
            
            -302,923
            
            
            285,454





(a)  
      The loan was secured by 2,072,727 shares of Dynasty Gaming Inc. (DNY), which
      were held in trust. The shareholder had the option of repaying the loan in
      cash
      or by surrendering to the Company the shares pledged as security. On December
      31, 2003 the closing market price for the shares was $0.25 per share and the
      Company recorded an impairment cost reducing the net carrying value of this
      loan
      receivable to $414,546. On December 23, 2004 the loan was repaid for an amount
      of $389,000 ($346,588 plus $42,412 in interest) and the Company recorded an
      impairment cost of $67,958 for the year.




(b) As
      required by the CICA Handbook Section 3063, *Impairment
      of long-lived assets,* the
      Company tested the carrying value of its subsidiary’s website and found it was
      impaired. As a result an impairment loss of $234,965 was recorded in the year.







68




**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**


**6**.
            **Property,
                Plant and Equipment**


****


**2005**Cost
            
            Accumulated
                Amortization
            
            Net
                Book Value$
            
            $
            
            $Computer
                hardware and software
            
            
            231,197
            
            
            90,476
            
            
            140,721Furniture
                and fixtures
            
            
            73,683
            
            
            31,124
            
            
            42,559304,880
            
            
            121,600
            
            
            183,280





**2004**Cost
            
            Accumulated
                Amortization
            
            Net
                Book Value$
            
            $
            
            $Computer
                hardware and software
            
            
            94,687
            
            
            38,697
            
            
            55,990Furniture
                and fixtures
            
            
            70,183
            
            
            20,139
            
            
            50,044164,870
            
            
            58,836
            
            
            106,034




**7.**
            **Assets
                Under Capital Leases**







****
            
            
            
            
            
            
            
            
            **2005**Cost
            
            
            Accumulated
                Amortization
            
            
            Net
                Book Value$
            
            
            $
            
            
            $Computer
                hardware and software
            
            
            29,432
            
            
            8,830
            
            
            20,602Furniture
                and fixtures
            
            
            71,716
            
            
            27,537
            
            
            44,179101,148
            
            
            36,367
            
            
            64,781





**2004**Cost
            
            
            Accumulated
                Amortization
            
            
            Net
                Book Value$
            
            
            $
            
            
            $Furniture
                and fixtures
            
            
            68,716
            
            
            16,492
            
            
            52,224




**8.**
            **Goodwill**




During
      the third quarter of 2005 the Company performed the goodwill impairment test
      and
      determined that goodwill associated with the self-sustaining foreign subsidiary
      CPC Econometrics Inc. was impaired. CPC had not signed new contracts and
      consequently the revenue stream could be substantially reduced, whereupon an
      impairment loss of $328,348 was recorded.




69




**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**


**9.**
            **Bank
                Indebtedness**




A
      subsidiary of the Company has a $100,000 line of credit facility with interest
      payable at prime rate plus 0.75% renewable annually. The facility is secured
      by
      a term deposit of $100,000 US ($116,300 Cdn).




**10.**
            **Obligations
                Under Capital Leases**


****    ****


**2005**
            
            **2004**$
            
            $Payable
                in capital and interest instalments, ending August 2008
            
            
            41,119
            
            
            53,558Payable
                in capital and interest instalments, ending November 2006
            
            
            5,004
            
            
            -46,123
            
            
            53,558Less:
                current portion
            
            
            18,962
            
            
            12,43927,161
            
            
            41,119




The
      future minimum lease payments with respect to capital leases are as
      follows:




2006
              
              $
              23,2962007
              
              
              18,0002008
              
              
              12,000Total
                  future minimum lease payments
              
              
              53,296Less:
                  amount representing interest (average of 12%)
              
              
              7,173Present
                  value of obligations under capital leases
              
              $
              46,123




**11.**
            **Long-term
                Debt**




**2005**
            
            **2004**$
            
            $International
                Federation of Gynaecology and Obstetrics (“FIGO”) unsecured non-interest
                bearing debt due July 1, 2004; $200,000 US dollars.
            
            
            232,600
            
            
            240,400Loan
                repayable in consecutive monthly principal payments of $1,400 plus
                interest at prime plus 1%, secured by a moveable hypothec on
                furniture.
            
            
            53,200
            
            
            70,000285,800
            
            
            310,400Less:
                current portion
            
            
            249,400
            
            
            257,20036,400
            
            
            53,200





The
      debt
      payable to FIGO is a result of an agreement, dated May 1, 2003, entered into
      by
      a subsidiary of the Company. As part of the agreement FIGO was to provide a
      10
      year endorsement of the subsidiary’s web portal “Obgynworld”. On July 1, 2004,
      as a result of non-payment of the debt, FIGO withdrew its endorsement (Note
      24).
      Consequently the Company fully amortized the web portal endorsement and recorded
      a cost of $1,266,717 in the year 2004.








70





**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**




**11.**
            **Long-term
                Debt - cont’d**




Long-term
      debt principal repayments to maturity are as follows:




2006
              
              $
              249,4002007
              
              
              16,8002008
              
              
              16,8002009
              
              
              2,800







**12.**
            **Income
                Taxes**




**2005**
            
            **2004**
            
            **2003**$
            
            $
            
            $Loss
                from continuing operations before income taxes:Canadian
            
            
            (1,384,249
            )
            
            (1,253,362
            )
            
            (421,918
            )Foreign
            
            
            444,417
            
            
            576,052
            
            
            211,240(939,832
            )
            
            (677,310
            )
            
            (210,678
            )Combined
                federal and provincial statutory rates
            
            
            31.00
            %
            
            31.02
            %
            
            33.05
            %Computed
                income tax recovery at statutory rates
            
            
            (291,348
            )
            
            (210,102
            )
            
            (69,629
            )Increase
                (decrease) resulting from:Non
                capital losses carry forward
            
            
            -
            
            
            -
            
            
            (1,204
            )Impairments
            
            
            101,787
            
            
            10,540
            
            
            47,171Non-deductibleexpenses
            
            
            7,074
            
            
            6,099
            
            
            1,633Non-recognition
                of tax benefits related to non-capital losses
            
            
            374,432
            
            
            219,098
            
            
            18,092Non-recognition
                of future income tax assets and liabilities
            
            
            (54,165
            )
            
            117,128
            
            
            58,030Differences
                due to income tax rates for foreign income
            
            
            47,124
            
            
            51,730
            
            
            2,007Other
            
            
            59,823
            
            
            16,517
            
            
            15,734Income
                tax expense
            
            
            244,727
            
            
            211,010
            
            
            71,834








**2005**
            
            
            2004
            
            
            2003$
            
            
            $
            
            
            $Current
                income tax expenseCanadian
                operations
            
            
            -
            
            
            -
            
            
            -Foreign
                operations
            
            
            129,791
            
            
            122,021
            
            
            38,784129,791
            
            
            122,021
            
            
            38,784Future
                income tax expenseCanadian
                operations
            
            
            -
            
            
            -
            
            
            -Foreign
                operations
            
            
            114,936
            
            
            88,989
            
            
            33,050114,936
            
            
            88,989
            
            
            33,050







71




**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**


**12.**
            **Income
                Taxes - cont’d**




The
      future income tax liability on foreign operations arose from the difference
      between the cash basis used for tax purposes and the accrual basis used for
      financial statements. In Canada, future income taxes are recognized for income
      tax consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities, and their tax bases.




Future
      tax liabilities are comprised of the following as at December 31, 2005 and
      2004.







**2005**
            
            **2004**$
            
            $Future
                tax liabilities:Operating
                losses carried forward
            
            
            762,000
            
            
            529,883Capital
                losses carried forward
            
            
            315,000
            
            
            315,000Timing
                differences due to capital, intangible and other assets
            
            
            240,842
            
            
            209,861Timing
                difference between the accrual and cash basis of foreign
                income
            
            
            248,162
            
            
            100,112Less:
                valuation allowance
            
            
            (1,317,842
            )
            
            (1,054,744
            )Future
                tax liabilities
            
            
            (248,162
            )
            
            (100,112
            )Future
                tax liabilitiesCanadian
                operations
            
            
            -
            
            
            -Foreign
                operations
            
            
            (248,162
            )
            
            (100,112
            )









As
      at
      December 31, 2005, the Company has taxable capital losses carry-forward of
      approximately $1,017,000 which are available to be applied against future
      taxable capital gains and non-capital losses carry-forward of approximately
      $2,455,400, **** which
      are
      available to be applied against future taxable income. The non-capital losses
      expire as follows:




72


**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**




Year
                of
                Expiry
              
              
              Amount2015
              
              
              1,209,0002014
              
              
              644,0002010
              
              
              54,0002009
              
              
              196,0002008
              
              
              64,0002007
              
              
              1,4002006
              
              
              287,000







The
      potential tax benefits relating to these losses have not been recognized in
      the
      financial statements.









**13.**
            **Capital
                Stock**




a)
            Authorized




The
      Company is authorized to issue an unlimited number of common
      shares.




b)
            Escrowed
                shares




As
      at
      December 31, 2005, 18,263,900 common shares are subject to escrow conditions
      and
      may only be released for trading based on a pre-determined schedule and
      conditions extending over a period of six years.




c)
            Cancelled
                common shares held in escrow




On
      December 22, 2004 as part of the sale of Events
      International Meeting Planners (“EIMP”) the buyer surrendered 2,413,054 common
      shares of the Company which were held in escrow. These shares were subsequently
      cancelled (see Note 3).




d)
            Private
                Placement




On
      April
      29, 2005, the Company completed a private placement agreement with third-party
      investors and issued 8,000,000 common shares at a price of $0.15 per share
      for
      gross proceeds of $1,200,000. In connection with the private placement,
      8,000,000 Series “A” Warrants were granted, each warrant entitling the holder to
      acquire one additional common share at a price of $0.25 for a period of one
      year. Also 800,000 broker rights, entitling the holder to acquire one common
      share at a price of $0.15 each for a period of one year, were issued. The
      out-of-pocket issuance costs were $157,506.





The
      Company has allocated the $0.15 **** per
      share
      private placement value completely to the shares. The fair value of the warrants
      attached to these shares, due to the short life of the warrants (one year)
      and
      the fact that the warrants are exercisable at a 40% premium (at $0.25 per
      warrant) above the issue price of the private placement is deemed to be nil.





73




**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**


The
      Company has estimated the fair value of the broker rights at $0.03 per right for a total
      cost of $24,000; this has been credited to other capital. The total issuance
      cost of $181,506 (out-of-pocket costs of $157,506 and broker rights costs of
      $24,000) has been charged against the $1,200,000 capital stock for a net
      issuance amount of $ 1,018,494.




The
              Companyestimated
              fair value using the Black-Scholes model with the following
              assumptions:****Risk-free
                interest rate
            4.05%Expected
                life
            1
                yearExpected
                volatility in the market price of the shares
            50%Expected
                dividend yield
            nil




e)
            Business
                acquisition




On
      September 21, 2005 the Company issued 9,000,000 common shares for the purchase
      of 100% of the issued and outstanding shares of Mahjong Systems Limited and
      Mahjong Development Inc. The fair value of the shares on issuance was $0.15
      per
      share for a total value $1,350,000.








74




**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**





**13.**
            **Capital
                Stock - cont’d**




f)
            Private
                Placement




On
      December 28, 2005, the Company completed a second private placement agreement
      with third-party investors and issued 15,000,000 units (the “Units”) of the
      Company at a price of $0.35 per unit for gross proceeds of $5,250,000. Each
      Unit
      sold consists of one common share and one-half of one share purchase warrant,
      each full warrant entitling a holder to acquire an additional common share
      at a
      price of $0.50 per share for a period of two years. Also 1,350,000 broker
      warrants, entitling the holder to acquire one common share at a price of $0.50
      each for a period of two years, were issued. The out-of-pocket issuance costs
      were $481,547.





The
      Company has estimated the fair value of the warrants at $0.05 per warrant for a total cost
      of $442,500; this cost has been credited to other capital. The total issuance
      cost of $924,047 (out-of-pocket costs of $481,547 and other costs of $442,500)
      has been charged against the $5,250,000 capital stock for a net issuance amount
      of $ 4,325,953.




The
      Company estimated
      fair value using the Black-Scholes model with the following
      assumptions: ****




Risk-free
                    interest rate
                5.37%Expected
                    life
                1
                    yearExpected
                    volatility in the market price of the shares
                44%Expected
                    dividend yield
                nil







g)
            Warrants,
                rights and options exercised during the year by
                quarter




Number
            
            Exercise
                Price
            
            Proceeds*****#
            
            $
            
            $Third
                QuarterWarrants
            
            
            3,666,667
            
            
            0.25
            
            
            916,667Rights
            
            
            200,000
            
            
            0.15
            
            
            36,000Fourth
                QuarterWarrants
            
            
            4,333,333
            
            
            0.25
            
            
            1,083,333Rights
            
            
            342,666
            
            
            0.15
            
            
            61,680Options
            
            
            123,667
            
            
            0.15
            
            
            23,4978,666,333
            
            
            
            
            
            2,121,177





***** “Proceeds”
      is comprised of net cash proceeds plus the related stock-based compensation
      and
      brokers issue costs.








75





**DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**


**13.**
            **Capital
                Stock - cont’d**





Issued
      common shares:





**December
                31, 2005**
            
            **December
                31, 2004**
            ********
            ****
            **Number
                of shares**
            ****
            **Book
                Value**
            ****
            **Number
                of shares**
            ****
            **Book
                Value**
            ********
            ****
            **#**
            
            **$**
            ****
            **#**
            ****
            **$**Common
                shares, beginning of period
            
            
            36,187,782
            
            
            3,589,810
            
            
            38,600,836
            
            
            3,831,116Cancelled
            
            
            -
            
            
            -
            
            
            (2,413,054
            )
            
            (241,306
            )Issuance-
                private placements
            
            
            23,000,000
            
            
            5,344,447
            
            
            -
            
            
            -Issuance-
                business acquisition
            
            
            9,000,000
            
            
            1,350,000
            
            
            -
            
            
            -Issuance-
                warrants, rights and options exercised
            
            
            8,666,333
            
            
            2,121,177
            
            
            -
            
            
            -Common
                shares, end of period
            
            
            76,854,115
            
            
            12,405,434
            
            
            36,187,782
            
            
            3,589,810









**14.**
            **Stock
                - Based Compensation Plan**






The
      Company maintains a Stock Option Plan for eligible individuals: directors,
      officers, employees and consultants. On October 28, 2005 the aggregate number
      of
      shares reserved for issuance was increased to 5,500,000 from the previous
      aggregate of 3,500,000. Under the plan, options are periodically granted to
      purchase common shares at an exercise price which is generally based on the
      stock price quoted on the exchange at the time of the grant. Generally, these
      options vest in six equal instalments over a period of 18 months, with the
      first
      instalment vesting immediately and the remaining options vesting upon 6 months,
      9 months, 12 months, 15 months, and 18 months after the date of grant. The
      options terminate 5 years after the grant.




The
      options are granted to purchase common shares at an exercise price equal to
      or
      greater than the market price of such shares on the day of grant; except for
      the
      200,000 options granted on December 29, 2005. The market price at the date
      of
      grant of the 200,000 options was $0.61. The 1,150,000 options granted on October
      17, 2005 vest over a period of 36 months at equal instalments every six months
      with the first vesting six months after the date of grant.




There
      were no options granted during the fiscal year ended December 31,
      2004.







76




**DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**
   **14.**
                  **Stock
                      -Based Compensation Plan
                      -cont’d**


The
      summarized information on options as at December 31, 2005 is as
      follows:






**Options
                Outstanding**
            ****
            ****
            **Options
                Exercisable**
            ******Number
                of options**
            ****
            ****
            **Weighted
                average remaining life (years)**
            
            ****
            **Exercise
                price**
            ****
            ****
            **Number
                of options**
            ****
            ****
            **Exercise
                price**#
            
            
            #
            
            
            $
            
            
            #
            
            
            $100,000
            
            
            1.23
            
            
            0.75
            
            
            100,000
            
            
            0.7525,000
            
            
            1.59
            
            
            1.00
            
            
            25,000
            
            
            1.0015,000
            
            
            2.47
            
            
            0.38
            
            
            15,000
            
            
            0.38418,083
            
            
            4.16
            
            
            0.15
            
            
            271,750
            
            
            0.15666,666
            
            
            4.72
            
            
            0.44
            
            
            111,111
            
            
            0.441,150,000
            
            
            4.79
            
            
            0.50
            
            
            -
            
            
            0.5010,000
            
            
            4.81
            
            
            0.45
            
            
            1,667
            
            
            0.4521,000
            
            
            4.81
            
            
            0.44
            
            
            3,500
            
            
            0.44200,000
            
            
            4.81
            
            
            0.50
            
            
            33,333
            
            
            0.502,605,749
            
            
            
            
            
            
            
            
            561,361









The
      number of options has varied as follows for the years ended December
      31:




**2005**
            
            
            
            **2004****Number
                of options**
            
            **Weighted
                average exercise price**
            
            **Number
                of options**
            
            **Weighted
                average exercise price**#
            
            $
            
            #
            
            $Outstanding
                at beginning of year
            
            
            200,000
            
            
            0.73
            
            
            200,000
            
            
            0.73Forfeited
            
            
            107,750
            
            
            0.47
            
            
            -
            
            
            -Granted
            
            
            2,637,166
            
            
            0.41
            
            
            -
            
            
            -Exercised
            
            
            123,667
            
            
            0.15
            
            
            -
            
            
            -Outstanding
                at end of year
            
            
            2,605,749
            
            
            0.44
            
            
            200,000
            
            
            0.73Options
                exercisable at end of year
            
            
            561,361
            
            
            0.38
            
            
            200,000
            
            
            0.73







The
      fair
      value compensation expense recorded for the year ended December 31, 2005, in
      respect of this plan was $30,257 (2004 - no options were granted). The weighted
      average fair value of options granted during 2005 was estimated at $0.11 using
      the Black-Scholes model on the date of grant. The following weighted-average
      assumptions were used:




Risk-free
                  interest rate
              5.37%Expected
                  life
              2.15
                  yearsExpected
                  volatility in the market price of the shares
              44%Expected
                  dividend yield
              nil








77




**DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**


**14.**
            **Stock
                -Based Compensation Plan
                (cont’d)**




Had
      compensation cost been determined using the fair-value-based method at the
      date
      of the grant for awards granted in the years ended December 31, 2002 and
      December 31, 2003 the Company’s pro-forma effect on earnings per share would
      have been as presented in the table below:






**2005**
            
            
            **2004**
            ****
            ****
            **2003**Loss
                from continuing operations
            
            
            Net
                Loss
            
            
            Loss
                from continuing operations
            
            
            Net
                Loss
            
            
            Loss
                from continuing operations
            
            
            Net
                Loss$
            
            
            $
            
            
            $
            
            
            $
            
            
            $
            
            $Loss
                for the Year:Reported
            
            
            (1,184,559
            )
            
            (1,184,559
            )
            
            (888,320
            )
            
            (2,204,904
            )
            
            (282,512
            )
            
            (703,468
            )Stock-based
                compensation
            
            
            -
            
            
            -
            
            
            (15,083
            )
            
            (15,083
            )
            
            (14,650
            )
            
            (14,650
            )Pro
                forma
            
            
            (1,184,559
            )
            
            (1,184,559
            )
            
            (903,403
            )
            
            (2,219,987
            )
            
            (297,162
            )
            
            (718,118
            )




Basic
      and
      diluted loss per share would have remained unchanged.





No
      awards
      were granted prior to January 1, 2002. The pro-forma amounts for options issued
      after January 1, 2002 include a compensation cost calculated using the
      Black-Scholes model.





110,000
      options granted March 25, 2002 at an exercise price of $0.75; the fair value
      of
      options granted is $0.10 per option using the Black-Scholes model with the
      following assumptions:




Risk-free
                  interest rate
              
              2.95%Expected
                  life
              
              2
                  yearsExpected
                volatility in the market price of the shares
              74%Expected
                dividend yield
              
              nil








78




**DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**


25,000
      options granted August 5, 2002 at an exercise price of $1.00; the fair value
      of
      options granted is $0.09 per option using the Black-Scholes model with the
      following assumptions:




Risk-free
                interest rate
            
            3.19%Expected
                life
            
            2
                yearsExpected
              volatility in the market price of the shares
            74%Expected
              dividend yield
            
            nil


70,000
      options granted June 23, 2003 at an exercise price of $0.38; the fair value
      of
      options granted is $0.34 per option using the Black-Scholes model with the
      following assumptions:




Risk-free
                interest rate
            
            3.69%Expected
                life
            
            4 yearsExpected
              volatility in the market price of the shares
            162%Expected
              dividend yield
            
            nil




**15.**
            **Other
                Capital**




Other
      capital consists of the following:


**2005**
            
            **2004**$
            
            $Warrants
                and brokers’ rights costs
            
            
            450,220
            
            
            -Stock-based
                compensation costs
            
            
            25,310
            
            
            -475,530
            
            
            -




**16.**
            **Cumulative
                Translation Adjustment**





Cumulative
      translation adjustment, which arises from the translation to Canadian dollars
      of
      assets and liabilities of the Company’s self-sustaining foreign operations,
      resulted in a net change of $53,995 for the year ended December 31, 2005; a
      net
      change of $65,158 for the year ended December 31, 2004 and a net change of
      $71,395 for the year ended December 31, 2003. The net change resulted primarily
      from the strengthening of the Canadian dollar against the U.S.
      dollar.







**17.**
            **Other
                Income**




**2005**
            
            **2004**
            ****
            **2003**$
            
            $
            
            $Interest
                on liens
            
            
            21,444
            
            
            10,152
            
            
            1,923Allowance
                for doubtful accounts
            
            
            -
            
            
            15,413
            
            
            -Other
                interest income
            
            
            (30,587
            )
            
            (21,595
            )
            
            (544
            )Foreign
                exchange gain
            
            
            (20,363
            )
            
            (29,824
            )
            
            (67,634
            )(29,506
            )
            
            (25,854
            )
            
            (66,255
            )






79




**DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**




**18.**
            **Gain
                on Settlement of Debt**




A
      subsidiary of the Company has settled its debt due to a creditor in the amount
      of $1,365,803 for $300,000. The amount was discharged on December 23, 2004
      and
      the resulting gain on settlement of $1,065,803 has been included in the
      statement of operations.







**19.**
            **Net
                Change in Non-cash Assets and Liabilities Related to
                Operations**





**2005**
            
            **2004**
            ****
            **2003**$
            
            $
            
            $Accounts
                receivable
            
            
            181,226
            
            
            (1,087,440
            )
            
            (515,256
            )Work-in-process
            
            
            39,698
            
            
            (5,407
            )
            
            (49,856
            )Income
                taxes receivable
            
            
            -
            
            
            -
            
            
            19,472Prepaid
                expenses and deposits
            
            
            (267,505
            )
            
            225,305
            
            
            (255,721
            )Accounts
                payable and accrued liabilities
            
            
            (797,062
            )
            
            467,460
            
            
            805,667Income
                taxes payable
            
            
            (12,303
            )
            
            (7,209
            )
            
            18,765Deferred
                revenue
            
            
            (54,146
            )
            
            201,931
            
            
            97,324(910,092
            )
            
            (205,423
            )
            
            120,395




**Supplemental
                cash flow information:**






**2005**
            
            **2004**
            ****
            **2003**$
            
            $
            
            $Income
                taxes paid
            
            
            121,160
            
            
            129,230
            
            
            21,015Interest
                paid
            
            
            21,351
            
            
            20,338
            
            
            1,379Non-cash
                investing and financing activitiesAcquisition
                of assets through capital leases
            
            
            32,432
            
            
            -
            
            
            68,716Capital
                lease obligation
            
            
            (32,432
            )
            
            -
            
            
            -Cost
                of warrants and brokers’ rights
            
            
            466,500
            
            
            -
            
            
            -Other
                capital
            
            
            (466,500
            )
            
            -
            
            
            -Issuance
                of stock for acquisition of subsidiary
            
            
            1,343,137
            
            
            -
            
            
            -Stock
                received as part of proceeds of sale of discontinued operations
            
            
            -
            
            
            241,306
            
            
            241,306Cancellation
                of stock received
            
            
            -
            
            
            (241,306
            )
            
            (241,306
            )Cancellation
                of debt
            
            
            -
            
            
            278,200
            
            
            278,200Write-down
                of intangible asset on cancellation of debt
            
            
            -
            
            
            (278,200
            )
            
            (278,200
            )Increase
                in development costs due to amortization
            
            
            7,006
            
            
            -
            
            
            -Increase
                in common stock due to reduction in other capital pursuant to stock
                rights
                and options exercised
            
            
            21,227
            
            
            -
            
            
            -Balance
                of purchase on acquisition
            
            
            -
            
            
            -
            
            
            (125,000
            )Cancellation
                of balance of purchase on sale of discontinued operations
            
            
            -
            
            
            -
            
            
            125,000Issuance
                of stock for acquisition of subsidiary
            
            
            -
            
            
            -
            
            
            750,000Cancellation
                of stock previously issued for acquisition of subsidiary
            
            
            -
            
            
            -
            
            
            (750,000
            )







80




**20.**
            **Financial
                Instruments**




a)
            Credit
                risk




Credit
      risk results from the possibility that a loss may occur from the failure of
      another party to adhere to payment terms. To lower this risk, the Company's
      extension of credit is based on an evaluation of each customer's financial
      condition. Management reviews the ageing of trade accounts receivable and other
      factors related to the risk that customer accounts may not be paid in full
      and,
      when appropriate, reduces the carrying value to provide for possible
      loss.





b)
            Interest
                rate risk




The
      Company is exposed to interest rate fluctuations on its bank indebtedness,
      and
      portions of its long-term debt which bear interest at prime rate plus .75% and
      1% respectively.







c)
            Foreign
                currency risk




A
      portion
      of the Company’s revenues is derived in US dollars and is subject to exchange
      fluctuation. The Company, as much as possible, uses the revenue stream in US
      dollars as a natural hedge to cover costs denominated in US dollars. The
      following shows, in Canadian dollars, the assets and liabilities in other
      currencies:




**2005**
            **2004****US
                $**
            
            **Cdn
                $**
            
            **US
                $**
            ****
            **Cdn
                $**Current
                assets
            
            
            125,797
            
            
            146,303
            
            
            328,011
            
            
            394,269Current
                liabilities
            
            
            539,953
            
            
            627,966
            
            
            590,000
            
            
            709,180










81




**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**




d)
            Fair
                value disclosure




Fair
      value estimates are made as of a specific point in time, using available
      information about the financial instruments. These estimates are subjective
      in
      nature and often cannot be determined with precision. The Company has estimated
      that the carrying value of its short-term financial assets and liabilities
      approximates their fair values at the balance sheet date because of the
      short-term maturity of these instruments.




The
      carrying value of the Company's obligations under capital leases is not
      considered to approximate fair value because they bear interest at 12% which
      is
      higher than current market rates. However, no calculation has been done to
      estimate fair value because of the immaterial amounts of the
      obligations.





The
      carrying value of the long term debt, except for the long term debt mentioned
      below, is considered to approximate fair value since it bears interest at
      current borrowing rates for similar types of borrowing
      arrangements.





The
      fair
      value of the long term debt of $200,000 US payable to International Federation
      of Gynaecology and Obstetrics (FIGO) cannot be determined since it bears no
      interest and has no fixed payment date.







**21.**
            **Economic
                Independence**






A
      subsidiary of the Company, CPC Econometrics Inc., generated approximately 77%
      (2004 - 44%) of its revenues from one customer and in 2003, approximately 76%
      from two customers.




**22.**
            **Commitments**




Leases
      for premises





A
      subsidiary of the Company entered into two agreements to lease premises; the
      first lease expires on November 30, 2007 and the second on December 31, 2013.
      The second lease has been sublet since September 2004. The minimum annual lease
      payments for both leases, excluding the benefits of the sublet and excluding
      operating and real estate taxes, for the next five years and thereafter are
      as
      follows:




2006
              96,7432007
              91,5182008
              34,0342009
              34,0342010
              34,034Thereafter
              34,034







82




**DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**


Stock
      options





The
      Company has a commitment to grant a total of 1,333,333 stock options, at an
      exercise price of $0.44 per option, to directors: 50% in 2006 and 50% in 2007.




**23.**
            **Related
                Party Transactions**




Transactions
      with companies controlled by shareholders and directors are as
      follows:




**2005**
            
            **2004**
            ****
            **2003**$
            
            $
            
            $Revenues
                earned
            
            
            -
            
            
            28,016
            
            
            55,395Direct
                costs paid
            
            
            517,389
            
            
            847,597
            
            
            564,728Marketing
                and promotion costs paid
            
            
            -
            
            
            35,570
            
            
            23,285Administrative
                costs paid
            
            
            257,850
            
            
            145,300
            
            
            30,183Assets
                acquired under capital lease
            
            
            -
            
            
            -
            
            
            68,718




The
      above
      transactions are in the normal course of operations and are measured at the
      exchange amount, which is the amount of consideration established and agreed
      to
      by the related parties. The Company has $183,151 accounts payable to related
      parties as at December 31, 2005; nil in 2004.





**24.**
            **Contingency**




The
      subsidiary of the Company, based on a legal interpretation and its understanding
      of the agreement with FIGO (see Note 11), removed a liability of $200,000 US
      from its 2004 financial statements. Nevertheless, although management believes
      it would be highly unlikely and without merit, FIGO could institute a claim
      against the subsidiary for this amount.




**25.**
            **Subsequent
                Event**




On
      March
      6, 2006, the Company granted 950,000 stock options to directors and officers
      at
      an exercise price of $0.50 per option.




**26.**
            **Comparative
                Figures**




Certain
      comparative figures for the prior years have been reclassified to conform with
      the presentation adopted in the current year.






**27.**
            **Segmented
                Information**






Dynasty
                Gaming Inc.’s reportable segments are represented by the following
                subsidiary companies. The subsidiary head offices are located in
                Canada
                except for, CPC Econometrics which is based in the United States
                and
                Mahjong Systems Limited which is based in Turks and Caicos
                Islands.




MedEvents
                Inc. has ceased commercial activity as of July
                2005.






83


**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**




CadenceHealthcare
                  Communications Inc. generates revenues from developing marketing
                  and
                  communications plans for companies in the pharmaceutical
                  industry.




CPC
                Econometrics Inc. generates revenues by providing management consulting
                services and e-commerce consulting.




Mahjong
                Systems Limited and Mahjong Development Inc. (“Mahjong”) will generate
                revenue from software licensing fees and a share of winnings from
                each
                game played.




Dynasty
                Gaming Inc. generates revenues primarily by providing management
                services
                to the other company segments. The services are charged at cost plus
                mark-up based on proportionate
                usage.




The
      Company's revenues are generated from the following geographical
      areas:




**2005**
            
            **2004**
            ****
            **2003**$
            
            $
            
            $US
            
            
            6,279,319
            
            
            5,237,340
            
            
            3,004,127Canada
            
            
            1,676,838
            
            
            1,001,452
            
            
            955,321Total
                sales revenues
            
            
            7,956,157
            
            
            6,238,792
            
            
            3,959,448






84




**DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2005, 2004, AND 2003**
  **27.Segmented
          Information -
          cont'd**
  The
          Company's two major customers have contributed to sales revenue as indicated
          in
          the following table:
 
 **2005**
                  
                  2004
                  
                  2003$
                  
                  $
                  
                  $Customer
                      A
                  
                  
                  6,115,783
                  
                  
                  2,739,582
                  
                  
                  281,071Customer
                      B
                  
                  
                  163,566
                  
                  
                  2,479,537
                  
                  
                  2,713,037All
                      other customers
                  
                  
                  1,676,808
                  
                  
                  1,019,673
                  
                  
                  965,340Total
                      sales revenues
                  
                  
                  7,956,157
                  
                  
                  6,238,792
                  
                  
                  3,959,448
    Cadence
                  
                  CPCIntersegment
                  
                  Dynasty
                  
                  
                  
                  Medevents
                  
                  Healthcare
                  
                  EconometricsConsolidated
                  
                  eliminations
                  
                  Gaming
                      Inc
                  
                  Mahjong
                  
                  Inc.
                  
                  Communications
                  
                  Inc.$
                  
                  $
                  
                  $
                  
                  $
                  
                  $
                  
                  $
                  
                  **$****Revenue****External**
                  
                  
                  **7,956,157**
                  
                  
                  **-**
                  
                  
                  **161,700**
                  
                  
                  **-**
                  
                  
                  **9,187**
                  
                  
                  **1,505,951**
                  
                  
                  **6,279,319****Intersegment**
                  
                  
                  **-**
                  
                  
                  **(403,753**
                  **)**
                  
                  **403,698**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **55**
                  
                  
                  **-****Total
                      revenues**
                  
                  
                  **7,956,157**
                  
                  
                  **(403,753**
                  **)**
                  
                  **565,398**
                  
                  
                  **-**
                  
                  
                  **9,187**
                  
                  
                  **1,506,006**
                  
                  
                  **6,279,319****Direct
                      cost**
                  
                  
                  **5,294,768**
                  
                  
                  **(55**
                  **)**
                  
                  **-**
                  
                  
                  **53,593**
                  
                  
                  **(45,972**
                  **)**
                  
                  **1,061,682**
                  
                  
                  **4,225,520****Selling
                      and administration**
                  
                  
                  **3,249,019**
                  
                  
                  **(403,698**
                  **)**
                  
                  **1,100,756**
                  
                  
                  **445,515**
                  
                  
                  **48,275**
                  
                  
                  **619,009**
                  
                  
                  **1,439,162****Amortization**
                  
                  
                  **53,360**
                  
                  
                  **-**
                  
                  
                  **9,550**
                  
                  
                  **6,559**
                  
                  
                  **3,850**
                  
                  
                  **31,892**
                  
                  
                  **1,509****Impairment**
                  
                  
                  **328,348**
                  
                  
                  **(335,652**
                  **)**
                  
                  **664,000**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **-****Interest
                      expense (income)**
                  
                  
                  **(9,143**
                  **)**
                  
                  **-**
                  
                  
                  **(3,065**
                  **)**
                  
                  **4,583**
                  
                  
                  **358**
                  
                  
                  **13,249**
                  
                  
                  **(24,268**
                  **)****Other
                      income**
                  
                  
                  **(20,363**
                  **)**
                  
                  **-**
                  
                  
                  **(6,552**
                  **)**
                  
                  **(2,715**
                  **)**
                  
                  **(11,096**
                  **)**
                  
                  **-**
                  
                  
                  **-****(Loss)
                      earnings before income taxes**
                  
                  
                  **(939,832**
                  **)**
                  
                  **335,652**
                  
                  
                  **(1,199,291**
                  **)**
                  
                  **(507,535**
                  **)**
                  
                  **13,772**
                  
                  
                  **(219,826**
                  **)**
                  
                  **637,396****Income
                      taxes**
                  
                  
                  **244,727**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **244,727****Net
                      (Loss) earnings**
                  
                  
                  **(1,184,559**
                  **)**
                  
                  **335,652**
                  
                  
                  **(1,199,291**
                  **)**
                  
                  **(507,535**
                  **)**
                  
                  **13,772**
                  
                  
                  **(219,826**
                  **)**
                  
                  **392,669****Segment
                      assets**
                    **Segment
                      assets excluding under-noted**
                  
                  
                  **8,550,083**
                  
                  
                  **(3,513,752**
                  **)**
                  
                  **9,148,038**
                  
                  
                  **506,508**
                  
                  
                  **9,794**
                  
                  
                  **322,839**
                  
                  
                  **2,076,656****Investment**
                  
                  
                  **-**
                  
                  
                  **(1,350,000**
                  **)**
                  
                  **1,350,000**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **-****Deferred
                      development costs**
                  
                  
                  **2,736,451**
                  
                  
                  **1,481,826**
                  
                  
                  **-**
                  
                  
                  **1,254,625**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **-****11,286,534**
                  
                  
                  **(3,381,926**
                  **)**
                  
                  **10,498,038**
                  
                  
                  **1,761,133**
                  
                  
                  **9,794**
                  
                  
                  **322,839**
                  
                  
                  **2,076,656**
    85
  **DYNASTY
            GAMING INC.**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
            OF DECEMBER 31, 2005, 2004, AND 2003**
  27.Segmented
            Information -
            cont'd
  **2004**
                  
                  **Consolidated**
                  
                  **Intersegment**
                    **eliminations**
                  
                  **Dynasty
                      Gaming Inc**
                  **Mahjong**
                  
                  **MedEvents**
                    **Inc.**
                  
                  **Cadence
                      Healthcare**
                    **Communications**
                    **Inc.**
                  
                  **CPC**
                    **Econometrics**
                    **Inc.**$
                  
                  $
                  
                  **$**
                  **$**
                  
                  **$**
                  
                  $
                  
                  **$****Revenue****External**
                  
                  
                  **6,238,792**
                  
                  
                  **-**
                  
                  
                  **26,053**
                  **-**
                  
                  
                  **27,267**
                  
                  
                  **948,132**
                  
                  
                  **5,237,340****Intersegment**
                  
                  
                  **-**
                  
                  
                  **(943,972**
                  **)**
                  
                  **509,555**
                  **-**
                  
                  
                  **-**
                  
                  
                  **434,417**
                  
                  
                  **-****Total
                      revenues**
                  
                  
                  **6,238,792**
                  
                  
                  **(943,972**
                  **)**
                  
                  **535,608**
                  **-**
                  
                  
                  **27,267**
                  
                  
                  **1,382,549**
                  
                  
                  **5,237,340****Direct
                      cost**
                  
                  
                  **4,315,070**
                  
                  
                  **(453,397**
                  **)**
                  
                  **-**
                  **-**
                  
                  
                  **93,633**
                  
                  
                  **1,065,735**
                  
                  
                  **3,609,099****Selling
                      and administration**
                  
                  
                  **2,068,605**
                  
                  
                  **(509,555**
                  **)**
                  
                  **942,348**
                  **-**
                  
                  
                  **290,885**
                  
                  
                  **281,868**
                  
                  
                  **1,063,059****Amortization**
                  
                  
                  **1,316,510**
                  
                  
                  **-**
                  
                  
                  **-**
                  **-**
                  
                  
                  **1,272,217**
                  
                  
                  **44,191**
                  
                  
                  **102****Impairments**
                  
                  
                  **302,923**
                  
                  
                  **-**
                  
                  
                  **67,958**
                  **-**
                  
                  
                  **234,965**
                  
                  
                  **-**
                  
                  
                  **-****Interest
                      expense (income)**
                  
                  
                  **(11,443**
                  **)**
                  
                  **-**
                  
                  
                  **(15,281)**
                  **-**
                  
                  
                  **686**
                  
                  
                  **14,124**
                  
                  
                  **(10,972**
                  **)****Other
                      expense (income)**
                  
                  
                  **(14,411**
                  **)**
                  
                  **-**
                  
                  
                  **(24,979)**
                  **-**
                  
                  
                  **(4,845**
                  **)**
                  
                  **15,413**
                  
                  
                  **-****Gain
                      on settlement of debt**
                  
                  
                  **(1,065,803**
                  **)**
                  
                  **-**
                  
                  
                  **-**
                  **-**
                  
                  
                  **(1,065,803**
                  **)**
                  
                  **-**
                  
                  
                  **-****Loss
                      on sale of property**
                  
                  
                  **4,651**
                  
                  
                  **-**
                  
                  
                  **-**
                  **-**
                  
                  
                  **-**
                  
                  
                  **4,651**
                  
                  
                  **-****(Loss)
                      earnings before income taxes**
                  
                  
                  **(677,310**
                  **)**
                  
                  **18,980**
                  
                  
                  **(434,438)**
                  **-**
                  
                  
                  **(794,471**
                  **)**
                  
                  **(43,433**
                  **)**
                  
                  **576,052****Income
                      taxes**
                  
                  
                  **211,010**
                  
                  
                  **-**
                  
                  
                  **-**
                  **-**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **211,010****Net
                      (loss) earnings from continuing**
                    **operations**
                  
                  
                  **(888,320**
                  **)**
                  
                  **18,980**
                  
                  
                  **(434,438)**
                  **-**
                  
                  
                  **(794,471**
                  **)**
                  
                  **(43,433**
                  **)**
                  
                  **365,042****Segment
                      assets**
                    **Segment
                      assets excluding under-noted**
                  
                  
                  **2,695,027**
                  
                  
                  **(709,461**
                  **)**
                  
                  **1,117,566**
                  **-**
                  
                  
                  **35,056**
                  
                  
                  **875,749**
                  
                  
                  **1,376,117****Goodwill
                      - CPC Econometrics**
                  
                  
                  **328,348**
                  
                  
                  **(335,652**
                  **)**
                  
                  **664,000**
                  **-**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **-****3,023,375**
                  ****
                  ****
                  **(1,045,113**
                  **)**
                  ****
                  **1,781,566**
                  **-**
                  ****
                  ****
                  **35,056**
                  ****
                  ****
                  **875,749**
                  ****
                  ****
                  **1,376,117**
    86
  **DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2005, 2004, AND 2003**
   **27. Segmented
          Information
          -cont'd**
  **2003**
                
                **Consolidated**
                
                **Intersegment**
                  **eliminations**
                
                **Events**
                  **International**
                  **Holding**
                  **Corporation**
                
                **MedEvents**
                  **Inc.**
                
                **Cadence
                    Healthcare**
                  **Communications**
                  **Inc.**
                
                **CPC**
                  **Econometrics**
                  **Inc.****Revenues**
                
                $
                
                $
                
                $
                
                $
                
                $
                
                $RevenuesExternal
                
                
                3,959,448
                
                
                
                
                
                48,434
                
                
                390,438
                
                
                516,449
                
                
                3,004,127Intersegment
                
                
                -
                
                
                (1,552,796
                )
                
                917,902
                
                
                -
                
                
                634,894
                
                
                -**Segment
                    revenues**
                
                
                3,959,448
                
                
                (1,552,796
                )
                
                966,336
                
                
                390,438
                
                
                1,151,343
                
                
                3,004,127Direct
                    cost
                
                
                2,913,254
                
                
                (620,772
                )
                
                -
                
                
                268,947
                
                
                948,912
                
                
                2,316,167Selling
                    and administration
                
                
                908,168
                
                
                (917,902
                )
                
                1,019,516
                
                
                162,101
                
                
                169,409
                
                
                475,044Amortization
                
                
                129,505
                
                
                
                
                
                -
                
                
                114,148
                
                
                10,527
                
                
                4,830Impairments
                
                
                285,454
                
                
                
                
                
                285,454
                
                
                -
                
                
                -
                
                
                -Interest
                    expense (income)
                
                
                1,379
                
                
                
                
                
                2,236
                
                
                22
                
                
                2,275
                
                
                (3,154
                )Other
                    income
                
                
                (67,634
                )
                
                
                
                
                -
                
                
                (67,634
                )
                
                -
                
                
                -(Loss)
                    earnings from continuing
                  operations
                    before income taxes
                
                
                (210,678
                )
                
                (14,122
                )
                
                (340,870
                )
                
                (87,146
                )
                
                20,220
                
                
                211,240Income
                    taxes
                
                
                71,834
                
                
                
                
                
                -
                
                
                -
                
                
                -
                
                
                71,834**(Loss)
                    earnings from continuing**
                  **operations**
                
                
                (282,512
                )
                
                (14,122
                )
                
                (340,870
                )
                
                (87,146
                )
                
                20,220
                
                
                139,406
    87


**DYNASTY
        GAMING INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
        AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
        AMOUNTS ARE IN CANADIAN DOLLARS)**







**28.**
            **Canadian
                and United States Accounting Policies
                Differences:**




The
      consolidated financial statements of the Company have been prepared in
      accordance with generally accepted accounting principles in Canada (Canadian
      GAAP). The significant differences between Canadian GAAP and generally accepted
      accounting principles in the United States (U.S. GAAP), and their effect on
      the
      consolidated financial statements, are described below:





*Consolidated
      statement of operations:*





In
      December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
      No.
      123 (revised 2004), "Share-Based Payment" ("SFAS 123R"), which is a revision
      of
      SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS 123R supersedes
      Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
      to Employees" and amends SFAS No. 95, "Statement of Cash Flows".





Effective
      January 1, 2004, for U.S. GAAP purposes, the Company adopted SFAS 123R, using
      the modified retroprospective application method. SFAS 123R requires the
      recognition of the cost of employee services received in exchange for an award
      of equity instruments in the financial statements and is measured based on
      the
      grant date fair value of the award. SFAS 123R also requires the stock option
      compensation expense to be recognized over the period during which an employee
      is required to provide service in exchange for the award (the vesting period).
      Prior to adopting SFAS 123R, the Company accounted for stock-based compensation
      plans under APB No. 25. Under APB 25, generally no compensation expense is
      recorded when the terms of the award are fixed and the exercise price of the
      employee stock option equals or exceeds the fair value of the underlying stock
      on the date of grant.





Under
      the
      modified retroprospective application method, SFAS No. 123R applies to new
      awards and to prior years’ awards to give effect to the fair value-based method
      of accounting for awards granted, modified, or settled in cash on a basis
      consistent with the proforma disclosures required for those periods by statement
      123. Under Canadian GAAP, for awards granted before January 1, 2004, the Company
      did not recognize any compensation cost at the time of grant or as the requisite
      service was rendered. Therefore, the following table reconciles loss from
      continuing operations and net loss as reported in the accompanying consolidated
      statements of operations to loss from continuing operations and net loss that
      would have been reported had the consolidated financial statements been prepared
      in accordance with U.S. GAAP (there would be no impact to discontinued
      operations):






Year
                      ended December 312005
                  
                  
                  2004
                  
                  2003Loss
                        from continuing operations,
                    in
                      accordance with Canadian GAAP
                  
                  $                                    (1,184,559)
                  
                  
                  $                       
                        (888,320)
                  
                  $                       
                      (282,512)Stock
                      based compensation costs
                  
                  -
                  
                  
                  (15,083)
                  
                  (14,650)Loss
                        from continuing operations,
                    in
                      accordance with U.S. GAAP
                  
                  $                                   
                    (1,184,559)
                  
                  
                  $                       
                    (903,403)
                  
                  $                        (297,162)Net
                      loss, in accordance with Canadian GAAP
                  
                  $                                    (1,184,559)
                  
                  
                  $                    (2,204,904)
                  
                  $      
                                      
                      (703,468)Stock
                      based compensation costs
                  
                  -
                  
                  
                  (15,083)
                  
                  (14,650)Net
                      loss, in accordance with U.S. GAAP
                  
                  $                                   
                    (1,184,559)
                  
                  
                  $          
                               
                      (2,219,987)
                  
                  $                       
                    (718,118)












88




**DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**








**28.**
            **Canadian
                and United States Accounting Policies Differences: -
                cont’d**




Basic
      and
      diluted net loss per share in accordance with U.S. GAAP would have remained
      unchanged from the amounts reported in accordance with Canadian
      GAAP.





*Accumulated
      other comprehensive income (loss)* :





The
      application of U.S. GAAP requires the disclosure of comprehensive income (loss)
      in a separate financial statement, which includes net income as well as
      revenues, charges, gains and losses recorded directly to equity.




**Year
                  ended December
                  31****2005**
              ****
              ****
              **2004**
              ****
              ****
              **2003**Net
                  loss in accordance with U.S. GAAP
              
              $
              (1,184,559
              )
              $
              (2,219,987
              )
              $
              (718,118
              )Foreign
                  currency translation adjustment
              
              
              (53,995
              )
              
              (65,158
              )
              
              (71,395
              )Accumulated
                  other comprehensive loss
              
              $
              $(1,238,554
              )
              $
              (2,285,145
              )
              $
              (789,513
              )





*Estimated
      Value of Warrants* :





As
      described in Note 13 to the consolidated financial statements, the Company
      allocated the proceeds of the 2005 private placements between capital stock
      and
      warrants (including broker rights) based on the estimated fair value of the
      warrants using the Black-Scholes model. For Canadian GAAP, the Company used
      an
      estimated life of the warrants in the model. For U.S. GAAP reporting purposes,
      the Company used the contractual term of the warrants in the model. This results
      in different amounts being allocated to the warrants under U.S. GAAP, with
      no
      impact to operating results or cash flows. The impact of this allocation on
      December 31, 2005 on shareholders’ equity is as follows:






**Canadian
                  GAAP**
              ****
              ****
                **U.S.
                  GAAP**Capital
                  stock
              
              
              
              
              $
              12,405,434
              
              $
              12,139,934Other
                  capital
              
              
              
              
              $
              475,530
              
              $
              741,030Total
                  shareholders’ equity
              
              
              
              
              $
              8,774,587
              
              $
              8,774,587










89






**DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**










**28.**
            **Canadian
                and United States Accounting Policies Differences: -
                cont’d**




*New
      Accounting Pronouncements* :





In
      October 2005, the FASB issued FASB Staff Position ("FSP") 123R-2, "Practical
      Accommodation to the Application of Grant Date as Defined in FASB Statement
      No.
      123(R) ("FSP 123R-2")". FSP 123R-2 provides companies with a "practical
      accommodation" when determining the grant date of an award that is subject
      to
      the accounting provisions in SFAS 123R. Specifically, assuming a company meets
      all of the other criteria in the definition of grant date in SFAS 123R, a mutual
      understanding (between the company and the recipient) of the key terms and
      conditions of an award is presumed to exist at the date the award is approved
      (in accordance with the company's normal corporate governance policy) if (1)
      the
      award is unilateral grant meaning that the recipient does not have the ability
      to negotiate the key terms and conditions of the award, and (2) the key terms
      and conditions of the award are expected to be communicated to the recipient
      within a relatively short period of time (as defined in the FSP 123R-2) after
      the grant was approved. This FSP was effective upon initial adoption of SFAS
      123-R on January 1, 2006. The adoption of this FSP is not expected to have
      a
      significant impact on the Company’s U.S. GAAP financial results.





In
      November 2005, the FASB issued FSP 123R-3, "Transition Election Related to
      Accounting for the Tax Effects of Share-Based Payment Awards" ("FSP 123R-3").
      FSP 123R-3 provides a practical exception when a company transitions to the
      accounting requirements in SFAS 123R. SFAS 123R requires a company to calculate
      the pool of excess tax benefits available to absorb tax deficiencies recognized
      subsequent to adopting SFAS 123R ("APIC Pool"), assuming the company had been
      following the recognition provisions prescribed by SFAS 123. The FASB learned
      that several companies do not have the necessary historical information to
      calculate the APIC pool as envisioned by SFAS 123R and accordingly, the FASB
      decided to allow a practical exception as documented in FSP 123R-3. This FSP
      was
      effective on its issuance date. The adoption of this FSP did not have a
      significant impact on the Company’s U.S. GAAP financial results.





In
      December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets an
      amendment of APB Opinion No. 29” *.* This
      Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges
      of similar productive assets and replaces it with a general exception for
      exchanges of nonmonetary assets that do not have commercial substance. A
      nonmonetary exchange has commercial substance if the future cash flows of the
      entity are expected to change significantly as a result of the exchange. This
      Statement is effective for nonmonetary exchanges occurring in fiscal periods
      beginning after June 15, 2005. The adoption of this Statement is not
      expected to have a significant impact on the Company’s U.S. GAAP financial
      results.





In
      December 2004, the FASB issued FSP 109-1, “Application of FSB Statement No. 109,
      Accounting for Income Taxes, to the Tax Deduction on Qualified Production
      Activities Provided by the American Jobs Creation Act of 2004”. This Statement,
      which became effective upon issuance, provides that the tax deduction for income
      with respect to qualified domestic production activities, as part of the
      American Job Creation Act of 2004 that was enacted on October 22, 2004, will
      be
      treated as a special deduction as described in SFAS No. 109. The adoption of
      this FSP did not have a significant impact on the Company’s U.S. GAAP financial
      results.











90




**DYNASTY
          GAMING INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          AT DECEMBER 31, 2005, 2004 AND 2003**
 **(TABULAR
          AMOUNTS ARE IN CANADIAN DOLLARS)**




**28.**
            **Canadian
                and United States Accounting Policies Differences: -
                cont’d**




In
      December 2004, the FASB issued FSP109-2, “Accounting and Disclosure Guidance for
      the Foreign Earnings Repatriation Provision within the American Jobs Creation
      Act of 2004”. This FSP, which became effective upon issuance, allows an
      enterprise additional time beyond the financial reporting period of enactment
      of
      the American Jobs Creation Act of 2004 to evaluate the effect of this Act on
      its
      plan for reinvestment or repatriation of foreign earnings for purposes of
      applying SFAS No. 109. The adoption of this FSP did not have a significant
      impact on the Company’s U.S. GAAP financial results.





In
      March
      2005, the FASB issued FASB Interpretation (“FIN”) No. 47, “Accounting for
      Conditional Asset Retirement Obligations” (“FIN No. 47”), which is
      effective no later than the end of fiscal years ending after December 15,
      2005. FIN No. 47 clarifies that the term conditional asset retirement
      obligation as used in SFAS No. 143, *Accounting
      for Asset Retirement Obligations* (“SFAS
      No. 143”). Conditional asset retirement obligation refers to a legal
      obligation to perform an asset retirement activity in which the timing and
      (or)
      method of settlement are conditional on a future event that may or may not
      be
      within the control of the entity. The adoption of this Statement is not expected
      to have a significant impact on the Company’s U.S. GAAP financial
      results.





In
      May
      2005, the FASB issued SFAS No. 154, *Accounting
      Changes and Error Corrections* (“SFAS
      No. 154”). This Statement requires retrospective application to prior
      periods’ financial statements of voluntary changes in accounting principles
      unless it is impracticable to determine either the period-specific effects
      or
      the cumulative effect of the change. SFAS No. 154 makes a distinction
      between “retrospective application” of an accounting principle and the
“restatement” of financial statements to reflect the correction of an error.
      SFAS No. 154 replaces Accounting Principles Bulletin (“APB”) No. 20, *Accounting
      Changes* (“APB
      No. 20”), and SFAS No. 3, *Reporting
      Accounting Changes in Interim Financial Statements* .
      APB
      No. 20 previously required that most voluntary changes in accounting
      principles be recognized by including the cumulative effect of changing to
      the
      new accounting principles in the net income of the period of the change. SFAS
      No. 154 is effective for accounting changes and corrections of errors made
      in fiscal years beginning after December 15, 2005.